DE Q3 2026 Earnings Analysis
Deere delivered strong Q3 with 14.4% equipment operating margin, raising 2026 net income guidance to $4.75-5.0B, while Construction & Forestry thrives and agriculture approaches cycle bottom.
Key Metrics
Key Takeaways
- Equipment operations achieved 14.4% margin with disciplined execution and inventory management.
- Construction & Forestry up 18% driven by infrastructure, data center, and energy projects.
- Agriculture bottoming in 2026; measured recovery ahead with healthy dealer inventories positioning 2027.
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Transcript
// Full episode scriptWelcome to Beta Finch, your AI-powered earnings breakdown, where we take the numbers and the noise from corporate earnings calls and turn them into something you can actually digest. I'm Alex.
And I'm Jordan. Today we're digging into Deere & Company's third quarter fiscal 2026 results — big green tractors, big infrastructure equipment, and a business that's basically riding two different economic cycles at once.
Before we get into it — this podcast is AI-generated content for educational and entertainment purposes only. Nothing we discuss should be considered investment advice. Always do your own research and consult a qualified financial advisor before making any investment decisions.
Good, let's get into the numbers. Alex, what jumped out at you?
The headline is Deere beat expectations pretty handily. Net sales and revenue up 5% to $12.6 billion, equipment operations sales up 6% to $11 billion, net income of $1.38 billion, or $5.10 a share. And that 14.4% operating margin for equipment operations is genuinely strong given how choppy the ag market is right now.
Right, and that's really the story of this quarter — a tale of two businesses. Production & Precision Ag, their big-tractor and combine segment, was actually down 6% year-over-year to $4 billion, with margins around 13.2%. That's the segment feeling the ag downturn most directly.
But then you flip to Small Ag & Turf — up 12% to $3.4 billion with an 18.4% margin — and Construction & Forestry, up 18% to $3.6 billion with a 12.1% margin. Those two segments are basically carrying the company through the ag trough.
That diversification point came up again and again on the call. Management kept saying it — while big ag equipment is struggling, construction and the smaller ag/turf business are picking up the slack. It's a nice illustration of why a diversified portfolio actually matters in a cyclical industry.
Let's talk guidance, because they actually raised the full-year outlook despite trimming some segment numbers. Full-year net income guidance moved up to $4.75 to $5 billion, and operating cash flow guidance improved to $5 to $5.5 billion.
But within that, Production & Precision Ag guidance came down — now expecting sales down about 10% for the year, with margin guidance narrowed to 11-12%. That's mostly South America and Europe softness. South America specifically is now guided down 15-20% for the year, driven by high interest rates and elevated fertilizer costs squeezing farmer economics.
Meanwhile Small Ag & Turf guidance actually went up — margin guide raised to 14.5-15.5% — and Construction & Forestry held its roughly 20% sales growth guide with margins tightened to 10.5-11.5%. Construction is genuinely firing on all cylinders right now: data centers, infrastructure, road building.
One thing worth flagging for listeners — tariffs were a huge theme on this call. Deere now expects about $1.1 billion in direct tariff expense for the year, offset partially by $382 million in IEPA refunds recognized so far. CFO Brent Norwood said net tariff exposure this year is around $750 million, but he flagged that it'll actually step up to roughly $1 billion next year as the refund benefit doesn't repeat.
That's an important nuance — investors hear "tariff relief" and assume it's all good news, but the mechanics here mean next year could actually be a modest headwind, not a tailwind.
The other big storyline was the model year 2027 early order programs — these are essentially pre-orders dealers and farmers lock in ahead of the season. Deanna Kovar, who runs the ag and turf business, said combined planter and sprayer orders are running up mid-single digits versus last year.
And that's a meaningful signal because management explicitly said they view 2026 as the bottom of the agricultural equipment cycle. Modest order growth heading into 2027 supports that thesis — not a sharp rebound, but a "measured recovery," as they put it.
What I found most interesting technically was the precision ag adoption data. See & Spray — their weed-detection spraying technology — is set to nearly double in factory adoption, now on about a third of North American sprayer orders, and they're seeing over 50% herbicide savings for customers using it. Plus more than 40% of planters ordered for next year include their most advanced tech packages.
That matters because with input costs eating up roughly 70% of a farmer's operating budget, technology that cuts those costs becomes even more valuable exactly when farm profitability is under pressure. It's a nice flywheel for Deere — tougher times actually increase the value proposition of their tech stack.
On the construction side, they mentioned SmartGrade adoption is up more than 50% year-to-date, and they just launched their first Deere-designed excavators this spring, with what they called very positive early customer feedback. That's part of a broader multi-year rollout.
There was also a good exchange about dealer inventory health. Deanna noted that model-year 2023 and 2024 high-horsepower tractor used inventory is down nearly 40% from a year ago, and the spread between new and used equipment values has largely normalized. That's a big deal because bloated used inventory and price gaps were a real drag on new equipment sales during this downturn.
And an analyst asked directly about the FTC right-to-repair settlement — Brent Norwood was clear that Deere's position hasn't fundamentally changed, they've long supported customer repair rights, and the agreement mostly formalizes tools they already offer, like their Operations Center PRO Service for diagnostics and software updates.
So stepping back — what's the takeaway for someone following this stock?
I'd frame it as: the worst of the ag downturn appears to be priced in and possibly behind us, construction is a genuine growth engine right now, and management is executing well on cost discipline and inventory management heading into what they expect to be a gradual 2027 recovery. The tariff picture is a wildcard worth watching next year.
Before we wrap — everything discussed is AI-generated analysis for educational purposes. Past performance doesn't guarantee future results. Please do your own due diligence.
Deere's setting up for an interesting 2027 — modest ag recovery, continued construction strength, and a lot riding on commodity prices and interest rates from here.
That's it for this episode of Beta Finch. Thanks for listening, and we'll catch you next time we break down the numbers.
See you then.