tapebrief
DE · Q2 2025

DE · Q3 2025 Earnings

Cautious

Deere & Company

Reported August 14, 2025

30-second summary

Q3 revenue fell 9% YoY to $12.02B with GAAP EPS of $4.75, and all four segments printed down — but the real story is the guide: management cut the FY2025 net income high end by $250M (to $4.75–5.25B) while reaffirming the low end, and quantified the FY tariff hit at ~$600M pre-tax, up from ~$500M last quarter. Newly disclosed segment guides expose where the pain concentrates — C&F operating margin guided to 8.5–10% on "higher tariff costs and lower price realization," well below the 13.8% C&F printed in Q3 2024. Small Ag & Turf is the one bright spot, with the sales outlook improved to down ~10% and margin guided to 12–13.5%.

Headline numbers

EPS

Q3 FY2025

$4.75

Revenue

Q3 FY2025

$12.02B

-9.0% YoY

Operating margin

Q3 FY2025

13.0%

Key financials

Q3 FY2025
MetricQ3 FY2025YoYQ2 FY2025QoQ
Revenue$12.02B-9.0%$12.76B-5.8%
EPS$4.75—$6.64-28.5%
Operating margin13.0%—18.1%-506bps

Guidance

Deere lowered full-year EPS guidance by $0.25 at the high end (to $4.75–$5.25B) and reduced effective tax rate forecast; newly disclosed segment-level guides signal weak ag/construction demand and ~$600M tariff headwind, partially offset by improved Small Ag & Turf outlook.

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

New guidance

MetricPeriodGuideYoY
Production & Precision Ag Net SalesFY2025Down 15% to 20%—
Production & Precision Ag Operating MarginFY202515.5% to 17%—
Small Ag & Turf Net SalesFY2025Down ~10%—
Small Ag & Turf Operating MarginFY202512% to 13.5%—
Construction & Forestry Net SalesFY2025Down 10% to 15%—
Construction & Forestry Operating MarginFY20258.5% to 10%—
Tariff Cost Impact (Full Year 2025)FY2025~$600 million pre-tax—

Changes to prior guidance

MetricPeriodPrior guideNew guideΔResult
EPS (GAAP)
FY2025
$4.75 to $5.50$4.75 to $5.25-$0.25 reduction at high endLowered
Effective Tax Rate
FY2025
20% to 22%19% to 21%-1.0 to -1.0 percentage pointsLowered
Financial Services Net Income
FY2025
~$750 million~$770 million+$20 million (+2.7%)Raised

Reaffirmed unchanged this quarter: Operating Cash Flow (Equipment Operations) ($4.5 to $5.5 billion)

Segment KPIs

Q3 FY2025
SegmentQ3 FY2025YoY
Production & Precision Agriculture$4.273B-16.0%
Small Agriculture & Turf$3.025B-1.0%
Construction & Forestry$3.059B-5.0%
Financial Services$1.418B-5.0%

Other KPIs

Q3 FY2025
SegmentQ3 FY2025
Production & Precision Agriculture Operating Margin13.6%
Small Agriculture & Turf Operating Margin16.0%
Construction & Forestry Operating Margin7.7%
Financial Services Net Income$205 million
Full-Year Net Income Guidance$4.75 billion to $5.25 billion

Management tone

Tariff manageable → tariff structural → tariff defines FY ceiling → tariff drives segment-level margin reset

Three quarters ago tariffs were a "fluid environment" to monitor; last quarter the impact was sized at ~$500M; this quarter the bill is ~$600M with ~$300M concentrated in Q4 alone. The anchor quote: "our forecast for the pre-tax impact of tariffs in fiscal 2025 is now adjusted to nearly $600 million. The primary drivers for the change from last quarter are increased tariff rates on Europe, India, and steel and aluminum." The shift signals that tariffs have moved from a discrete macro headwind to the binding constraint on Deere's FY ceiling — every $100M of tariff inflation costs roughly $0.30 of GAAP EPS at the company's effective tax rate, which directly maps to the high-end cut.

Negative price as temporary channel work → persistent structural pricing pressure. Last quarter management said there was "not much opportunity for price mitigation" in FY25 with order books full; this quarter the framing hardens to active price defense: "The price actions that we took in the quarter were reflective of a need to be aggressive on price in the North American earth-moving market where competitive pressure has been tougher... In large ag, the negative price that you saw in the quarter was primarily driven by actions taken to address used inventory in North America." The shift signals price is now a tool for inventory management and share defense, not a margin lever — and the C&F margin guide cut to 8.5–10% is the financial manifestation.

Uncertainty as near-term noise → uncertainty as a structural constraint on customer behavior. The single most striking line of the call: "we currently have more uncertainty than ever in the North American ag market, which translates to the broadest range of outcomes for a following year than we've had in a long time." Last quarter management framed the headwind as policy-driven and fixable with tariff clarity; this quarter "more uncertainty than ever" admits that customers are now preserving optionality rather than committing — which delays not just the trough but the visibility into the trough.

Inventory reduction as a project nearing completion → inventory management as a sustained structural imperative. Last quarter Deere said the production cuts had positioned the company for the cycle turn; this quarter management commits to running "factories lean" and maintaining flexibility on an indefinite horizon: "Our disciplined approach to managing new inventory, along with our focus on used, positions us well as this cycle turns... we will continue to run our factories lean." The shift signals that the underproduction lever — ~10% in small ag and C&F in FY25 — is being framed as a permanent operating posture rather than a one-cycle adjustment, with implications for 2026 absorption.

Recurring themes management leaned on this quarter:

Structural cost discipline and inventory management as sources of future competitive advantageTariff costs as material headwind requiring offset through pricing and efficiencyRegional divergence: North America weakness versus Europe and India optimismUsed equipment inventory management as critical ongoing priorityTechnology adoption (PrecisionX, JDLink Boost, Operations Center) scaling despite market downturnPreservation of optionality and flexibility in response to elevated uncertainty

Risks management surfaced:

Tariff escalation and evolving global trade environment creating structural cost pressuresPersistent North American used equipment inventory overhang limiting new equipment demandElevated interest rates suppressing customer capital investment decisionsCommodity price weakness compressing grower margins, particularly cotton in Southeast U.S.Single-family housing starts and commercial real estate slowdown impacting construction demand

Q&A highlights

Tammy Zecoria · JP Morgan

How will production levels scale with retail demand in 2026? If retail sales grow 5-10%, will production grow similarly or more given underproduction in 2025?

Large ag will produce in line with retail (similar growth rates). Small ag and turf, and construction and forestry will have some lift building in line with retail, given 10% underproduction this year provides room for production growth beyond retail growth.

~10% under production in fiscal 2025 across segmentsSmall tractors <100 hp down 30% YoY, 15% sequentially in Q4Large ag expected to match retail growthSmall ag/turf/CNF will get incremental lift from underproduction catch-up

Kristen Owen · Oppenheimer

Break down the $600M full-year tariff impact by type (direct vs. steel/aluminum) and segment allocation. What non-regrettable mitigation actions have been taken?

Tariff impact increased from $500M to $600M (~$100M in Q2, $200M in Q3, $300M in Q4). Europe and steel combined ~50% of impact; adding India and Japan reaches ~67%. Mitigation includes USMCA certification in Mexico, no-regret sourcing decisions, and pricing embedded in early order programs. Stabilization needed before further actions.

$600M full-year tariff impact (revised up from $500M)Europe and steel: ~50% of impactEurope, steel, India, Japan combined: ~67% of impactKey drivers: higher reciprocal rate on Europe, steel 25% to 50%, higher India rate

Stephen Fisher · UBS

What is driving implied positive pricing in Q4? Is it tariff pass-through, removal of discounts on used sales incentives, or other factors? Can the market bear this higher pricing?

Q4 pricing lift comes from: (1) comparison to Q4 2024 when additional pool fund incentives were in place, (2) MY26 model pricing starting to ship (sprayers +4-4.5%, Brazil mid-single digits positive), and (3) Brazil pricing returned to positive after running negative last year. Market reception positive given demand signals.

MY26 sprayer pricing: 4-4.5% increaseBrazil MY26 pricing: mid-single digits positive (vs. negative last year)Q4 2024 had incremental pool fund incentives creating comparison benefitModel year 26 equipment starting shipments in Q4

Kyle Menges · Citigroup

Construction segment order book improving but pricing still competitive. Will price realization improve and turn positive in 2026? What pricing is embedded in the order book?

Q3 incentives drove retail sales up 18 months high. Pricing expected to moderate in Q4 as current incentive levels are accrued. Price stabilization expected in Q4. Contractors have strong backlog and work activity. Bonus depreciation could provide demand tailwind. Fundamentals solid despite pricing pressure.

North America earth moving retail up in Q3 (first up in ~18 months)Price competitive environment ongoingPrice moderation expected Q4Contractors have elevated backlogs and activity levels

Jeremy Nathan · Daiwa

Describe margin puts and takes for 2026 covering pricing, production, efficiencies given underproduction catch-up this year.

2026 tailwinds: production ramp to retail demand from underproduction catch-up, list pricing 2-4% in early order programs, large tractor pricing ~3%, tariff pricing beginning to flow in. Headwinds/controllables: continued focus on product cost reduction, production cost reduction, potential inflationary pressures, tariff regime uncertainty. Focus on factory efficiency and lean operations.

2026 list prices: 2-4% for early order programsLarge tractor MY26 pricing: ~3% YoYUnderproduction catch-up tailwind vs. 2025Tariff pricing capability improves in 2026 vs. 2025

Answers to last quarter's watch list

H2 PPA decrementals vs. the implied 80% setup. PPA operating margin compressed 920bps YoY to 13.6%, broadly tracking the H2 setup management telegraphed in Q2. The FY guide of 15.5–17% requires a Q4 step-up driven by MY26 pricing, and ex-tariff decrementals are running ~45% in the segment — so the underlying margin quality is better than the headline implies, but not enough to reset 2026 starting points higher.
Continue monitoring
Early order program pricing for model-year 2026. Management gave the cleanest quantification yet: MY26 list price increases of 2–4% in early order programs, large tractor MY26 at ~3%, sprayers at +4–4.5%, and Brazil MY26 mid-single-digits positive. Market reception described as positive. Pricing power is holding within a narrow band — meaningful enough to offset some tariff inflation but well short of fully recovering 4–5% incremental cost.
Resolved positively
Used inventory levels in North American large ag. Still no specific months-on-hand disclosure. Management reaffirmed used inventory as "priority number one" and acknowledged Q3 negative price was driven by actions to address it — but offered no quantified progress metric.
Continue monitoring
Whether the FY2025 net income range narrows or shifts. Narrowed and shifted down. The high end was cut by $250M (from $5.50B to $5.25B) while the low end held at $4.75B — confirming tariff exposure is settling toward the lower half of management's prior scenario set.
Resolved negatively
Financial Services net income tracking versus the ~$750M FY guide. Q3 came in at $205M, the FY guide was raised to ~$770M, and the segment is now the cleanest beat in the portfolio. The financing-demand worry from Q2 did not materialize.
Resolved positively
C&F margin trajectory. Resolved negatively and the worst outcome on the page. C&F operating margin printed 7.7% in Q3 (vs. 13.8% YoY), the new FY guide of 8.5–10% sits well below year-ago levels, and management explicitly cited "higher levels of tariff costs and lower price realization." This now looks more like a structural reset than cyclical compression.
Resolved negatively

What to watch into next quarter

Q4 PPA operating margin landing inside the 15.5–17% FY guide. Q3 printed 13.6%; the FY guide requires a sharp Q4 step-up driven by MY26 pricing. Anything below 17% in Q4 implies the FY lands at the low end of the band.

Whether the $600M FY tariff figure holds or moves again. This is the fourth revision in two quarters ($500M → $600M with composition changing on European reciprocal rates and steel doubling). A further upward revision in Q4 reset would directly pressure the $4.75B EPS floor.

C&F operating margin: does it stay above the new 8.5% floor? Q3 came in at 7.7% — already below the bottom of the new FY band. Q4 needs to deliver meaningfully above 8.5% to validate that the segment guide is realistic rather than aspirational.

First quantified 2026 framework on the Q4 call. Management explicitly declined to offer 2026 margin targets in Q3 Q&A despite multiple analyst attempts. The Q4 call is typically when initial FY26 guidance lands; the question is whether management commits to a range or hides behind "broadest range of outcomes in a long time."

Used inventory months-on-hand disclosure. Two consecutive quarters now of "priority number one" framing without a quantified metric. Any specific number in Q4 (months of supply, % YoY reduction) would be a material disclosure.

Small Ag & Turf as the cleanest segment. Q3 margin of 16.0% sits well above the 12–13.5% FY guide. Whether Q4 margin holds or compresses sharply will tell you if the improved-outlook signal is durable or whether the upgrade was front-loaded.

Sources

  1. Deere & Company Q3 FY2025 press release, filed with the SEC 2025-08-14: https://www.sec.gov/Archives/edgar/data/315189/000155837025011453/de-20250814xex99d1.htm
  2. Q3 FY2025 prepared remarks and Q&A.
  3. Tapebrief DE Q2-2025 brief for cross-quarter trajectory and tariff-impact baselines.

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