DE · Q2 2026 Earnings
CautiousDeere & Company
Reported May 21, 2026
30-second summary
30-second take: Deere printed $13.37B in Q2 revenue (+4.8% YoY) and $6.55 GAAP EPS (down slightly from $6.64 prior year), with the headline composition telling the real story — Construction & Forestry roared +29% and Small Ag & Turf +16%, while the core Production & Precision Ag franchise fell -14%. Management held FY2026 net income guidance at $4.5–5.0B and disclosed a $272M IEPA tariff refund that trims net FY tariff drag to ~$900M from a $1.2B gross run-rate. The tone was visibly defensive — "current outlook" language and a baseline cycle bottom anchored in 2026, with the H2 price-cost bridge leaning heavily on favorable comps rather than underlying pricing power.
Headline numbers
EPS
Q2 FY2026
$6.55
Revenue
Q2 FY2026
$13.37B
+4.8% YoY
Operating margin
Q2 FY2026
16.7%
Key financials
Q2 FY2026| Metric | Q2 FY2026 | YoY |
|---|---|---|
| Revenue | $13.37B | +4.8% |
| EPS | $6.55 | — |
| Operating margin | 16.7% | — |
Guidance
Prior quarter data unavailable — comparison not possible.
Segment KPIs
Q2 FY2026| Segment | Q2 FY2026 | YoY |
|---|---|---|
| Production & Precision Agriculture | $4.503B | -14.0% |
| Small Agriculture & Turf | $3.485B | +16.0% |
| Construction & Forestry | $3.79B | +29.0% |
| Financial Services | $1.366B | -1.0% |
| Financial Services Net Income | $190 million | — |
Other KPIs
Q2 FY2026| Segment | Q2 FY2026 |
|---|---|
| Production & Precision Agriculture Operating Margin | 15.7% |
| Small Agriculture & Turf Operating Margin | 20.6% |
| Construction & Forestry Operating Margin | 14.8% |
| FY2026 Net Income Guidance | $4.5B to $5.0B |
Management tone
Management opened with notably hedged framing — "take a closer look at Deere's second quarter earnings, then spend some time talking about our markets and our current outlook for fiscal 2026" — language that decouples Q2 results from forward expectations. This is a defensive sequencing choice: lead with what's done, then negotiate down expectations on what's ahead. The absence of bullish anchors (backlog superlatives, demand-strength language, pricing-power claims) is the tell.
The cycle-timing language remained consistent with prior framing: "our baseline view remains that 2026 will represent the bottom of the ag cycle," with the pace of recovery dependent on geopolitical developments, ag fundamentals, and policy outcomes. Management cited model year 22-23 8R tractor inventory down 45% from peak and aging fleet hours as setup for replacement demand, but did not commit to a recovery slope. Notably, the 2027 reference in the prepared remarks pertained to construction customer demand strength ("confidence that incremental demand will extend into 2027"), not to a large-ag recovery timeline.
The H2 margin bridge relies on mechanical, not structural, drivers. Prepared remarks from Brent Norwood and Josh Beal pointed to the most favorable cost comparisons landing in Q4 alongside slightly higher back-half revenue. The improvement story is comp-driven (tariffs that began H2 FY2025, related indirect inflation, and Q4 production absorption from concentrated large-ag tractor shipments) rather than evidence of underlying pricing power — implied net price realization for FY2026 sits at 1.5%–2.0%, roughly matching general inflation ex-tariffs.
Recurring themes management leaned on this quarter:
Q&A highlights
Patty Bogart · Millis Research
Construction industry growing at ~5% but Deere's sales growth significantly exceeds that. Is the company seeing healthy industry growth or gaining substantial market share?
Management attributed growth to three factors: (1) Deere's own underproduction last year creating a catch-up effect, (2) stronger industry growth in road building beyond the 5% earth-moving forecast, and (3) documented market share gains over the past 12 months, particularly in the last 6 months following pricing adjustments.
Jerry Revich · Wells Fargo
Detailed precision agriculture metrics: see-and-spray acreage covered, retrofit orders, Precision Essentials renewal rates for 2025 cohort, and list price increases for advanced features in new EOP offerings.
Management provided comprehensive precision ag update: see-and-spray growing from 5M acres last year to higher pace YoY with 50-60% herbicide savings demonstrated; Precision Essentials overall renewal ~70% but 2nd-year cohort exceeds 90%; new crops (wheat, barley, canola) expanding addressable market; take rates for 27 see-and-spray orders exceeding current year; harvest automation utilization at 80%+ in Brazil.
Chirag Patel · Jefferies
Tariff refund breakdown: how was the $272M IEPA refund distributed across the three business segments?
Management provided explicit tariff expense and refund allocation: ~$1.2B full-year tariff exposure unchanged; $272M refund split ~50% CNF, ~30% SAT, ~20% large ag; full-year tariff expense net of refund ~$900M; tariff splits by business align with their exposure percentages.
Esther Castillo · Morgan Stanley
Assess downside risks to global ag cycle outlook given abnormal geopolitical environment; provide historical period reference for farmer behavior during similar stress.
Management laid out structural factors supporting cycle bottom in 2026: elevated fleet age in North America (high-horsepower tractors and combines), used inventory normalization (model 22-23 8R tractors down 45% from peak), and replacement demand building. Brazil-specific pressure noted (fertilizer inflation, currency weakness, planting season proximity). Baseline remains 2027 recovery, pace contingent on policy, ag fundamentals, and geopolitical factors. U.S. commodity price improvement since August (+20% corn/soybeans) offsets input cost concerns for farmers who pre-purchased.
Meg Dobry · Bayard
Two-part: (1) Clarify tariff math—is the $272M refund a true benefit vs. initial guidance or offset by other tariff headwinds? (2) How does management reconcile improving price-cost margins in H2 when raw material/energy costs are rising globally?
Management clarified tariff math: $1.2B run-rate tariff expense unchanged quarter-over-quarter; $272M refund is incremental benefit bringing net FY2026 tariff cost to ~$900M. On price-cost: H2 improvement driven by three factors: (1) lapping tariffs that began in H2 FY2025, (2) lapping indirect inflation from FY2025 tariffs, (3) better price realization in H2 (vs. H1 discounting), plus (4) large ag factories benefit from higher production absorption in Q4 due to order book timing. Current inflation acknowledged but comps become favorable despite ongoing cost pressure.
What to watch into next quarter
Production & Precision Ag operating margin — held 15.7% in Q2 despite -14% revenue. Watch whether Q3 holds above 15% or breaks lower as large-ag volume continues to compress; a sub-15% print would challenge the FY net income range.
C&F order book and shipment cadence — order book up 60% since November to the highest level since April 2024, with >80% of production slots filled. Watch whether the +29% Q2 growth rate sustains into Q3 or decelerates as the underproduction catch-up effect lapses.
Net FY2026 tariff cost trajectory — currently ~$900M after the $272M IEPA refund against a $1.2B gross run-rate. Watch for any further refund disclosures or additional tariff impositions; this line item is the single most volatile guidance input.
Net price realization vs. inflation — implied 1.5%–2.0% for FY2026 against general inflation of similar magnitude leaves no cushion. Watch whether H2 pricing holds or slips, particularly in overseas markets where PPA and SAT each shaved ~0.5 point off FY price expectations.
Brazil large-ag commentary — September planting season exposure to spot fertilizer prices and currency weakness. Watch for any quantification of Brazil revenue drag in Q3 results.
Q4 production absorption — management flagged Q4 as the quarter with the most favorable cost comparisons and concentrated large-ag tractor shipments. Watch whether the absorption math actually delivers or whether retail-driven production cuts further into the build.
Sources
- Deere & Company Q2 FY2026 press release (8-K Exhibit 99.1), filed 2026-05-21. https://www.sec.gov/Archives/edgar/data/315189/000110465926064747/de-20260521xex99d1.htm
- Deere & Company Q2 FY2026 earnings call prepared remarks and Q&A.
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