01—Abstract
Summary
Summary of the 10-Q filed May 28, 2026. Cited figures are marked; the original filing is the authoritative source.
Deere & Company's fiscal Q2 2026 (quarter ended May 3, 2026) showed mixed results: net sales and revenues rose 5% to $13.4 billiona and 8% year-to-date to $23.0 billion, but net income attributable to Deere fell 2% to $1.77 billion in the quarter and 9% to $2.43 billion year-to-date.
Diluted EPS was $6.55b versus $6.64 a year ago (six-month diluted EPS $8.97 versus $9.82). The top-line growth was driven by Construction & Forestry (sales up 29% in the quarter) and Small Agriculture & Turf (up 16%), which offset a 14% decline in Production & Precision Agriculture (PPA) sales. PPA operating margin compressed to 15.7% from 22.0%, reflecting lower large-ag shipment volumes, higher material costs, and tariffs.
Cash generation and balance sheet items warrant attention. Operating cash flow was $1.04 billionc for the first six months, up from $568 million, but receivables and inventory build absorbed much of the seasonal cash. Trade receivables rose to $7.6 billion from $5.3 billion at fiscal year-end, while financing receivables declined as agricultural retail demand softened.
Total assets were $107.0 billiond and total borrowings remained elevated, with short-term borrowings at $15.6 billion. The company returned $1.38 billion to shareholders in the first half through dividends and buybacks, and remains rated A/A1/A+ with stable outlooks. Management guides to 2026 net sales growth, with a PPA decline more than offset by gains in CF and SAT.
Management expects large-ag demand in North America and South America to weaken. A recovery of roughly $272 million from IEEPA tariff refunds lowered cost of sales in the quarter, and the company faces an ongoing FTC antitrust lawsuit over right-to-repair, with no estimate of financial impact yet.
02—Key points
Key Highlights
- Net sales and revenues rose 5% in Q2 2026 to $13.4 billion (8% year-to-date to $23.0 billion), led by Construction & Forestry (+29%) and Small Ag & Turf (+16%) in the quarter.
- Net income attributable to Deere fell 2% to $1.77 billion in Q2 (diluted EPS $6.55 vs. $6.64), and 9% to $2.43 billion year-to-date, as PPA shipments declined and material and tariff costs rose.
- PPA operating margin fell to 15.7% in Q2 from 22.0%, with PPA sales down 14%; this segment is guided lower for full-year 2026.
- Cost of sales rose to 70.2% of net sales in Q2 from 68.1%, driven by material costs, partly offset by a $272 million IEEPA tariff refund recovery.
- Operating cash flow improved to $1.04 billion in the first half from $568 million, though trade receivables climbed to $7.6 billion from $5.3 billion at fiscal year-end.
- Financing receivables declined to $42.9 billion as agricultural retail demand softened; Financial Services net income rose 18% in Q2 to $190 million.
- Returned $1.38 billion to shareholders in the first half, and the Board declared a $1.62 quarterly dividend; $7.4 billion remains under the buyback authorization.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2026filed May 28, 2026Financial Statements
Q2 FY2026 against Q2 FY2025
| Line item | Q2 FY2026Q2 FY2025 | Change |
|---|---|---|
| Revenue | $13.37B$12.76B | +4.7% |
| R&D Expenses | $583.00M$549.00M | +6.2% |
| SG&A Expenses | $1.21B$1.20B | +1.0% |
| Operating Expenses | $11.08B$10.43B | +6.2% |
| Interest Expense | $712.00M$784.00M | −9.2% |
| Net Income | $1.77B$1.80B | −1.7% |
| EPS (Basic) | $6.57$6.65 | −1.2% |
| EPS (Diluted) | $6.55$6.64 | −1.4% |
| Shares Outstanding (Basic) | 270.10M271.10M | −0.4% |
| Shares Outstanding (Diluted) | 270.80M271.80M | −0.4% |
05—Questions
Frequently Asked Questions
Why did Deere's net income decline despite higher sales?
Sales growth was concentrated in lower-margin mix shifts and came with higher costs. PPA shipment volumes fell sharply, production costs rose from materials and tariffs, and warranty expense increased by $64 million after tax in Q2. Lower PPA volume reduced profit by about $313 million after tax, more than the gains from CF and SAT volume and favorable price and currency effects.
What is the outlook for Deere's large agriculture business in 2026?
Management expects PPA sales to decline in 2026 due to subdued large-ag demand in North America and softening in South America, driven by high input costs and interest rates. Management expects this to be more than offset by improvements in Construction & Forestry and Small Ag & Turf, so consolidated net sales are still forecast to rise in 2026.
How much of the recent tariff cost has Deere recovered?
Direct incremental tariffs cost about $372 million net of recoveries in the first half of 2026. Following the Supreme Court's February 2026 decision invalidating IEEPA tariffs, Deere filed a refund claim for $272 million, which CBP accepted, and recorded it as a reduction in cost of sales. Future tariff recoveries depend on the refund process and ongoing trade policy changes, which remain uncertain.
Is there material legal risk to Deere from the FTC lawsuit?
The FTC and several state attorneys general allege that Deere monopolized repair tools and unfairly restricted independent repair. The court denied Deere's motion to dismiss, and the company is in discussions with plaintiffs about a potential resolution. Management says it cannot predict the outcome or estimate the financial impact, and no specific accrual for this matter is disclosed beyond the general legal accruals of about $175 million.
Is Deere's debt load a concern for investors?
Total borrowings are substantial, with short-term borrowings of $15.6 billion and long-term borrowings of $42.3 billion at May 3, 2026. Most of the debt supports Financial Services' receivables portfolio, and the Financial Services debt-to-equity ratio is 8.7 to 1. Deere held $9.3 billion in cash and marketable securities and $5.9 billion in unused credit lines, and its A/A1/A+ ratings have stable outlooks, which supports continued market access.
06—Continue