Deere Q1 2026 Earnings: Revenue Rises 13%, Cycle Bottom Called, Construction Surges

Deere & Company (DE) posted Q1 2026 net sales and revenues of $9.6 billion, a 13% increase year-over-year, with equipment operations revenue climbing 18% to $8 billion. Net income reached $656 million, or $2.42 per diluted share. Every reporting segment exceeded expectations, and management characterized 2026 as the bottom of the current agricultural cycle, citing improving order velocity, normalizing used inventory, and a construction order bank at its highest level in nearly two years.

Construction & Forestry Leads the Quarter

Construction & Forestry sales jumped 34% to $2.7 billion, making it the standout segment of the quarter. The division's order bank rose over 50% in a single quarter, reaching its highest level since May 2024. That order bank acceleration is a forward-looking signal: contractors and rental companies are placing equipment orders well ahead of delivery, a behavior that typically precedes sustained volume growth.

The demand drivers are broad-based. Infrastructure spending tied to federal programs, data center construction activity, and rental fleet re-fleeting are all contributing to the acceleration. Rental companies, in particular, have been deferring fleet replacement for several quarters and are now re-entering the market as fleet age and utilization rates climb.

Deere raised its full-year Construction & Forestry net sales forecast to up approximately 15%, with operating margins expected between 9% and 11%. The guidance raise reflects both the strong order bank and the segment's production ramp capacity heading into the second half of fiscal 2026.

New Excavator Line and the Tenna Acquisition

Deere announced its first fully Deere-designed and North Carolina-built 20-ton class excavator line. The machines target approximately 40% of the North American construction equipment market, a segment where Deere previously relied on third-party designs. Bringing excavator development fully in-house gives Deere greater control over product differentiation, cost structure, and technology integration across the platform.

Deere also completed the acquisition of Tenna, a construction fleet management and workflow digitization platform. The acquisition extends Deere's presence in the construction vertical beyond hardware, into software services that carry recurring revenue characteristics. Fleet management data, covering asset utilization, location, and maintenance status, is increasingly central to how large contractors manage capital allocation decisions.

Large Ag: Contraction Continues, Leading Indicators Shift

The agricultural equipment picture is more complex. The North American Large Ag industry is still expected to decline 15-20% in fiscal 2026, reflecting the prolonged digestion of the 2021-2022 equipment supercycle. Farmer net income remains under pressure from lower commodity prices, and new large equipment volumes remain well below the cycle peak.

Even so, order signals are improving. Deere reported better large tractor order velocity and rolling order books with visibility extending into Q4 of fiscal 2026. Management's characterization of 2026 as the cycle bottom is tied to these leading indicators rather than current-period volumes. A cycle bottom is defined by the rate of change flipping direction, not by volumes returning to prior highs.

Small Ag & Turf Outperforms

Small Ag & Turf delivered a notably strong quarter, with sales growing 24% to $2.2 billion and an operating margin of 9%. The segment benefited from improved dealer inventory positioning and a recovery in turf and compact utility equipment demand. The 24% growth rate stands in sharp contrast to the ongoing headwinds in Large Ag, illustrating how divergent conditions are within the broader agricultural equipment market.

Compact utility tractors, zero-turn mowers, and turf equipment serve a different end market than row-crop machinery. Homeowners, landscaping contractors, and hobby farmers were not exposed to the same degree of supercycle excess, and their replacement cycles are structurally shorter. That dynamic is now visible in the segment's revenue trajectory.

Used Inventory: The Mechanism Behind the Cycle-Bottom Case

One of the most closely watched metrics in the agricultural equipment cycle is used inventory. Deere reported that used model year 2022 and 2023 8R tractor inventory is down over 40% from its peak, including a 20% sequential decline in Q1 alone. Elevated used inventory has been a structural headwind for two reasons: it competes directly with new equipment sales at the dealer level, and it suppresses the trade-in values that farmers rely on when financing new purchases.

The pace of reduction suggests the inventory overhang is clearing faster than the broader market anticipated. When used inventories normalize, dealers recover the balance sheet capacity to stock new units, and farmers receive trade-in values that make equipment upgrades economically feasible. The 40%-from-peak decline brings that transition closer, even if Large Ag volumes remain pressured through most of fiscal 2026.

What the Guidance and Order Data Imply

Deere's guidance and order bank data sketch a forward picture defined by divergence and transition. Construction & Forestry enters the second half of fiscal 2026 with its order bank at a near two-year high and a raised full-year sales forecast. Large Ag remains in a managed contraction, but the used-inventory clearing rate and improving order velocity are the early-stage inputs that historically precede volume recovery in equipment cycles.

The new excavator line, targeting roughly 40% of the North American construction equipment market, represents a multi-year growth avenue independent of the agricultural cycle. The Tenna acquisition positions Deere to capture recurring software revenue in the construction vertical. Together, these moves widen the company's addressable market beyond its traditional equipment hardware base. For a full breakdown of management's commentary and segment-level detail, the [Deere Q1 2026 earnings podcast](/podcasts/DE_Q1_2026) covers the quarter in depth, alongside broader [industrials earnings coverage](/groups/industrials) on Beta Finch.

Key Takeaways from Q1 2026

• Net sales and revenues of $9.6 billion, up 13% year-over-year; equipment operations revenue grew 18% to $8 billion.
• Net income of $656 million, or $2.42 per diluted share, with all segments exceeding expectations.
• Construction & Forestry sales rose 34% to $2.7 billion; order bank climbed over 50% in a single quarter to its highest level since May 2024.
• Full-year Construction & Forestry guidance raised to approximately +15% net sales growth, with 9-11% operating margins.
• North American Large Ag industry still expected to decline 15-20% in fiscal 2026, but order velocity and used inventory trends are improving.
• Used model year 2022-2023 8R tractor inventory down over 40% from peak, including a 20% sequential decline in Q1.
• First fully Deere-designed 20-ton class excavator line announced, targeting approximately 40% of the North American construction equipment market.
• Tenna acquisition completed, expanding Deere's construction fleet management and workflow digitization capabilities.
• Management characterized 2026 as the bottom of the current agricultural cycle.