DEERE & Q2 FY26 earnings call DE

Management's central theme is cross-segment diversification: large ag is operating below trough, small ag & turf is progressing toward mid-cycle, and Construction & Forestry sits slightly above mid-cycle. All three delivered double-digit margins in the quarter, with enterprise equipment-operations margin of 16.9%. The company maintained its overall fiscal-2026 net income outlook while progressing toward its 2030 LEAP ambitions outlined at the December NYSE investor event. Brent Norwood emphasized structurally higher profitability versus prior comparable cycle points despite the tariff headwind^🌐.

Deere recognized a $272 million recovery for refund claims associated with IEEPA tariffs, filed and accepted by U.S. Customs and Border Protection, which benefited production cost and lifted margins by nearly 2.5 points in the quarter (about 1 point of full-year tailwind). After the Supreme Court ruling invalidated IEEPA tariffs, introduced Section 122 tariffs, and adjusted Section 232, full-year direct tariff exposure remains ~$1.2 billion (~3% margin headwind); net of the refund, guidance embeds ~$900 million of tariff cost. Excluding the refund, direct tariff expense was ~$200 million of headwind in the quarter, with the rest from higher material and freight costs.

Management reiterated the baseline view that 2026 represents the bottom of the ag cycle, with recovery expected to begin in 2027. New large-ag inventory in North America remains favorable — high-horsepower tractors and combines are down more than 50% from their mid-2024 peak, with inventory-to-sales ratios in line with historical averages. Used inventory is down mid-teens from the March 2024 peak; model-year '22–'23 used high-horsepower tractors are down ~45% from last year's peak. Sprayer used inventory is down ~30% and planter inventory ~50%. The company plans to produce in line with retail demand and underproduce retail in Brazil, most notably combines.

C&F net sales rose 29% to $3.79 billion on higher volumes and favorable price and currency. The US/Canada order book is up more than 60% since November — its highest level since April 2024 — with over 80% of production slots filled for the year, and nearly all slots for the new John Deere excavator spoken for. Data-center construction is expected to top $100 billion in 2026 with additional double-digit growth into 2027, benefiting site-prep, water, and utility contractors. Road building performance was described as stellar, prompting an increase in the segment industry guide.

The South America ag industry outlook was cut to down ~15% (from down ~5%) on incremental Brazil softness, with large tractors and combines declining more than the industry and small/midsized tractors more resilient. The Iran conflict hit Brazilian growers at a sensitive point ahead of September planting, with more exposure to spot input prices, high interest rates, and a strengthening real pressuring grower margins. Despite this, Deere cited continued market-share growth across all tractor categories, positive price realization, and double-digit margins in Brazil even at trough levels.

Deere launched six new 8-series (ADAR/ADAR X) tractors with 440-, 490-, and 540-horsepower JD14-powered options, plus planting solutions (Exact Depth, FurrowVision downforce automation, Exact Shot, Exact Rate) and See & Spray expansion to wheat, barley, and canola with a new See & Scout capability. See & Spray acreage scaled to 5 million acres (from 1 million in year one), demonstrating 50%-60% herbicide savings. Precision Essentials renewals run ~70% overall and over 90% for the second-year cohort. Harvest-settings automation utilization exceeded 60% in the Northern Hemisphere and over 80% in Brazil. JDLink Boost via the Starlink partnership passed 12,500 kits with 25% growth in the quarter; monthly active digital users reached nearly 440,000 and engaged acres rose ~10% YoY.

The company returned $635 million to shareholders in the quarter through share repurchases and dividends. Deere reiterated a commitment to $20 billion of US manufacturing investment over 10 years, and this quarter began building Deere-designed excavators in Kernersville, North Carolina following a $70 million expansion. Roughly 80% of US complete-good sales are produced at US facilities, and ~75% of components used there are sourced from US-based suppliers.