DE · Q1 2026 Earnings

Cautious

Deere & Company

Reported February 19, 2026

30-second summary

SENTIMENT: Constructive Q1 FY2026 revenue rose 13% YoY to $9.61B with GAAP EPS of $2.42 and equipment-ops operating margin of 5.9% — and management raised the FY2026 net income guide to $4.50–5.00B from $4.00–4.75B, a $375M midpoint lift driven by Small Ag & Turf (+24% YoY) and Construction & Forestry (+34% YoY) running well ahead of plan. The raise was accompanied by a $500M lift on both ends of the equipment-ops operating cash flow range (now $4.5–5.5B), upward revisions to S&T and C&F FY operating margin bands (to 13.5–15% and 9–11% respectively), and explicit reaffirmation of the ~$1.2B tariff line and 25–27% tax rate band. This is the first upward revision in the cycle and the cleanest signal yet that management sees FY2026 as the trough.

Headline numbers

EPS

Q1 FY2026

$2.42

Revenue

Q1 FY2026

$9.61B

+13.0% YoY

Operating margin

Q1 FY2026

8.0%

Key financials

Q1 FY2026

Metric	Q1 FY2026	YoY	Q4 FY2025	QoQ
Revenue	$9.61B	+13.0%	$12.39B	-22.5%
EPS	$2.42	—	$3.93	-38.4%
Operating margin	8.0%	—	10.9%	-290bps

Guidance

Deere raised full-year FY2026 net income and EPS guidance on stronger-than-expected Q1 results and resilience in high-growth segments (Small Ag/Turf +24%, Construction +34%), while withdrawing tariff expense disclosure and adding segment-level sales guidance for the first time.

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

New guidance

Metric	Period	Guide	YoY
Production & Precision Agriculture Net Sales (Full Year)	FY 2026	Down 5 to 10%	—
Small Agriculture & Turf Net Sales (Full Year)	FY 2026	Up ~15%	—
Construction & Forestry Net Sales (Full Year)	FY 2026	Up ~15%	—

Changes to prior guidance

Metric	Period	Prior guide	New guide	Δ	Result
Net Income (Full Year)	FY 2026	$4.0B to $4.75B	$4.5B to $5.0B	midpoint +$150M (+3.2% midpoint lift); range floor +$500M, ceiling +$250M	Raised
EPS (Full Year, GAAP)	FY 2026	$4.00 to $4.75	$4.50 to $5.00	midpoint +$0.375 (+4.3% midpoint lift); floor +$0.50, ceiling +$0.25	Raised
Financial Services Net Income (Full Year)	FY 2026	~$830 million	~$840 million	+$10M (+1.2%)	Raised
Operating Cash Flow (Equipment Operations, Full Year)	FY 2026	$4 to $5 billion	Withdrawn — no replacement	—	Withdrawn
Effective Tax Rate (Full Year)	FY 2026	25% to 27%	Withdrawn — no replacement	—	Withdrawn
Direct Tariff Expense (Pre-Tax, Full Year)	FY 2026	~$1.2 billion	Withdrawn — no replacement	—	Withdrawn

Segment KPIs

Q1 FY2026

Segment	Q1 FY2026	YoY
Production & Precision Agriculture	$3.163B	+3.0%
Small Agriculture & Turf	$2.168B	+24.0%
Construction & Forestry	$2.67B	+34.0%
Financial Services	$1.384B	-6.0%
Financial Services Net Income	$244 million	—
Production & Precision Agriculture Operating Profit	$139 million	—
Small Agriculture & Turf Operating Profit	$196 million	—
Construction & Forestry Operating Profit	$137 million	—

Other KPIs

Q1 FY2026

Segment	Q1 FY2026
Production & Precision Agriculture Operating Margin	4.4%
Small Agriculture & Turf Operating Margin	9.0%
Construction & Forestry Operating Margin	5.1%
FY2026 Net Income Guidance (range)	$4.5B - $5.0B

Management tone

Trough as the operating posture → trough as the foundation for recovery. The Q4 framing was explicit: "we believe this coming year will mark the bottom of the cycle." The Q1 qualitative statements pivot the same observation forward: "2026 represents the bottom of the current cycle and provides a strong foundation for accelerated growth." Same trough thesis, repositioned as a setup rather than a destination. Combined with the segment-level sales guides (PPA down 5–10%, S&T and C&F up ~15%), the raised FY net income range, the $500M cash flow lift, and raised S&T/C&F margin bands, management is signaling that visibility into the recovery path has firmed up since November.

Tariff as binding constraint → tariff as quantified and managed. The ~$1.2B tariff line was explicitly reaffirmed; per the transcript, Section 232 steel tariff mitigation and India relief were offset by volume growth. The framing shifted from tariff-as-headwind-eroding-guidance to tariff-as-known-cost-being-managed. This is the first quarter in this cycle the tariff figure held without revision.

Lean production as posture → lean production with segment-specific velocity. Last quarter's framing emphasized entering FY2026 lean across the portfolio. This quarter's segment prints validate that S&T and C&F are getting incremental lift from underproduction catch-up — Q1 +24% and +34% YoY respectively, well above the +15% FY guides — while PPA remains constrained at +3%. Management noted S&T field inventory in both tractor horsepower categories is ~40% lower YoY, supporting the build-to-retail plan. C&F order bank rose 50%+ in the quarter, providing visibility into the second half.

Recurring themes management leaned on this quarter:

First quarter earnings reviewMarket conditions assessmentFiscal 2026 outlookConstruction and Forestry business positioningPower Systems segment

Q&A highlights

Kristen Owen · Oppenheimer

How should investors bridge from neutral Q1 PPA pricing to full-year 1.5% guide? Why was CNF pricing guidance trimmed?

PPA pricing was neutral in Q1 due to South America incentives and inventory management, but full-year guidance of 1.5% maintained due to easier comps from Q3 accruals and expected positive pricing in remaining quarters. CNF pricing guidance reduced by 0.5 points due to faster-than-expected backlog build in early 2026, delaying announced January price increases.

PPA full-year price guidance: 1.5 points positiveCNF price guidance reduced by 0.5 pointsCNF backlog built faster than anticipated in first two monthsSouth American combine inventory at half of 2023 peak levels

Angel Castillo · Morgan Stanley

Can you decompose CNF order strength between tax incentives, end-market demand, and product portfolio improvements?

Strength driven primarily by contractor confidence in their backlogs and end-market fundamentals (infrastructure, mega-projects, data centers). Infrastructure investment strong but housing subdued. Rental refleeting contributing with mid-teens retail growth. Broad-based confidence across geographies including Europe.

CNF retail settlements up mid-teens year-over-year in Q1Order bank up over 50% in past quarter, highest since May 2024Contractor backlogs growing into 2027Rental refleeting positive

David Rasso · Evercore ISI

Why maintain large ag guidance of down 15-20% when order books are improving and more stable, despite commodity prices not confirming this improvement?

North American guide maintained but broken into product lines: spring seasonal equipment (sprayers/planters) down ~20%, tractors down ~15%, combines down 10-15%. Stability from China re-entering market, government support, and old fleet age driving replacement demand despite flat commodity prices. Used inventory down significantly (Model 22-23 8Rs down 40% from March 2024 peak, down 20% sequentially in Q1).

Large ag industry guide: down 15-20% for North AmericaSpring seasonals: down ~20%Tractors: down ~15%Combines: down 10-15%

Stephen Fisher · UBS

What regional production dynamics should be expected for Q2 and rest of year, given Q1 showed North America weakness vs. Europe strength?

Q1 had unfavorable regional mix with Europe up, North America and South America down. This reverses in subsequent quarters with North America production picking up and tractor orders providing visibility through Q4. More normal geographic mix improves margins; expect double-digit margins each quarter for rest of year in large ag.

Q1 large ag volume roughly flat year-over-year but unfavorable geographic mixTractor order books now into Q4North America production picking up in Q2 and beyondExpectation of double-digit margins each quarter for large ag remainder of 2026

Jamie Cook · Truist Securities

To what degree will production be limited in 2026 to set up for 2027? Why aren't PPA margins at upper end of guidance given improvements in order velocity and geographic mix?

Combine production will be largely level based on early order program. Tractor production may see modest increases based on orders now into Q4, but no significant changes to full-year plan. PPA margins constrained by combination of factors: still below trough production levels in North America (market down 15-20%), some softening in profitable South America partially offsetting North America improvements. Factories running lean with inventory in good shape.

Combine production level throughout year based on early order programTractor order book into Q4PPA production still below trough levelsNorth America market down 15-20% limits margin upside

Answers to last quarter's watch list

Q1 FY2026 PPA operating margin floor. PPA operating margin printed 4.4% in Q1, with revenue +3% YoY. Management framed Q1 as the weak quarter due to lean production. The FY 11–13% margin band was reaffirmed, implying meaningful Q2–Q4 step-up. The revenue print being positive YoY (versus the FY "down 5–10%" guide) is a positive signal underneath the weak margin.

Continue monitoring

Whether the $1.2B FY2026 tariff figure holds. Reaffirmed at ~$1.2B. Per the transcript: "Tariffs for the year are still projected at around $1.2 billion, as mitigation on Section 232 steel tariffs and some relief in India have been offset by volume growth." Status: Resolved

S&T margin recovery from 1.0%. S&T operating margin recovered to 9.0% in Q1 from 1.0% in Q4 FY2025, with revenue +24% YoY. The margin is still below the newly raised 13.5–15% FY band, but the sequential recovery is decisive and the FY band was raised this quarter. The Q4 1.0% print now reads as a discrete quarter event rather than a structural reset.

Resolved positively

Effective tax rate trajectory. The 25–27% tax rate band was explicitly reaffirmed in the transcript. Status: Resolved

Price-cost positivity actually delivering in the print. The press release does not provide a price-cost breakdown for Q1. Per the transcript, excluding tariffs, production costs were lower year-over-year across all three segments — a positive cost signal. Pricing was roughly flat in PPA and slightly negative in C&F in the quarter.

Continue monitoring

Order book velocity for spring early order programs. Combine EOP finished better than expected; large tractor order velocity picked up in the last month of the quarter, with rolling order books extending into Q4. S&T order activity was solid. C&F order bank up 50%+ in the quarter.

Resolved positively

What to watch into next quarter

PPA Q2 operating margin trajectory toward the 11–13% FY band. Q1 printed 4.4%; the reaffirmed FY 11–13% band requires meaningful margin recovery. Q2 is the first test of whether the Q2–Q4 step-up materializes.

C&F operating margin: closing the gap to the newly raised 9–11% FY band. Q1 printed 5.1% on +34% revenue growth — strong volume but weak margin conversion. The Q2 print needs to show operating-leverage absorption or the raised band ceases to be credible.

Whether C&F revenue growth decelerates toward the +15% FY guide. Q1 +34% YoY combined with an order bank up 50%+ suggests pull-forward or sandbagged guidance. Q2 will reveal which, and whether the guide gets raised again.

S&T margin recovery toward the newly raised 13.5–15% FY band. Q1 at 9.0% represents a sequential snapback but a ~450bps gap to the new band floor. Q2 needs to demonstrate the margin can scale with sustained +20%+ revenue growth.

Tariff trajectory: does the ~$1.2B figure hold for a second consecutive quarter? This is the first quarter in the cycle the tariff line was reaffirmed unchanged. Sustained stability would mark a meaningful inflection in management's ability to quantify and manage the exposure.

Multi-quarter trajectory for the FY2026 net income guide. This is the first upward revision since the cycle began compressing in Q2 FY2025. Whether Q2 FY2026 lifts further, holds, or rolls back will signal whether the cycle-bottom framing is firming.

Sources

Deere & Company Q1 FY2026 press release, filed with the SEC 2026-02-19: https://www.sec.gov/Archives/edgar/data/315189/000110465926017239/de-20260219xex99d1.htm
Deere & Company Q1 FY2026 earnings call prepared remarks and Q&A, 2026-02-19.
Tapebrief DE Q4 FY2025, Q3 FY2025, and Q2 FY2025 briefs for cross-quarter trajectory on tariff exposure, FY2026 guidance baseline, and segment margin reference points.

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