01—Abstract
Summary
Summary of the 8-K filed February 19, 2026. Cited figures are marked; the original filing is the authoritative source.
Deere & Company (DE) reported first quarter fiscal 2026 net income of $656 milliona, or $2.42 per diluted share, down 25% from $869 million, or $3.19 per share, a year earlier.
Worldwide net sales and revenues rose 13% to $9,611 millionb, and net sales (equipment operations) rose 18% to $8,001 million. The top-line growth was driven by Small Ag & Turf (sales up 24%) and Construction & Forestry (sales up 34%), with the Production & Precision Ag segment up only 3%. Profitability, however, weakened sharply in the large agriculture business: Production & Precision Ag operating profit fell 59% to $139 million (4.4% margin vs. 11.0%), reflecting higher tariffs, unfavorable mix, and higher warranty expense.
Income taxes rose to $196 millionc from $27 million, which weighed on net income even as pretax income fell less sharply. Management characterized fiscal 2026 as the likely bottom of the current cycle and pointed to recovering demand in construction and small agriculture. The company raised its fiscal 2026 net income guidance to $4.5 billion to $5.0 billion.
Outlook calls for Production & Precision Ag net sales to fall 5% to 10%, with U.S. & Canada large ag industry down 15% to 20%, while Small Ag & Turf and Construction & Forestry net sales are each expected to rise about 15%. Financial Services net income is forecast at roughly $840 milliond, down from $890 million in fiscal 2025. Cash flow was negative in the quarter, with equipment operations operating cash flow of $(1,343) million, though this is seasonal.
Inventories rose to $8,286 million from $7,744 million a year earlier, and the company continued shareholder returns with $302 million in share repurchases and $441 million in dividends paid. Investors should weigh the strong top-line recovery in smaller segments against the sharp margin compression in large agriculture and the ongoing tariff and warranty pressures.
02—Key points
Key Highlights
- Q1 FY2026 net income of $656M ($2.42 diluted EPS), down 25% YoY from $869M ($3.19), though net sales and revenues rose 13% to $9,611M
- Fiscal 2026 net income guidance raised to $4.5B-$5.0B, with management calling 2026 the bottom of the current cycle
- Production & Precision Ag operating profit fell 59% to $139M, with margin compressing to 4.4% from 11.0% on tariffs, mix, and warranty costs
- Small Ag & Turf sales up 24% and operating profit up 58% to $196M (9.0% margin); Construction & Forestry sales up 34% and operating profit up 111% to $137M (5.1% margin)
- Industry outlook for U.S. & Canada large ag is down 15% to 20%, while U.S. & Canada small ag & turf and construction equipment are each expected to be flat to up roughly 5%
- Income tax provision rose to $196M from $27M, a significant drag on quarterly net income
- Equipment operations operating cash flow was negative $1,343M in the quarter, and inventories increased to $8,286M from $7,744M a year earlier
03—Questions
Frequently Asked Questions
Why did Deere's net income decline despite higher sales?
Net income fell 25% to $656M even though net sales and revenues rose 13%. The main drivers were a sharp drop in Production & Precision Ag operating profit (down 59% to $139M) due to higher tariffs, unfavorable sales mix, and higher warranty expenses, along with a jump in income taxes to $196M from $27M a year earlier.
Did Deere change its fiscal 2026 outlook?
Yes, Deere increased its fiscal 2026 net income guidance to $4.5 billion to $5.0 billion. However, it guided Production & Precision Ag net sales down 5% to 10%, Small Ag & Turf and Construction & Forestry net sales each up about 15%, and Financial Services net income to about $840 million, down from $890 million in fiscal 2025.
Is the agricultural downturn expected to end soon?
Management said it believes 2026 represents the bottom of the current cycle and pointed to a recovery in construction and small agriculture demand. Its industry outlook still projects U.S. & Canada large ag industry volumes down 15% to 20% for fiscal 2026, so large-ag weakness is expected to persist this year.
How is Deere's cash position and capital return looking?
Cash and cash equivalents fell to $6,798M from $8,276M at fiscal year-end. Equipment operations used $1,343M in operating cash flow during the quarter, which is seasonal. Deere still returned cash, repurchasing $302M of common stock and paying $441M in dividends. Management's fiscal 2026 forecast for net operating cash flow is $4.5 billion to $5.5 billion.
What are the main risks highlighted in the filing?
Key risks include tariffs and retaliatory trade actions, agricultural cycle volatility, warranty and product-liability costs, and supply chain disruption. The filing also flags a Federal Trade Commission lawsuit, joined by five state attorneys general, alleging Deere unlawfully withheld self-repair capabilities from farmers and independent repair providers.
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