DE · Q2 2025 Earnings
CautiousDeere & Company
Reported May 15, 2025
30-second summary
Net income fell to $1.80B ($6.64 GAAP EPS) on revenue of $12.76B (-16% YoY), with all three equipment segments down double digits and PPA revenue off 21%. Management broadened — not lowered the top of — the FY2025 net income range to $4.75–5.50B to absorb a ~$500M pre-tax tariff hit ($400M of which lands in H2), and explicitly conceded there is "not much opportunity for price mitigation" this year because order books are nearly full. The operational beat is real (18.8% equipment-ops operating margin on a down-cycle quarter), but the forward setup is harder: H2 decrementals look closer to 80% in large ag, and 2026 pricing power is now an open question.
Headline numbers
EPS
Q2 FY2025
$6.64
Revenue
Q2 FY2025
$12.76B
-16.0% YoY
Operating margin
Q2 FY2025
18.1%
Key financials
Q2 FY2025| Metric | Q2 FY2025 | YoY |
|---|---|---|
| Revenue | $12.76B | -16.0% |
| EPS | $6.64 | — |
| Operating margin | 18.1% | — |
Guidance
Prior quarter data unavailable — comparison not possible.
Segment KPIs
Q2 FY2025| Segment | Q2 FY2025 | YoY |
|---|---|---|
| Production & Precision Agriculture | $5.23B | -21.0% |
| Small Agriculture & Turf | $2.994B | -6.0% |
| Construction & Forestry | $2.947B | -23.0% |
| Financial Services | $1.385B | -1.0% |
| Financial Services Net Income | $161 million | — |
Other KPIs
Q2 FY2025| Segment | Q2 FY2025 |
|---|---|
| Production & Precision Agriculture Operating Margin | 22.0% |
| Small Agriculture & Turf Operating Margin | 19.2% |
| Construction & Forestry Operating Margin | 12.9% |
| Total Operating Profit | $2,308 million |
| FY2025 Net Income Guidance (Range) | $4.75 billion - $5.50 billion |
Management tone
Management's posture this quarter is markedly more defensive than Deere's usual "navigating the cycle" cadence — the words "resilience," "navigating uncertainty," and "fluid environment" do heavy lifting, and the hedging language ("should these tariff levels continue," "should uncertainty levels abate") is unusually dense for a company that typically speaks in concrete order-book terms.
The most consequential shift is on pricing power. Deere has spent the last several years pushing price ahead of inflation; this quarter management explicitly stepped off that lever: "We don't see much opportunity for price mitigation to impact fiscal 2025, given our order books for most product lines are nearly full for the remainder of the year." In Q&A, Goldman's Jerry Rivich pressed whether Deere could be tariff-cost-negative on price in 2026 — management's answer was a philosophical pivot toward "measured" pricing, citing customer price fatigue after 4-5 years of cumulative increases, with early order programs running just 2-4%. That is a meaningful break from the prior playbook.
The second shift is around what is actually depressing demand. Management drew a sharp line between fundamentals and sentiment: "when excluding tariffs, we've seen some stabilization in the North American ag market." The implication is that the headwind is policy-driven rather than structural, and recovery is contingent on tariff clarity rather than commodity prices or rates. That is both reassuring and uncomfortable — it concedes the cycle bottom is a political variable.
Third, the Smart Industrial narrative has quietly shifted from growth catalyst to defensive value tool. The framing in prepared remarks emphasized leveraging the centralized tech stack to "bring value accretive solutions faster" during a downturn — a reframing that lands differently than the prior "platform optionality" pitch.
Finally, late-model used inventory remains an unresolved overhang. Management's language ("I'm confident our approach will yield results") is forward-looking rather than declarative, suggesting normalization is taking longer than initially expected.
Recurring themes management leaned on this quarter:
Risks management surfaced:
Q&A highlights
David Rathaus · Evercore ISI
Questioned why implied decrementals for large ag segment in H2 are particularly weak (appears to be 80%+), particularly whether pricing strategy on backlog with retail invoices is creating the margin pressure, and whether this conservative view should be used as a 2026 starting point given similar mix.
Management broke down the margin pressure: $400M of $500M full-year tariff impact hits H2 (2-2.5 pts margin impact); decremental math appears outsized due to small year-over-year sales change denominator; less pricing favorability in H2 vs. H1; material cost favorability moderates in H2; production costs ex-tariffs remain positive but at lower level.
Jerry Rivich · Goldman Sachs
Asked whether there is any scenario where Deere could be priced tariff cost negative in 2026, noting the company's historical track record of pushing pricing ahead of inflation and that competitors face same or worse pressures.
Management stated they are taking a measured approach to pricing given the significant inflation of the last 4-5 years; achieving ~1 point of price in 2025 despite challenged market; early order programs showing 2-4% price; will continue to focus on cost mitigation and production cost reduction; too early to predict 2026 precisely but committed to trying to be measured from a price perspective.
Rob Wertheimer · Milius Research
Asked about SAS (Software-as-a-Service) strategy: how many different SAS models currently exist, clarification on Precision Essentials product line, pipeline outlook for SAS features rolling out in coming years, and progress on farmer adoption and value recognition.
Management described three SAS buckets: (1) Precision digital technologies (Precision Essentials, G5 licenses) with lower upfront costs; (2) Sense and act technologies (See & Spray, Exact Shot) usage-based on field savings; (3) Autonomy solutions targeting fully autonomous corn production by 2030. Plans to bundle solutions for cross-machine customer value. Pipeline includes expanding See & Spray to additional crops/geographies, autonomy expansion beyond large ag (mowing, orchards, construction), and digital solutions like OPS Center expansion to road building.
Tim Sign · Raymond James
Asked about implied profitability in PPA segment for H2, how to view as stepping stone to 2026, and what explains decrementals of ~80% in H2 versus mid-30s in H1, accounting for tariff impacts.
Management attributed high H2 decrementals to: (1) tariff impact of ~$100M in Q2 and $400M in H2; (2) North American large ag weakness and production at lower retail levels amplifying decremental; (3) less favorable pricing in H2 vs. H1; (4) smaller top-line change creating outsized decremental math.
Chad Dillard · Bernstein
Asked how Deere philosophically approaches sharing tariff cost burden across all constituents (vendors, dealers, customers/farmers), given farmers have already seen significant price increases in recent years.
Management indicated a balanced, multi-stakeholder approach: taking pricing action (2-4% in early order programs) while maintaining optionality; working with suppliers to share costs; continuing dual sourcing and supplier resilience efforts; implementing measured pace given dynamic tariff environment that changes rapidly; sharing burden across all stakeholders.
What to watch into next quarter
H2 PPA decrementals vs. the implied 80% setup. If actual H2 PPA op margin lands materially above the path implied by the $400M tariff hit and the 2.0–2.5 pt margin guide, that resets the 2026 starting point higher.
Early order program pricing for model-year 2026. Management called out 2-4% in current EOPs; whether that holds, expands, or compresses as books open is the cleanest forward read on pricing power post-tariff.
Used inventory levels in North American large ag. Management said normalization is in progress but offered no specific metric. Watch for any quantified disclosure of late-model used inventory months-on-hand.
Whether the FY2025 net income range narrows or shifts. The current $4.75–5.50B range is unusually wide; the direction it tightens next quarter will tell you whether tariff exposure is settling toward the high or low end of management's scenarios.
Financial Services net income tracking versus the ~$750M FY guide. Q2 came in at $161M; sustained run-rate softness here would be a second-order signal that customer financing demand is weakening beyond the equipment cycle.
C&F margin trajectory. At 12.9% with 23% revenue declines and "competitive pricing pressure" flagged — and ~40% of the FY tariff hit landing in this segment — C&F is the segment most at risk of structural margin reset rather than cyclical compression.
Sources
- Deere & Company Q2 FY2025 press release, filed with the SEC 2025-05-15: https://www.sec.gov/Archives/edgar/data/315189/000155837025007795/de-20250515xex99d1.htm
- Q2 FY2025 prepared remarks and Q&A excerpts (as provided in extraction inputs; no full transcript link available).
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