01—Abstract
Summary
Summary of the 10-Q filed February 26, 2026. Cited figures are marked; the original filing is the authoritative source.
Deere & Company's first quarter of fiscal 2026 (ended February 1, 2026) showed a sharp divergence between top-line growth and profitability.
Net sales and revenues rose 13% to $9.611 billiona, driven by higher equipment shipment volumes in Small Agriculture & Turf and Construction & Forestry, plus favorable currency translation. However, net income attributable to Deere fell about 25% to $656 million from $869 million, and diluted EPS dropped to $2.42 from $3.19. The decline was driven primarily by $361 million in pretax incremental tariff costs, which Deere said had a $272 million after-tax impact, and by a prior-year one-time favorable discrete tax benefit of $163 million.
Production & Precision Agriculture operating margin compressed to 4.4%b from 11.0%, reflecting tariffs, adverse sales mix, and higher warranty expense. Segment performance was mixed. SAT operating profit rose 58% on higher volumes and price realization, and CF operating profit more than doubled, though tariffs weighed on both.
Financial Services net income increased 6% to $244 millionc on better financing spreads and lower credit provisions, even as revenue fell with the deconsolidation of Banco John Deere. Consolidated interest expense fell 13% to $719 million, helped by lower borrowing rates and balances. Cash flow from operations was negative $890 million, a seasonal pattern tied to inventory build and employee incentive payouts.
Management expects 2026 net sales to rise overall, with lower large-ag sales in North America offset by gains in SAT and CF, and flat operating cash flow from equipment operations. Key items for investors include the pending FTC right-to-repair antitrust lawsuit, where Deere is in preliminary settlement discussions, and the February 20, 2026 Supreme Court ruling invalidating IEEPA tariffs, which could provide tariff relief and potential refunds that Deere is still evaluating.
Deere also completed the $440 milliond acquisition of Tenna LLC after quarter end and declared a $1.62 quarterly dividend. Liquidity remained solid, with $8.2 billion in cash and marketable securities and $7.2 billion in unused credit lines.
02—Key points
Key Highlights
- Net sales and revenues rose 13% to $9.611 billion, led by higher SAT and CF shipment volumes and favorable currency translation.
- Net income attributable to Deere fell 25% to $656 million (diluted EPS $2.42 vs. $3.19), mainly from $361 million in pretax incremental tariffs and a $163 million prior-year tax benefit that did not recur.
- PPA operating margin fell to 4.4% from 11.0% on tariffs, unfavorable mix, and higher warranty costs, while SAT operating profit rose 58% and CF operating profit more than doubled.
- Financial Services net income grew 6% to $244 million on better financing spreads and lower credit loss provisions, and interest expense fell 13% to $719 million.
- Operating cash flow was negative $890 million, a seasonal outflow from inventory build and incentive payouts; $361 million in tariffs remains a headwind going forward.
- The February 20, 2026 Supreme Court decision invalidating IEEPA tariffs could bring tariff relief and recovery of prior payments, which management is still evaluating.
- FTC right-to-repair antitrust lawsuit remains unresolved; Deere is in preliminary settlement talks and cannot estimate the impact. Deere also closed the $440 million Tenna acquisition after quarter end.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2026filed February 26, 2026Financial Statements
Q1 FY2026 against Q1 FY2025
| Line item | Q1 FY2026Q1 FY2025 | Change |
|---|---|---|
| Revenue | $9.61B$8.51B | +13.0% |
| R&D Expenses | $554.00M$526.00M | +5.3% |
| SG&A Expenses | $972.00M$972.00M | 0.0% |
| Operating Expenses | $8.78B$7.61B | +15.3% |
| Interest Expense | $719.00M$829.00M | −13.3% |
| Net Income | $656.00M$869.00M | −24.5% |
| EPS (Basic) | $2.43$3.20 | −24.1% |
| EPS (Diluted) | $2.42$3.19 | −24.1% |
| Shares Outstanding (Basic) | 270.30M271.60M | −0.5% |
| Shares Outstanding (Diluted) | 270.90M272.30M | −0.5% |
05—Questions
Frequently Asked Questions
Why did net income fall even though sales grew 13%?
Higher costs more than offset the revenue gains. Incremental tariffs reduced net income by about $272 million after tax ($361 million pretax), and the prior-year quarter included $163 million in favorable discrete tax items that did not repeat. Higher shipment volumes added back about $188 million after tax.
How is the agriculture business performing relative to construction and forestry?
The segments diverged. Production & Precision Agriculture sales rose only 3%, but operating profit fell 59% to $139 million and margin dropped to 4.4%. Small Agriculture & Turf and Construction & Forestry sales grew 24% and 34%, with operating profit up 58% and 111%, respectively. Management expects large-ag sales in North America to remain subdued in 2026.
What is the company's near-term outlook for 2026?
Management expects consolidated net sales to rise in 2026 as gains in SAT and CF more than offset a decline in PPA sales. Equipment operations operating cash flow is forecast to be flat versus 2025, and capital expenditures are estimated at about $1.4 billion. Tariffs are expected to remain a cost headwind, and the Supreme Court ruling could offset some of that if refunds are realized.
Is Deere's liquidity and balance sheet position sound?
Yes. Cash and marketable securities totaled $8.2 billion and unused credit lines were $7.2 billion at February 1, 2026. Deere's credit ratings are A+ (Fitch), A1 (Moody's), and A (S&P), all with stable outlooks. Total borrowings declined by $1.5 billion in the quarter, and the Financial Services debt-to-equity ratio improved to 8.2 to 1 from 8.4 to 1.
06—Continue