How does the $272M IEEPA refund break down across the segments?

Full-year tariff run-rate expense unchanged at ~$1.2B, split ~45% C&F, ~1/3 SAT, ~20% large ag. The $272M refund (~1 point full-year equipment-ops tailwind) splits ~50% C&F, ~30% SAT, ~20% large ag. “About 50% of the refund went to the Construction and Forest division, about 30% to small ag and turf and then the remaining 20% into the large ag business.”

With no offsetting pricing, what mitigation actions is Deere taking and what more is to come?

Price forecast of 1.5%-2% matches ex-tariff inflation, so tariffs are dilutive; Deere is not surcharging customers and instead pursues resourcing, reshoring, exemption submissions, and USMCA compliance, expecting to largely counter the tariff impact through cost measures. “we are not surcharging our customers on tariffs... we are focusing on reducing our tariff exposure through cost actions”

How to frame downside risk to regional outlooks in an abnormal geopolitical environment, and any historical reference for farmer behavior?

Elevated fleet age and much healthier used inventory (MY22-23 tractors down ~45% from peak) set up replacement demand; grower margins are pressured, acutely in Brazil, but the baseline remains 2027 recovery. Seibert added US farmers locked in inputs and have seen corn/soybean prices up ~20% since August, so their setup looks better than at peak uncertainty. “our expectation still as a baseline... is that we see recovery in 2027”

Deere & Company (DE) Q2 FY26 earnings call: guidance and Q&A

Q: With industry earthmoving guided up only 5% but Deere sales growing much faster, is Deere gaining share?

Prior-year underproduction in earthmoving creates a natural lift as Deere now builds to retail demand; industry (earthmoving up 5%, road building strength) is additive; and Deere has picked up share over the past 6-12 months after pricing adjustments. “we have seen some pickup in share over the past 12 months particularly in the last 6 or so as we've made some pricing adjustments during the last year”

Earnings call· May 2026 (Q2 FY26)· Industrials· May 21, 2026

Source: earnings call transcript

Executive summary

Deere & Company Q2 FY26 — Portfolio diversification and a one-time tariff refund hold enterprise guidance despite large-ag trough

Deere is managing the large-ag trough with all three segments at different cycle points — large ag below trough, small ag/turf mid-cycle, C&F above mid-cycle — letting construction and turf strength offset ag weakness. A one-time IEEPA tariff refund and disciplined inventory management underpin a reaffirmed enterprise outlook, while management frames FY26 as the ag-cycle bottom with recovery expected in 2027.

Highlights

Equipment operations margin of 16.9% with net sales up 5% to $11.778B; net income $1.773B ($6.55 diluted EPS)
Small Ag & Turf net sales up 16% to $3.485B at a 20.6% operating margin ($719M profit)
Construction & Forestry net sales up 29% to $3.79B; C&F order book up more than 60% since November, highest since April 2024, with over 80% of production slots filled
Meaningful ag inventory progress — NA high-horsepower tractor and combine new inventory down more than 50% from the mid-2024 peak; model-year '22–'23 used tractors down ~45% from last year's peak
Financial services FY26 net income outlook raised to $860M; C&F full-year net sales guide raised to up ~20% and margin to 10%-12%

Concerns

Production & Precision Ag net sales fell 14% to $4.503B on lower shipment volumes; large-ag US/Canada industry still guided down 15%-20%
South America ag industry outlook cut to down ~15% from down ~5% on Brazil grower-margin pressure (strong real, high rates, fertilizer inflation)
Direct tariff exposure ~$1.2B for the year (~3% margin headwind); net of the $272M refund ~$900M of tariff cost remains
Higher year-over-year production costs — ~$200M direct tariff expense in the quarter plus higher material and freight costs
Muted large-ag customer sentiment; input-cost inflation from the Iran conflict (fuel, fertilizer) pressuring grower margins

Guidance & targets

Category	Target	Timeline	Confidence
Full-year enterprise net income	$4.5B-$5.0B high materiality	FY26	High
Effective tax rate	24%-26% medium materiality	FY26	High
Cash flow from equipment operations	$4.5B-$5.5B high materiality	FY26	High
Production & Precision Ag full-year net sales	down 5% to 10% medium materiality	FY26	High
Production & Precision Ag full-year operating margin	11%-13% medium materiality	FY26	High
Small Ag & Turf full-year net sales	up approximately 15% medium materiality	FY26	High
Small Ag & Turf full-year operating margin	13.5%-15% medium materiality	FY26	High
Construction & Forestry full-year net sales	up approximately 20% high materiality	FY26	High
Construction & Forestry full-year operating margin	10%-12% medium materiality	FY26	High
Worldwide financial services net income	$860M medium materiality	FY26	High
Equipment operations net price realization	1.5%-2% medium materiality	FY26	Medium
Full-year direct tariff cost	~$1.2B gross (~3% margin headwind); ~$900M net of refunds high materiality	FY26	Medium
Large ag equipment industry sales (US & Canada)	decline 15% to 20% high materiality	FY26	Medium
Small ag & turf industry demand (US & Canada)	flat to up 5% medium materiality	FY26	Medium
European ag industry demand	flat to up 5% medium materiality	FY26	Medium
South America ag industry sales (tractors & combines)	decline about 15% high materiality	FY26	Medium
Asia ag industry sales	roughly flat year-over-year low materiality	FY26	Low
C&F earthmoving industry sales (US & Canada)	up around 5% (construction and compact construction equipment) medium materiality	FY26	Medium
Global forestry industry sales	decline 5% low materiality	FY26	Low
Global road building industry sales	grow approximately 10% medium materiality	FY26	Medium
Enterprise top-line growth	more than 5% medium materiality	FY26	Medium
Second-half revenue and cost cadence	slightly higher revenue in back half, Q4 higher than Q3; most favorable cost comparisons in Q4 low materiality	H2 FY26	Medium

Segment performance

Segment	Revenue	YoY	QoQ	Margin
Production & Precision Ag Decline driven primarily by lower shipment volumes and higher production costs, partially offset by favorable currency; volume weakness reflects the large-ag downturn. Price realization: +~1 pointCurrency translation: +~3 points	$4.503B	-14%	—	$706M operating profit; 15.7% operating margin
Small Ag & Turf Higher shipment volumes and favorable price realization drove the improvement; SAT strength (turf recovery, strong dairy/livestock margins) helps offset large-ag pressure. Price realization: +~1.5 pointsCurrency translation: +~2.5 points	$3.485B	+16%	—	$719M operating profit; 20.6% operating margin
Construction & Forestry Higher shipment volumes and favorable price realization (particularly strong in road building), partially offset by unfavorable production cost; end-market strength led to raised full-year guides. Price realization: +>2.5 pointsCurrency translation: +>3 points	$3.79B	+29%	—	$561M operating profit; 14.8% operating margin
Worldwide Financial Services Increase from favorable financing spreads and favorable derivative valuation adjustments, partially offset by a lower average portfolio. FY26 net income outlook raised to $860M	—	up YoY	—	$190M net income attributable to Deere
Brazil (geography, within large ag) Small/midsized tractors more resilient; large tractors and combines declined more than the industry. Deere plans to underproduce retail demand, most notably in combines. Market-share growth across all tractor categoriesStrong position maintained in combinesPositive price realization	—	Deere retail down less than industry (industry ~-15% over 6 months)	—	double-digit margins even at trough levels

DE operating KPIs by quarter

DE operating KPIs stated on its earnings calls, by fiscal quarter
KPI	Feb 2025 Q1 FY25	Aug 2025 Q3 FY25	Nov 2025 Q4 FY25	Feb 2026 Q1 FY26	This call May 2026 Q2 FY26	Jul 2026 Q3 FY26	Change vs prior quarter
Engaged acres	455M+ On engaged acres, maybe just to talk about the numbers, we're over 455 million globally year-over-year, that's up about 15%. Source: earnings call transcript	485M+ That's contributing to overall engaged acre growth, where we've now surpassed 485 million acres across the globe, 30% of which are highly engaged. Source: earnings call transcript	500M+ The John Deere operations center now covers over 500 million engaged acres, a 10% increase from last year. Source: earnings call transcript	500M Maybe stepping back to, as we think about just overall tech adoption and our conversations around are recovering acres with more dear technology, our engaged acres stepped up again this quarter or 500 million engaged acres. Source: earnings call transcript	—	520M+ We now have more than 520 million engaged acres across nearly 1.2 million connected machines. Source: earnings call transcript	—
Monthly active digital users	—	—	—	—	<440K Additionally, the quantity of monthly active digital users continues to grow, now reaching nearly 440,000. Source: earnings call transcript	450K+ Today, more than 450,000 unique active monthly digital users are engaging with our tools, reinforcing the growing importance of data-driven decisions across the farm. Source: earnings call transcript	—

Operating figures the company stated on at least two of the calls shown, checked against each call's transcript. Click a figure to read the sentence. A dash means it was not stated that quarter.

Orderbook & backlog

Construction & Forestry order book (US & Canada) up more than 60% since November; over 80% of production slots filled for the year Q2 FY26

highest level since April 2024

Supported by infrastructure, rental, and data-center demand; management expects incremental demand to extend into 2027.

New John Deere excavator production slots nearly all production slots spoken for Q2 FY26

Strong demand following CONEXPO 2026 launch.

Large ag order books (North America large tractors) well into the fourth quarter Q2 FY26

Order books healthy and consistent with retail-driven production plans as Deere closes out MY26 production.

Europe and Brazil order visibility extends through the third quarter and into the fourth Q2 FY26

Brazil expected to underproduce retail demand, most notably in combines.

Product announcements

Product	Type	Timeline
New John Deere 8-series ADAR/ADAR X tractors (440, 490, 540 HP)	launch	launched over the past year
See & Spray (Green-on-Green) and See & Scout	expansion	See & Spray Green-on-Green for Brazil next year; See & Scout recently announced
Furrow-optimization planting suite (Exact Depth, FurrowVision, Exact Shot, Exact Rate)	launch	recently released
New John Deere excavator (with Tina virtual superintendent + Operations Center)	launch	showcased at CONEXPO 2026; production ramping in FY26
Casa John Deere Brazil product launch (20+ products across ag and construction)	launch	earlier this quarter (Q2 FY26)

Deals & partnerships

Tenna acquisition (technology — Tina virtual superintendent)

Tenna acquisition, highlighted last quarter alongside the new excavator launch, underpins the 'Tina' virtual superintendent within the integrated job-site vision and Operations Center.

Starlink (SpaceX) partnership (satellite-based connectivity)

Provides reliable data access in areas with limited or no cell coverage across Deere's global footprint, powering JDLink Boost connectivity.

Capital programs

Kernersville, North Carolina excavator manufacturing expansion underway (production started) $70M expansion investment

Start: began building this quarter (Q2 FY26)

Benefit:US-designed and manufactured Deere excavators for the market

Recently started building Deere-designed excavators following the $70M expansion; part of the broader domestic-manufacturing commitment.

US manufacturing investment commitment underway (reiterated commitment) $20B

Start: ongoing

Benefit:expanded US domestic manufacturing footprint

Reaffirmed commitment toward $20 billion of US manufacturing investment over the next 10 years.

Risks & headwinds

Tariff cost exposure (IEEPA invalidation, new Section 122, Section 232 adjustments) FY26 and beyond

~$1.2B full-year direct exposure (~3% margin headwind); ~$900M net of the $272M refund; ~$200M direct tariff expense in the quarter

Mitigation:No customer surcharges; resourcing, reshoring, exemption/certification submissions, USMCA compliance, and cost reductions; ~80% of US complete goods made domestically.

Input-cost inflation from the Iran conflict (fuel, fertilizer) near term (started over the past quarter)

not quantified in dollars; contributing to higher inflation across the ag economy

Mitigation:North America/Europe growers largely purchased inputs ahead of the spring planting season at lower costs; higher commodity prices relieve some pressure.

Brazil / South America grower-margin pressure through remainder of FY26; acute ahead of September planting

South America industry outlook cut to down ~15% (from down ~5%); industry tractors/combines down ~15% over 6 months

Mitigation:Underproduce retail (especially combines); market-share gains, positive price, double-digit Brazil margins even at trough; strong dealer channel and owner equity.

Large-ag cycle downturn / muted customer sentiment FY26 (viewed as cycle bottom; recovery expected 2027)

large ag US/Canada industry expected down 15%-20%; PPA net sales down 14% in Q2

Mitigation:Tight new-inventory management, used-inventory reduction, through-cycle product/tech investment driving share gains; replacement demand building from aging fleet.

Higher production, material, and freight costs Q2 FY26; comps improve in back half

remainder of production-cost headwind (beyond ~$200M direct tariff) largely from higher material and freight costs

Mitigation:Back-half favorable comps as Deere laps prior-year tariff and indirect inflation; better Q4 overhead absorption on higher large-ag production.

Elevated interest rates and stronger Brazilian real near term / FY26

not quantified; reduced expectations for additional Brazil rate cuts given anticipated inflation

Mitigation:Financial services credit provision improved; dealers managing high-rate environment profitably with strong owner equity.

Q&A highlights

With industry earthmoving guided up only 5% but Deere sales growing much faster, is Deere gaining share?

Prior-year underproduction in earthmoving creates a natural lift as Deere now builds to retail demand; industry (earthmoving up 5%, road building strength) is additive; and Deere has picked up share over the past 6-12 months after pricing adjustments.

“we have seen some pickup in share over the past 12 months particularly in the last 6 or so as we've made some pricing adjustments during the last year”

asked by Paddy Bogart · answered by Josh Beal

3 min read 7 chapters

Detailed narrative

Diversified portfolio operating at three cycle points

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.

One-time IEEPA tariff refund and net tariff exposure

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.

Large-ag cycle bottom and inventory management

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.

Construction & Forestry strength and data-center demand

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.

Brazil and South America dynamics

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.

Precision Ag technology stack and adoption

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.

Capital allocation and US manufacturing commitment

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.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.