Agricultural and construction machinery company Deere (NYSE: DE) reported revenue ahead of Wall Street’s expectations in Q1 CY2026, with sales up 4.7% year on year to $13.37 billion. Its non-GAAP profit of $6.55 per share was 15% above analysts’ consensus estimates.
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Deere (DE) Q1 CY2026 Highlights:
- Revenue: $13.37 billion vs analyst estimates of $13.05 billion (4.7% year-on-year growth, 2.5% beat)
- Adjusted EPS: $6.55 vs analyst estimates of $5.70 (15% beat)
- Adjusted EBITDA: $3.60 billion vs analyst estimates of $2.32 billion (26.9% margin, 55.1% beat)
- Operating Margin: 17.6%, in line with the same quarter last year
- Market Capitalization: $143.5 billion
StockStory’s Take
Deere’s first quarter results outpaced Wall Street expectations on both revenue and profit, yet the market responded negatively, with shares declining sharply. Management attributed the quarter’s performance to strong demand in construction and small agriculture equipment, alongside positive impacts from one-time tariff refunds. However, elevated production costs and persistent margin headwinds, especially in the large agriculture segment, weighed on operating profitability. CFO Josh Beal emphasized, “Our second quarter came in largely in line with expectations for both top line and margin across all business segments, with the overall equipment operations achieving margins of 16.9%.”
Looking ahead, management is cautious about near-term agricultural market recovery, citing ongoing high input costs, volatile commodity prices, and uncertain geopolitical dynamics as risks. Deere aims to offset these pressures through disciplined inventory management, continued investment in advanced technology, and targeted cost reductions. CFO Josh Beal noted, “We are not surcharging our customers on tariffs…we will largely counter the negative financial impact of tariffs over the coming periods through cost measures.” Management continues to highlight the long-term opportunity for recovery, particularly as fleet ages increase and replacement demand builds.
Key Insights from Management’s Remarks
Management highlighted the impact of one-time tariff refunds, segment-specific demand trends, and a dynamic cost environment as primary factors shaping the quarter’s results and future outlook.
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Tariff refund benefit: A one-time $272 million refund related to IEEPA tariffs boosted margins by nearly 2.5 percentage points this quarter, particularly benefiting the construction and forestry segment. Management indicated this refund is not expected to recur, and ongoing tariff costs remain a structural headwind.
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Construction and road building strength: Robust infrastructure spending and rental fleet replacement drove strong demand in the construction and forestry business, with higher shipment volumes and positive price realization supporting improved profitability. Data center construction and road building were cited as particularly healthy end markets.
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Small Ag and Turf recovery: The small agriculture and turf division benefited from a rebound in turf markets and healthy margins in dairy and livestock operations. Higher shipment volumes and stable demand helped offset weaker performance in large agriculture.
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Large Ag headwinds persist: The large agriculture segment continued to face muted customer sentiment due to elevated input costs, high interest rates, and volatile commodity prices, especially in Brazil. Improved inventory management and new product introductions helped mitigate some pressure, but replacement demand remains tied to future market recovery.
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Precision technology and connectivity: Deere continued to launch new high-horsepower tractors and expand its precision agriculture technology stack, including advanced planting solutions and See & Spray systems. Enhanced connectivity through partnerships like Starlink and growth in digital platform adoption signal ongoing investment in higher-margin, recurring revenue streams.
Drivers of Future Performance
Deere’s outlook is shaped by ongoing margin and demand uncertainty, with management focused on cost mitigation, technology investment, and disciplined production as key levers for the remainder of the year.
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Tariff and input cost management: Management expects approximately $900 million in annual tariff costs to remain a margin headwind, with mitigation efforts centered on cost savings, product sourcing adjustments, and exemption submissions. The company does not plan to offset tariffs through customer surcharges, instead focusing on internal efficiencies.
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Segment performance divergence: The construction and forestry business is expected to maintain momentum, supported by robust infrastructure and data center investment, while large agriculture is forecasted to remain at the bottom of the cycle. Small ag and turf are projected to see steady demand, but large ag recovery depends on improvements in farmer sentiment and input cost stabilization.
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Technology-driven recurring revenue: Deere’s ongoing investment in precision agriculture and digital solutions is expected to drive future revenue, with management noting increased adoption rates of connected products and higher renewal rates for subscription-based services. These technology enhancements aim to improve customer productivity and support a transition toward less cyclical, higher-margin revenue streams.
Catalysts in Upcoming Quarters
Looking ahead, the StockStory team will be monitoring (1) Deere’s ability to manage persistent tariff and input cost pressures while sustaining profitability, (2) signs of recovery in large agriculture equipment demand as fleet replacement cycles progress, and (3) continued progress in expanding precision agriculture technology adoption and digital platform engagement. Execution in these areas will be critical for supporting long-term growth and margin improvement.
Deere currently trades at $531.80, down from $560.46 just before the earnings. Is there an opportunity in the stock?Find out in our full research report (it’s free).
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