tapebrief
DE · Q3 2025

DE · Q4 2025 Earnings

Cautious

Deere & Company

Reported November 26, 2025

30-second summary

Q4 FY2025 revenue rose 11% YoY to $12.39B with GAAP EPS of $3.93, but the print is a sideshow — the story is the FY2026 guide. Management set FY2026 net income at $4.00–4.75B, below FY2025's actual $5.03B, with tariff expense doubling to ~$1.2B, effective tax rate jumping from 19–21% to 25–27%, and operating cash flow cut by $0.5B at both ends. Management explicitly called 2026 "the bottom of the large ag cycle" with sales at "less than 80% of mid-cycle levels" — a sharper trough framing than anything heard in 2025.

Headline numbers

EPS

Q4 FY2025

$3.93

Revenue

Q4 FY2025

$12.39B

+11.0% YoY

Operating margin

Q4 FY2025

10.9%

Key financials

Q4 FY2025
MetricQ4 FY2025YoYQ3 FY2025QoQ
Revenue$12.39B+11.0%$12.02B+3.1%
EPS$3.93—$4.75-17.3%
Operating margin10.9%—13.0%-214bps

Guidance

FY2026 earnings guidance significantly lowered across all metrics (EPS, cash flow, tax rate) with tariff expense doubling to ~$1.2B; only Financial Services net income guidance raised.

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
Direct Tariff Expense (Pre-Tax)FY2026~$1.2 billion—

Changes to prior guidance

MetricPeriodPrior guideNew guideΔResult
EPS (GAAP)
FY2026
$4.75 to $5.25 billion$4.00 to $4.75 billion-$0.50B to -$0.75B at high end; -$0.75B at low endLowered
Financial Services Net Income
FY2026
~$770 million~$830 million+$60 millionRaised
Operating Cash Flow (Equipment Operations)
FY2026
$4.5 to $5.5 billion$4.0 to $5.0 billion-$0.5B at both ends of rangeLowered
Effective Tax Rate
FY2026
19% to 21%25% to 27%+4 to +6 percentage pointsRaised

Segment KPIs

Q4 FY2025
SegmentQ4 FY2025YoY
Production & Precision Agriculture$4.74B+10.0%
Small Agriculture & Turf$2.457B+7.0%
Construction & Forestry$3.382B+27.0%
Financial Services$1.548B+2.0%

Other KPIs

Q4 FY2025
SegmentQ4 FY2025
Production & Precision Agriculture Operating Margin12.7%
Small Agriculture & Turf Operating Margin1.0%
Construction & Forestry Operating Margin10.3%
Financial Services Net Income$293 million
FY2026 Net Income Guidance$4.00B - $4.75B

Management tone

Tariff manageable → tariff structural → tariff defines FY ceiling → tariff doubles and management accepts a cycle trough.

Three quarters ago management framed tariffs as a "fluid environment" sized at ~$500M; last quarter the bill was ~$600M with management still emphasizing "controllables"; this quarter the FY2026 tariff bill is ~$1.2B and management explicitly calls 2026 "the bottom of the large ag cycle." The anchor quote from the call: "we believe this coming year will mark the bottom of the cycle." The shift signals that management has stopped trying to absorb tariff inflation through cost actions alone — the FY2026 guide concedes the math doesn't work, and the EPS floor that held all year ($4.75B) is now the new ceiling.

Pricing power as a lever → pricing power as a partial offset. In Q2 FY2025 management stepped off the price-mitigation lever; in Q3 FY2025 negative price was framed as inventory-management driven; this quarter the framing is more granular: North American large tractor list prices are up 3–4% in early order programs, but Brazil pricing is muted and overall PPA guidance price lands at 1.5%. Per the Q&A with Oppenheimer's Kristen Owen: parts mix is shifting up as the cycle weakens, and parts pricing was "more muted" for 2026. The shift signals that even where Deere has pricing power, geographic and product mix is suppressing realization — and management is not promising to fully recover the incremental $600M tariff exposure on price.

Technology as large-ag-centric → technology as multi-segment growth engine. The most strategically meaningful shift in the prepared narrative: "In 2025, we saw an amplification of technology leverage across nearly all production systems...this growth isn't confined to large ag." For two years the precision/autonomy story has been framed primarily through large row-crop applications; this quarter management explicitly extended it across small ag, construction, and autonomy. The shift signals a deliberate diversification of the structural margin story away from the cyclically depressed large ag segment — useful framing for a year when the core business is at "less than 80% of mid-cycle levels."

Lean production as one-cycle adjustment → lean production as the FY2026 starting posture. Last quarter management described running factories lean as a sustained imperative; this quarter the language is more specific: "we will enter the year lean from a production perspective, but with flexibility to allow us to respond swiftly as market demand inflects." Q1 FY2026 production slots were deliberately limited in response to "higher levels of uncertainty" last summer/fall, breaking from typical seasonal patterns. The shift signals management is not betting on a sharp demand inflection in the early year and is preserving optionality rather than scaling production into hope.

Recurring themes management leaned on this quarter:

Cycle bottom emerging with multiple demand tailwindsTechnology acceleration across all production systems and geographiesUsed inventory normalization enabling healthier trade ladderStructural diversification improving through-cycle resilienceLean production posture with optionality for inflectionSmall ag and construction forestry offsetting large ag weakness

Risks management surfaced:

Global commodity prices remain under pressure despite strong yields and consumptionTariff headwinds projected at $1.2 billion directly with additional indirect inflationary impactsRow crop farmer liquidity constraints despite healthy balance sheetsMarket demand velocity shifts and uncertainty in North American large agTrade agreement uncertainty between US and China impacting Brazil soybean demand

Q&A highlights

Robert Marlayson · Jefferies

How is management thinking about setting the $1.2B tariff headwind in 2026, and over what period will they recapture it? What is the cadence throughout the year?

The $1.2B represents $600M incremental tariff hit on top of $600M in 2025, spread roughly evenly at $300M per quarter. Management expects price-cost to be positive in 2026, allowing them to capture back the incremental tariff exposure and some of the 2025 exposure, though not fully. They will continue mitigation activities and expect to take additional pricing in the future.

$1.2B pre-tax tariff hit in 2026$600M incremental from 2025Roughly $300M per quarter tariff impactPrice-cost expected to be positive for full year 2026

Jamie Cook · Truist Securities

On Production and Precision Ag's 7% sales decline implying ~60% decremental margins, how much is attributable to tariffs? How does geographic mix (particularly Brazil profitability improvement) factor into the elevated decrementals?

Tariffs account for approximately 1.5 percentage points of margin impact, reducing decrementals to low-to-mid 50s when backed out. The remaining elevated decrementals are driven by negative geographic mix, as North America large ag (their most profitable market) is declining significantly while other improving regions have lower profitability.

PPA implied decremental margin: ~60%Tariff margin impact: ~1.5 percentage pointsDecrementals ex-tariffs: low-to-mid 50sNorth America large ag remains most profitable market

Kristin Owen · Oppenheimer

Large ag pricing guidance is 1.5%, but early order programs showed 3-4% list price increases. What explains the gap and how much is geographic mix driving this discrepancy?

The 1.5% reflects several factors: (1) Brazil pricing will be positive but more muted (~guide range) vs. mid-single digits in 2025; (2) Parts mix vs. complete goods is increasing as the cycle weakens, and parts pricing was more muted in 2026. The 3-4% list price increases in North America large tractors are accurate but are masked by geographic and product mix effects.

North America large tractor list price increases: 3-4%Overall guidance price: 1.5%Brazil pricing 2025: mid-single digit, 2026: closer to guide range (muted)Parts mix increasing relative to complete goods in declining cycle

Tim Theon · Raymond James

Excluding tariffs, what is management's outlook for production costs in 2026, given cost build-up observed throughout 2025?

Excluding the incremental $600M tariff impact, production costs are expected to be slightly unfavorable in 2026. Headwinds include: overhead unfavorability (especially large ag), North American labor step-up in the current contract (partially offset by lower profit sharing), and material costs slightly negative ex-tariffs (including indirect tariff impacts). However, price-cost is expected to be favorable for the full year, and management sees continued opportunity to take costs out through product and process improvements.

Production costs slightly unfavorable ex-tariffs in 2026Overhead headwinds, particularly in large agNorth American labor contract step-up in 2026Profit sharing favorability from lower income levels

David Rasso · Evercore ISI

Given flat Q1 implied by the full-year large ag guide, the rest of the year is down 9%. Will PPA be down every quarter? What is the pricing cadence to drive margin improvement later in the year without volume growth?

Management expects PPA to be down year-over-year in all quarters despite the seasonal pattern. Q1 will be weak due to lean production, but seasonality will normalize with typical Q2 ramp-up and particularly strong Q4 from shipment timing. Margins are expected to improve significantly from Q1 through the balance of the year, with Q2-Q4 margins expected to be north of 14% or around that level, reflecting more even performance through the remainder of the year.

PPA down year-over-year all quarters in 2026Q1 flat implied by full-year guide (weak)Q2 typical ramp-up with highest net sales and marginsQ4 particularly strong from shipment timing

Answers to last quarter's watch list

Q4 FY2025 PPA operating margin inside the 15.5–17% FY guide. Q4 FY2025 PPA op margin came in at 12.7%; FY2025 landed at ~15.4%, just below the band's low end. The implied Q4 step-up driven by MY26 pricing did not deliver.
Resolved negatively
Whether the $600M FY tariff figure held or moved. It held for FY2025 but doubled for FY2026 to ~$1.2B, with $300M per quarter cadence. The FY2026 EPS guide ($4.00–4.75B) is now meaningfully below the FY2025 $4.75B floor that held all year, validating that escalating tariff exposure broke the floor.
Resolved negatively
C&F operating margin: above the 8.5% floor? Q4 FY2025 C&F operating margin was 10.3% — above the high end of the FY2025 8.5–10% band, with revenue +27% YoY. The structural-reset concern from Q3 FY2025 did not extend into Q4, and C&F finished as the cleanest equipment segment.
Resolved positively
First quantified FY2026 framework. Management committed to a full FY2026 range: $4.00–4.75B net income, $4.0–5.0B equipment-ops operating cash flow, 25–27% tax rate, ~$830M FS net income, ~$1.2B tariff expense, plus segment margin bands (PPA 11–13%, S&T 12.5–14%, C&F 8–10%). Management framed 2026 as the cycle bottom with midpoint EPS "less than 80% of mid-cycle levels." Status: Resolved positively (on the disclosure question; negatively on the implied earnings level)
Used inventory months-on-hand disclosure. Management quantified MY22/MY23 used 8R tractor inventory as reduced by "a mid-teens percentage" in Q4 FY2025 — the first specific quantification after three quarters of generic "priority number one" framing. Not a months-on-hand figure, but the first real datapoint on progress.
Resolved positively
Small Ag & Turf as the cleanest segment. Q4 FY2025 S&T operating margin collapsed to 1.0%. The FY2025 band of 12–13.5% held only because the first three quarters carried the average. The "cleanest segment" framing was indeed front-loaded — Q4 erased the constructive read.
Resolved negatively

What to watch into next quarter

Q1 FY2026 PPA operating margin floor. Management explicitly flagged Q1 as the weak quarter due to lean production, with Q2–Q4 expected "north of ~14%." Anything below the low single digits management flagged for Q1 would imply the Q2–Q4 path requires a level of recovery that hasn't been demonstrated.

Whether the $1.2B FY2026 tariff figure holds. The FY2025 tariff bill was revised multiple times ($500M → $600M with composition changes). Any upward revision to the $1.2B FY2026 figure in Q1 directly pressures the $4.00B EPS floor.

S&T margin recovery from 1.0%. Q4 FY2025 S&T print of 1.0% is the most uncomfortable number on the page. Whether Q1 FY2026 returns to double-digits or confirms a structural reset is the cleanest read on whether the FY2026 12.5–14% margin guide is achievable.

Effective tax rate trajectory. The 25–27% FY2026 range is 600bps above FY2025's 19–21%. Management cited fewer discrete items and less-favorable geographic mix (higher share of income from outside the U.S.). Q1 FY2026 will reveal whether this is a one-year step-up or a new baseline.

Price-cost positivity actually delivering in the print. Management has committed to positive FY2026 price-cost as the recovery mechanism for incremental tariff exposure. Q1 FY2026 is when that arithmetic first gets tested against MY26 pricing realization at the dealer level.

Order book velocity for spring early order programs. Management explicitly said "velocity can shift as market conditions change" on the MY26 row crop tractor orders within forecast range. Any commentary on EOP cancellations or accelerated bookings in Q1 FY2026 will signal whether the "cycle bottom" framing holds.

Sources

  1. Deere & Company Q4 FY2025 press release, filed with the SEC 2025-11-26: https://www.sec.gov/Archives/edgar/data/315189/000110465925116130/de-20251126xex99d1.htm
  2. Deere & Company Q4 FY2025 earnings call prepared remarks and Q&A, 2025-11-26.
  3. Tapebrief DE Q3 FY2025 and Q2 FY2025 briefs for cross-quarter trajectory on tariff exposure, guidance arc, and segment margin baselines.

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