tapebrief
DE · Q1 2026

DE · Q2 2026 Earnings

Cautious

Deere & Company

Reported May 21, 2026

30-second summary

Q2 FY2026 revenue rose 5% YoY to $13.37B with GAAP EPS of $6.55 and equipment-ops operating margin of 16.9% — and management reaffirmed the FY2026 net income range at $4.5–5.0B despite a sharp 14% decline in Production & Precision Ag. The print is carried by Construction & Forestry running +29% YoY (against a freshly raised ~+20% FY guide, up from ~+15%) and a one-time $272M IEEPA tariff refund (~250bps Q2 equipment-ops margin lift, ~100bps on a full-year basis), with Financial Services FY guidance ticking up to ~$860M. The cycle thesis hasn't changed — large ag is still at trough, 2027 remains the recovery year — but management chose to take the lift through segment guides (C&F sales and margin both raised) rather than the enterprise net income range.

Headline numbers

EPS

Q2 FY2026

$6.55

Revenue

Q2 FY2026

$13.37B

+5.0% YoY

Gross margin

Q2 FY2026

29.8%

Operating margin

Q2 FY2026

16.7%

Key financials

Q2 FY2026
MetricQ2 FY2026Q2 FY2025YoYQ1 FY2026QoQ
Revenue$13.37B$12.76B+4.7%$9.61B+39.1%
EPS$6.55$6.64-1.4%$2.42+170.7%
Gross margin29.8%————
Operating margin16.7%18.1%-140bps8.0%+870bps

Guidance

Full-year net income guidance reaffirmed, but segment performance mixed: Production & Precision Agriculture missed expectations with a steeper 14% decline, while Construction & Forestry substantially outperformed at +29% growth.

Guidance is issued for the full year only, refreshed each quarter. Prior and new below are the same FY updated this quarter.

Actuals vs prior guidance

MetricPeriodPrior guideActualΔResult
Production & Precision Agriculture revenueQ2 FY2026Down 5 to 10%Down 14% YoY-4 to -9 percentage points below guide (worse than guided range)Beat
Small Agriculture & Turf revenueQ2 FY2026Up ~15%Up 16% YoY+1 percentage point above guideBeat
Construction & Forestry revenueQ2 FY2026Up ~15%Up 29% YoY+14 percentage points above guideBeat

Changes to prior guidance

MetricPeriodPrior guideNew guideΔResult
EPS
FY2026
$4.50 to $5.00$16.67 to $18.52+$11.62–$13.52 (or +258–270%)Raised
Financial Services net income
FY2026
~$840 million~$860 million+$20 million (+2.4%)Raised

Reaffirmed unchanged this quarter: Net income ($4.5 billion to $5.0 billion)

Segment KPIs

Q2 FY2026
SegmentQ2 FY2026Q2 FY2025YoY
Production & Precision Agriculture$4.503B$5.23B-13.9%
Small Agriculture & Turf$3.485B$2.994B+16.4%
Construction & Forestry$3.79B$2.947B+28.6%
Financial Services$1.366B$1.385B-1.4%
Financial Services Net Income$190 million$161 million—

Other KPIs

Q2 FY2026
SegmentQ2 FY2026Q2 FY2025YoY
Production & Precision Agriculture Operating Margin15.7%22.0%—
Small Agriculture & Turf Operating Margin20.6%19.2%—
Construction & Forestry Operating Margin14.8%12.9%—
Total Operating Profit$2,237 million$2,308 million—

Management tone

Cycle-bottom confidence → market volatility acknowledgment → diversified-portfolio defense.

Q4 FY2025 framed 2026 as "the bottom of the cycle." Q1 FY2026 pivoted to "2026 represents the bottom of the current cycle and provides a strong foundation for accelerated growth." Q2 FY2026 shifts again: "Net income guidance maintained, reinforcing confidence amid market volatility" and "Our performance in the current market environment demonstrates the strength of our diversified portfolio." The trough thesis is intact, but the rhetorical anchor has moved from "we know where the bottom is" to "we have diversification to manage what we don't control." That is a softer posture, and the choice to reaffirm rather than raise the enterprise FY guide is consistent with it.

Tariff as quantified-and-managed → tariff as managed-with-a-one-time-tailwind. Q1's framing was that the ~$1.2B tariff exposure was stable and being absorbed. This quarter the $1.2B FY exposure is reaffirmed (net of IEEPA invalidation, new Section 122 tariffs, and Section 232 adjustments), but a $272M IEEPA refund — split ~50/30/20 across CNF/SAT/large ag per Q&A — reduces the net FY tariff cost to ~$900M. Management's strategy explicitly remains cost reduction rather than customer surcharges, with pricing held at 1.5–2% in line with non-tariff inflation. The shift signals confidence in absorbing the residual ~$900M, but the absence of any commentary on whether the refund recurs is conspicuous — it should be treated as one-time until proven otherwise.

Precision ag as adoption story → precision ag as recurring-revenue story with quantified engagement. Prepared remarks quantified what was previously rhetorical: 12,500+ JDLink Boost Kits sold since H2 2024 with 25% growth in the last quarter alone, ~440,000 monthly active digital users, engaged acres in the Operations Center up ~10% YoY (with highly engaged acres growing faster), and the largest-ever Brazil product launch (Casa John Deere) with 20+ new product and technology solutions. The recurring-revenue thesis now has engagement-cohort data behind it.

Production posture as lean-with-flexibility → lean-now-paying-off in C&F. Q4 FY2025 framed lean production as the FY2026 starting posture. The Q2 C&F print — order book +60% since November to highest level since April 2024 (per Brent Norwood's prepared remarks), +29% YoY revenue, FY sales guide raised to ~+20%, and FY margin band raised to 10–12% — is the first quarter where the flexibility-to-respond mechanic visibly worked. The gap between Deere's C&F sales and the +5% earth-moving industry guide reflects both underproduction catch-up from last year and genuine share gains from pricing adjustments over the past 12 months.

Recurring themes management leaned on this quarter:

Second quarter earnings reviewMarket outlook assessment for fiscal 2026Earnings discussion structure

Q&A highlights

Patty Bogart · Millis Research

Construction segment showing much higher sales growth (20%+) versus industry guide (up 5%). Is Deere gaining significant market share or is underproduction catch-up driving the gap?

Management confirmed underproduction in earth-moving segment last year is being filled this year as production aligns with retail demand. Additionally, industry growth is stronger than the 5% guide (particularly in road building), and Deere has captured market share gains over the past 12 months from pricing adjustments.

Industry up 5% in earth-moving but Deere sales up 20%+Road building industry up approximately 10% year-over-yearMarket share gains over past 12 months from pricing adjustmentsOrder book up more than 60% since November, highest level since April 2024

Chirag Patel · Jefferies

Request breakdown of the $272 million IEPA tariff refund across business segments to understand baseline margin performance excluding the one-time benefit.

Management provided detailed tariff refund split: ~50% to CNF, ~30% to SAT, ~20% to large ag. Also clarified that the $1.2B full-year tariff exposure remains unchanged; the refund is incremental, reducing net tariff cost from $1.2B to approximately $900M for the year (about 3% margin headwind before refund, 2% after).

IEPA tariff refund: $272 million (~1 point margin benefit for equipment operations)CNF receives ~50% of refund, SAT ~30%, large ag ~20%Full-year tariff expense: $1.2 billion unchangedNet tariff cost after refund: ~$900 million (~2% margin headwind)

Brent Norwood · John Deere (Management)

Management opening remarks on business resilience, cycle positioning, and tariff strategy.

Management emphasized diversified business operating at different cycle points (large ag at trough, SAT mid-cycle, CNF above mid-cycle), all achieving double-digit margins. Highlighted disciplined capital allocation, commitment to U.S. manufacturing (20B over 10 years), and intention to manage tariffs through cost reduction rather than customer surcharges. Noted pricing at 1.5-2%, in line with inflation excluding tariffs.

All three segments delivering double-digit margins despite varied cycle positioningEnterprise net income guidance maintained$635 million returned to shareholders in Q2 (repurchases + dividends)$20 billion U.S. manufacturing investment commitment over 10 years

Jerry Revich · Wells Fargo

Details on see-and-spray acreage coverage this year, retrofit orders, precision essentials renewal rates for 2025 cohort, and pricing for advanced features.

Management reported see-and-spray covering 1M acres year one, 5M acres last year, with year-to-date 2026 seeing more acres sprayed than same customers sprayed last year. Demonstrated 50-60% herbicide savings driving utilization. Precision Essentials renewals at ~70% overall, but 2-year renewal cohort (2024) now above 90%. Harvest automation utilization over 60% in northern hemisphere and over 80% in Brazil.

See-and-spray: 1M acres (year 1), 5M acres (last year), growing YoY in 202650-60% herbicide savings demonstrated with see-and-sprayPrecision Essentials: ~70% renewal rate overall, 90%+ for 2-year cohort~5,000 new customer organizations acquired through Precision Essentials

Angel Castillo · Morgan Stanley

Global ag cycle outlook broadly; downside risks given geopolitical environment (Iran conflict); reference periods for farmer behavior during trough periods.

Management reiterated baseline expectation of ag cycle recovery in 2027, supported by elevated fleet age, very low used inventory for late-model equipment (model year 22-23 8R tractors down 45% from peak), and structural improvements in setup. Noted differences by region: Brazil facing acute input cost and currency headwinds affecting near-term demand; U.S. farmers already secured inputs at lower prices, so near-term outlook slightly improved. Policy supports (RVO approval, E15, disaster relief) expected to help but not materially adjust 2026 demand.

Baseline: ag cycle recovery expected in 2027 (not 2026)Fleet age at very elevated levels; high-horsepower tractors at elevated fleet ageModel year 22-23 8R tractors down 45% from peak a year agoUsed inventory structural improvement supports replacement demand setup

Answers to last quarter's watch list

PPA Q2 operating margin trajectory. PPA operating margin printed 15.7% in Q2 — Q2 seasonality plus ~$55M IEEPA refund allocation (~120bps). Management left the FY 11–13% band unchanged, confirming the print is not an FY-level structural beat. Revenue declined 14% YoY, well below the segment's FY "down 5–10%" guide. The Q1 framing that PPA margin would step up in Q2 has been validated; the volume trajectory has not. Status: Margin resolved positively for Q2; volume trajectory deteriorating.
C&F operating margin trajectory. C&F operating margin printed 14.8% in Q2 with ~$136M IEEPA refund allocation (~360bps) flattering the quarter. More importantly, management raised the FY margin band to 10–12% (from 9–11%) — the durable signal. The Q1 weak-conversion concern is decisively resolved.
Resolved positively
Whether C&F revenue growth decelerates. It did not — C&F revenue printed +29% YoY in Q2 versus +34% in Q1, and management raised the FY sales guide to ~+20% (from ~+15%). Order book up more than 60% since November to its highest level since April 2024, with over 80% of production slots filled for the year (per Brent Norwood's prepared remarks). Both underproduction catch-up and share gains from pricing actions are driving the gap.
Resolved positively
S&T margin trajectory. S&T operating margin printed 20.6% in Q2 — Q2 seasonal strength plus ~$82M IEEPA refund allocation (~230bps). Management left the FY 13.5–15% band unchanged, confirming the quarterly print is seasonal/one-time-flattered rather than an FY beat. Status: On-track.
Tariff trajectory: does the ~$1.2B figure hold for a second consecutive quarter? Yes — the $1.2B FY2026 gross direct tariff exposure was reaffirmed unchanged, net of IEEPA invalidation, new Section 122 tariffs, and Section 232 adjustments. The $272M IEEPA refund reduces the net FY tariff cost to ~$900M. Per the Patel Q&A: ~50% to C&F, ~30% to SAT, ~20% to large ag in refund allocation; segment expense exposure split is C&F ~45%, SAT ~33%, large ag ~20%.
Resolved positively
Multi-quarter trajectory for the FY2026 net income guide. Reaffirmed at $4.5–5.0B — not lifted again. Management took conviction up through C&F segment guides (sales to ~+20%, margin to 10–12%) rather than the enterprise range, while lowering the South America industry guide. The cycle-bottom thesis is firming but management is preserving buffer.
Continue monitoring

What to watch into next quarter

PPA Q3 revenue trajectory versus the FY "down 5–10%" guide. Q1 +3%, Q2 -14% — the segment is now outside the FY revenue guide on the wrong side. Q3 needs to print closer to the guide range or the FY framework breaks, even if margin holds.

Whether the FY2026 net income guide gets raised on the Q3 print. Holding at $4.5–5.0B for a second consecutive quarter after a clean Q2 beat (ex-refund) tells you management is protecting H2 optionality. A Q3 raise — particularly to the floor — would signal the cycle bottom is firming materially; another reaffirm signals H2 large ag softening.

C&F operating margin ex-IEEPA refund: holding inside the raised 10–12% band. Q3 is the first quarter without the refund tailwind; whether C&F margin stays inside the new band on its own — and whether the +60% order book converts — is the cleanest read on the raise's durability.

Brazil ag demand: deepening drag or stabilization. The South America industry guide was cut to down ~15% (from down ~5%), reflecting fertilizer cost inflation, currency headwinds, and an earlier planting cycle. Watch for any quantified Brazil revenue or order-book color in Q3, and whether Deere's market-share gains continue to outpace the industry decline.

Whether the ~$1.2B gross tariff figure holds for a third consecutive quarter. The IEEPA refund this quarter is the first downward revision since the figure was set, though management noted offsetting Section 122 and Section 232 adjustments. Any further refund disclosures or upward revisions would each move the FY EPS math by ~$0.30 per $100M.

Precision ag engagement metrics. Management disclosed ~440,000 monthly active digital users, engaged acres +~10% YoY, and 12,500+ JDLink Boost Kits sold since H2 2024 with 25% growth in the last quarter. Q3 will surface whether these growth rates hold — the cleanest read on whether the recurring-revenue thesis scales.

Sources

  1. Deere & Company Q2 FY2026 press release, filed with the SEC 2026-05-21: https://www.sec.gov/Archives/edgar/data/315189/000110465926064747/de-20260521xex99d1.htm
  2. Deere & Company Q2 FY2026 earnings call prepared remarks and Q&A.
  3. Tapebrief DE Q1 FY2026, Q4 FY2025, Q3 FY2025, and Q2 FY2025 briefs for cross-quarter guidance trajectory, tariff arc, and segment margin baselines.

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