Deere Reports $1.38 Billion Quarterly Profit as Farm Equipment Market Faces Pressure

Deere & Company reported net income of $1.379 billion for its fiscal third quarter ended August 2, 2026, up 7% from $1.289 billion a year earlier. Diluted earnings per share rose to $5.10 from $4.75, while worldwide net sales and revenues increased 5% to $12.608 billion.

The stronger quarter did not erase the pressure in Deere’s biggest agricultural machinery business. Production & Precision Agriculture net sales fell 6% to $3.998 billion, and operating profit in the segment declined 9% to $527 million. Deere said lower shipment volumes weighed on the division, partly offset by favorable pricing and foreign-currency effects.

In its third-quarter earnings materials, Deere raised the lower end of its fiscal 2026 net-income forecast to $4.75 billion from $4.5 billion, while keeping the upper end at $5.0 billion. Management also repeated its view that 2026 will mark the bottom of the current agricultural equipment cycle, a forecast it tied to early order trends, improving used-equipment inventories and greater adoption of its technology.

Large farm equipment remains the weak point

Deere’s own industry outlook shows why the company is still cautious about the large-equipment market. It expects unit sales of large agricultural equipment in the United States and Canada to fall 15% to 20% in fiscal 2026. The same decline is forecast for tractors and combines in South America, while European agricultural equipment demand is expected to be flat. By contrast, the U.S. and Canadian small agriculture and turf market is forecast to range from flat to up 5%.

The latest retail-sales indicators in Deere’s presentation point to particularly weak demand for some of the most expensive machines. On a rolling three-month basis through July, U.S. and Canadian industry sales of four-wheel-drive tractors were down 34%, combine sales were down 20%, and sales of two-wheel-drive tractors above 100 PTO horsepower were down 7%. Deere’s dealer inventories of larger two-wheel-drive tractors were equivalent to 33% of trailing 12-month retail sales, compared with 31% a year earlier, while combine inventories edged down to 25% from 26%.

The broader U.S. farm-income picture is mixed rather than uniformly weak. The U.S. Department of Agriculture’s 2026 farm-sector forecast puts net farm income at $153.4 billion, down 0.7% from 2025 in nominal terms and 2.6% after adjusting for inflation. Total farm cash receipts are forecast to decline 2.7% to $514.7 billion, even though crop receipts are expected to rise 1.2% in nominal dollars. Production expenses are forecast to increase 1.0% to $477.7 billion.

Those figures help explain why a recovery in farm machinery can lag improvements in selected areas of agricultural income. Large tractors, combines and precision equipment represent major capital purchases, and Deere itself identifies farm income, crop and livestock prices, interest rates, trade conditions and dealer inventories among the factors that shape the agricultural equipment cycle. The company has not said that a broad recovery is already under way. Its current position is narrower: it believes the trough is being reached in 2026 and sees early ordering and used-equipment trends as encouraging signs.

Construction and smaller equipment carry more of the quarter

Strength outside large production agriculture provided the main counterweight. Small Agriculture & Turf net sales rose 12% to $3.383 billion, while operating profit increased 28% to $622 million. The segment’s operating margin widened to 18.4% from 16.0%. Deere attributed the sales increase to higher shipment volumes and favorable price realization, with stronger volume and mix also supporting profit.

Construction & Forestry produced an even larger percentage improvement. Net sales increased 18% to $3.618 billion and operating profit rose 84% to $436 million. The operating margin climbed to 12.1% from 7.7%. Deere said higher shipment volumes and pricing helped sales, while favorable price realization was the main positive factor for operating profit, partly offset by higher selling, administrative, research and development costs.

Financial Services also contributed modestly more profit, with quarterly net income rising 7% to $219 million from $205 million. Across the company, total operating profit before reconciling items and income taxes increased 18% to $1.856 billion.

The quarter also included $110 million of tariff recoveries, bringing recoveries for the first nine months of fiscal 2026 to $382 million. Deere said the tariff impact for its operating segments is primarily reflected in production costs. The company continues to identify trade-policy uncertainty and tariffs as risks, so the recoveries should not be read as evidence that tariff exposure has disappeared.

The stronger performance from construction and smaller equipment has helped Deere absorb part of the large-agriculture downturn. That diversification is visible in the year-to-date numbers as well, although it has not fully closed the gap with last year. Net income for the first nine months of fiscal 2026 was $3.808 billion, down 4% from $3.962 billion in the comparable 2025 period, even as total net sales and revenues rose 7% to $35.589 billion.

Guidance improves, but the farm recovery is still a forecast

Deere now expects fiscal 2026 net income of $4.75 billion to $5.0 billion. The revised range lifts the lower end from the $4.5 billion forecast issued after the second quarter. Equipment-operations net cash flow is forecast at $5.0 billion to $5.5 billion, and capital spending is expected to be about $1.3 billion.

The segment outlook still shows a sharp split across the portfolio. Deere expects full-year Production & Precision Agriculture net sales to decline about 10%, with an operating margin of 11% to 12%, compared with a 15.4% margin in fiscal 2025. Small Agriculture & Turf sales are forecast to rise about 15%, while Construction & Forestry sales are expected to increase about 20%.

That means the improved company-level profit outlook does not depend on a return to strong large-farm-equipment demand before the fiscal year ends. Deere is instead relying on stronger businesses elsewhere in the portfolio, pricing, disciplined production and what management sees as the early stages of stabilization in agricultural equipment.

The distinction matters because Deere’s statement that 2026 will be the bottom of the cycle is management’s outlook, not a confirmed turn in demand. The company still forecasts double-digit declines in large-ag unit sales in its two most important agricultural regions, and recent retail data remain weak for combines and four-wheel-drive tractors.

Deere has scheduled its fourth-quarter 2026 earnings call for November 25 at 9:00 a.m. Central Time. That update will provide the next company-wide look at whether the early order trends Deere is citing are translating into firmer demand for large agricultural equipment.