Why did net income decline year-to-date even though sales grew?

Year-to-date net income fell 4% to $3,808M despite a 7% sales increase, mainly because the prior-year period included favorable special tax items of $163M, production costs rose on higher material costs, and PPA shipments declined sharply. Tariff costs of $502M net of recoveries also weighed on margins, though the $382M in recoveries recognized in 2026 partly offset them.

How much of the recent earnings strength is from one-time items?

The tariff recoveries of $382M year-to-date, recognized after the February 2026 Supreme Court ruling, are non-recurring in nature and reduced cost of sales. Q3 net income also benefited from $110M of those recoveries, so investors should separate them from underlying operating performance when assessing run-rate margins.

Which segments are driving growth and which are under pressure?

Construction & Forestry (year-to-date sales up 26%, operating profit up 67%) and Small Agriculture & Turf (sales up 16%, operating profit up 30%) are driving growth on higher volumes and pricing. Production & Precision Agriculture is under pressure, with sales down 7% and operating profit down 34% year-to-date, reflecting weak large-ag demand in North America and Brazil.

How is Deere managing its balance sheet and shareholder returns?

Cash, cash equivalents, and marketable securities were $10,278M at August 2, 2026. Deere returned $2,013M to shareholders year-to-date through dividends ($1,316M) and buybacks ($697M), and $7.2 billion remains under the $18.0 billion repurchase authorization. Trade receivables rose to $7,723M on seasonal and volume effects, and short-term borrowings increased to $17,115M, reflecting working-capital needs.

What is the outlook for the remainder of fiscal 2026?

Management expects overall 2026 net sales to increase versus 2025, with the decline in PPA more than offset by gains in CF and SAT. It expects large-ag demand in North America and South America to stay subdued, and forecasts equipment operations operating cash flow to be roughly flat with 2025. Capital expenditures are estimated at about $1.3 billion for the year.

DE 10-Q Quarterly Report Q3 FY2026 — Revenue, Net Income, EPS

01—Abstract

Summary

Summary of the 10-Q filed August 27, 2026. Cited figures are marked; the original filing is the authoritative source.

Deere & Company's third quarter of fiscal 2026 (ended August 2, 2026) shows top-line growth driven by the Construction & Forestry and Small Agriculture & Turf segments, offsetting weakness in Production & Precision Agriculture.

Net sales and revenues rose 5% in the quarter to $12,608 million^a and 7% year-to-date to $35,589 million. However, net income attributable to Deere fell 4% for the nine months to $3,808 million, held back by a $502 million net tariff cost, higher material costs, and a prior-year special tax benefit. Diluted EPS for the quarter was $5.10, up from $4.75, while year-to-date EPS of $14.06 was down from $14.57.

Segment performance was mixed. PPA net sales fell 7%^b year-to-date and operating margin compressed to 11.8% from 16.4%, reflecting weak large-ag demand in North America and Brazil. SAT and CF delivered strong gains, with SAT operating profit up 30% year-to-date and CF operating profit up 67%, supported by volume growth and price realization.

Tariff recoveries of $382 million^c following the February 2026 Supreme Court ruling provided a meaningful one-time benefit to cost of sales, which investors should weigh when assessing underlying margin trends. Balance sheet and cash flow highlights include higher trade receivables and short-term borrowings, which pushed total cash-flow dynamics toward seasonal working capital build. Operating cash flow was $3,250 million, versus $3,464 million a year earlier.

Cash returned to shareholders totaled $2,013 million^d in the first nine months, and the board declared a quarterly dividend of $1.62 per share. Management expects 2026 net sales to rise, with PPA declining more than offset by CF and SAT, and expects fiscal 2026 capital expenditures of about $1.3 billion.

02—Key points

Key Highlights

Net sales and revenues up 5% in Q3 to $12,608M and up 7% year-to-date to $35,589M, driven by volume, price realization, and FX.
Net income attributable to Deere down 4% year-to-date to $3,808M, but up 7% in Q3 to $1,379M; year-to-date EPS $14.06 vs. $14.57.
Tariff recoveries of $382M year-to-date (after the February 2026 Supreme Court IEEPA ruling) lowered cost of sales; net tariff impact was $502M.
PPA operating margin fell to 11.8% year-to-date from 16.4% on lower shipments in the U.S., Canada, and Brazil; SAT margin rose to 17.0% and CF to 11.3%.
Effective tax rate rose to 28.1% in Q3 (21.2% prior year) and 24.8% year-to-date, driven by unfavorable discrete items.
Financial Services net income up 9% year-to-date to $653M on favorable financing spreads, partly offset by a 2% smaller average portfolio.
Settled FTC and state AG right-to-repair lawsuit on July 8, 2026, requiring fair and reasonable repair resource access and regulatory reporting; quarterly dividend of $1.62 declared August 26, 2026.

03—Questions

Frequently Asked Questions

Why did net income decline year-to-date even though sales grew?
Year-to-date net income fell 4% to $3,808M despite a 7% sales increase, mainly because the prior-year period included favorable special tax items of $163M, production costs rose on higher material costs, and PPA shipments declined sharply. Tariff costs of $502M net of recoveries also weighed on margins, though the $382M in recoveries recognized in 2026 partly offset them.
How much of the recent earnings strength is from one-time items?
The tariff recoveries of $382M year-to-date, recognized after the February 2026 Supreme Court ruling, are non-recurring in nature and reduced cost of sales. Q3 net income also benefited from $110M of those recoveries, so investors should separate them from underlying operating performance when assessing run-rate margins.
Which segments are driving growth and which are under pressure?
Construction & Forestry (year-to-date sales up 26%, operating profit up 67%) and Small Agriculture & Turf (sales up 16%, operating profit up 30%) are driving growth on higher volumes and pricing. Production & Precision Agriculture is under pressure, with sales down 7% and operating profit down 34% year-to-date, reflecting weak large-ag demand in North America and Brazil.
How is Deere managing its balance sheet and shareholder returns?
Cash, cash equivalents, and marketable securities were $10,278M at August 2, 2026. Deere returned $2,013M to shareholders year-to-date through dividends ($1,316M) and buybacks ($697M), and $7.2 billion remains under the $18.0 billion repurchase authorization. Trade receivables rose to $7,723M on seasonal and volume effects, and short-term borrowings increased to $17,115M, reflecting working-capital needs.
What is the outlook for the remainder of fiscal 2026?
Management expects overall 2026 net sales to increase versus 2025, with the decline in PPA more than offset by gains in CF and SAT. It expects large-ag demand in North America and South America to stay subdued, and forecasts equipment operations operating cash flow to be roughly flat with 2025. Capital expenditures are estimated at about $1.3 billion for the year.

04—Continue

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