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The agricultural machinery giant is using software, connectivity, and automation to boost farm productivity; cut down on fuel, chemical, and water use; and allow customers to meet input-efficiency and emissions goals. It upgraded its harvest automation system in 2025 to add predictive inputs, which enable farmers to measure crop variability and control ground speed. Autonomous tractors allow farmers to cover more ground during crop cycles, the company says. Meanwhile, Deere has introduced technologies like See &amp; Spray Ultimate, which deploys cameras and machine learning to target weeds.

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Based in Moline, Ill., this maker of tractors, combines, and other agricultural gear endured a tough 2024, as weather disruptions and trade tensions fueled a global downturn in farming. The slump in U.S. homebuilding, meanwhile, hurt its construction equipment division. Overall, Deere’s revenue dropped 16% year over year, to $51.7&nbsp;billion.

The 300 companies on this year’s list brought in over $12.6 trillion in revenue for the latest 12 months, with the median revenue figure at $22 billion.

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F500-2023-081-Deere

John Deere—the machinery and equipment company famous for its iconic green tractor—had one of its most profitable years ever in 2022, reaching $7 billion, up 20% from the previous year, as it took a page from the tech industry’s playbook, developing self-driving tractors, satellite-linked smart equipment, and a software-as-a-service business. 
<ul> 
 	<li>Revenues in 2022 grew 19% as the company was able to pass much of the increase in production costs on to farmers who were flush with cash after corn and soybean prices hit record highs.</li> 
 	<li>In May 2023 Deere announced a plan to connect remote farms in Brazil and the U.S. to state-of-the-art machinery via satellite.</li> 
 	<li>The tractor maker suffered a legislative setback in Colorado in April 2023 when Gov. Jared Polis signed a “right to repair” bill, enabling farmers to fix their own equipment, thus ending Deere’s monopoly on repairs of its machinery.</li> 
</ul>

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Aggregate sales hit $37.8 trillion last year—an increase of 19%, the highest annual growth rate in the list’s history.

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F500-2022-084-Deere

A staple of American manufacturing for nearly 200 years, Illinois-based Deere makes agricultural and construction machinery as well as diesel engines and lawn care equipment. In 2021, the company posted 24% year-over-year revenue growth. Profits jumped, too, with demand for its machinery snapping back as the global economy rebounded. Deere also smoothed its labor outlook for the near future by reaching a six-year labor agreement with the United Auto Workers union in November 2021, ending a five-week strike. After Russia’s invasion of Ukraine, Deere suspended shipments of machinery to Russia and Belarus.

After a year in which humanity leaned more heavily than ever on tech giants, see which companies topped Fortune's ranking of corporate reputation.

Total revenue for the world’s biggest companies fell 4.8% to $31.7 trillion this year—the first decline in half a decade.

<span data-sheets-value="{&quot;1&quot;:2,&quot;2&quot;:&quot;Even during a pandemic, people still have to eat. Agriculture was one business to ride out 2020 in a strong position. Deere, the 184-year-old American icon and maker of heavy machinery, saw strong agricultural sales corresponding with the seasonality of farming. That was largely enough to counter the lower demand for construction equipment made by Deere over the same time frame, with construction projects halted owing to COVID-19. Deere, however, still saw revenue fall 9.5%, to $35.5 billion, between 2019 and 2020. &quot;}" data-sheets-userformat="{&quot;2&quot;:12673,&quot;3&quot;:{&quot;1&quot;:0},&quot;10&quot;:2,&quot;11&quot;:4,&quot;15&quot;:&quot;Calibri&quot;,&quot;16&quot;:11}">Even during a pandemic, people still have to eat. Agriculture was one business to ride out 2020 in a strong position. Deere, the 184-year-old American icon and maker of heavy machinery, saw strong agricultural sales corresponding with the seasonality of farming. That was largely enough to counter the lower demand for construction equipment made by Deere over the same time frame, with construction projects halted owing to COVID-19. Deere, however, still saw revenue fall 9.5%, to $35.5 billion, between 2019 and 2020.

This year’s Fortune 500 marks the 67th running of the list.

F500-2021-88-Deere

<span data-sheets-value="{&quot;1&quot;:2,&quot;2&quot;:&quot;Even during a pandemic, people still have to eat. Agriculture was one business to ride out 2020 in a strong position. Deere, the 184-year-old American icon and maker of heavy machinery, saw strong agricultural sales corresponding with the seasonality of farming. That was largely enough to counter the lower demand for construction equipment made by Deere over the same time frame, with construction projects halted owing to COVID-19. Deere, however, still saw revenue fall 9.5%, to $35.5 billion, between 2019 and 2020. &quot;}" data-sheets-userformat="{&quot;2&quot;:12673,&quot;3&quot;:{&quot;1&quot;:0},&quot;10&quot;:2,&quot;11&quot;:4,&quot;15&quot;:&quot;Calibri&quot;,&quot;16&quot;:11}">Even during a pandemic, people still have to eat. Agriculture was one business to ride out 2020 in a strong position. Deere, the 184-year-old American icon and maker of heavy machinery, saw strong agricultural sales corresponding with the seasonality of farming. That was largely enough to counter the lower demand for construction equipment made by Deere over the same time frame, with construction projects halted owing to COVID-19. Deere, however, still saw revenue fall 9.5%, to $35.5 billion, between 2019 and 2020.

For an astounding 13th straight year, Apple claims the top spot in Fortune’s annual ranking of corporate reputation, based on a survey of almost 3,800 executives, directors, and analysts.

This year's Fortune Global 500 generated $33.3 trillion in revenues and $2.1 trillion in profits.

G500-2020-319-Deere

John May is not even a full year into his tenure as only the 10th chief executive ever to lead the 183-year-old American icon. He finds himself at the helm of the $39.2 billion agricultural giant as it rolls with virus-related punches; Deere briefly suspended production of construction and forestry equipment at some facilities amid weakened demand and pivoted to manufacturing 400,000 face shields for health care workers. For 2019, the company's revenue rose 5.1% year-over-year and profits spiked by 37%, to $3.3 billion. But even before the pandemic, Deere said it expected sales to fall at least 10% in 2020.

This year's Fortune 500 marks the 66th running of the list.

F500-2020-084-Deere

John May is seven months into his tenure as only the 10th chief executive ever to lead the 183-year-old American icon. He finds himself at the helm of the $39.2 billion agricultural giant as it rolls with virus-related punches; Deere briefly suspended production of construction and forestry equipment at some facilities amid weakened demand, and is now manufacturing 400,000 face shields for health care workers. The company's revenue rose 5.1% year-over-year and profits spiked by 37%, to $3.3 billion in 2019. But even before the pandemic, Deere said it expected sales to fall at least 10% in 2020.

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Global business is back. After limping through a worldwide financial crisis and economic slowdown, the 500 largest companies ranked by revenues shattered all sorts of performance records in 2013: They racked up combined revenues of $31.1 trillion, up 2.5% from 2012, and profits soared 27% to nearly $2 trillion. China’s 95 companies (up from 89 last year) posted $5.8 trillion in revenues. The U.S. has four fewer companies on the list than last year but remains (for now) the country leader, with 128 corporations on the list—including No. 1 Wal-Mart Stores—reporting $8.6 trillion in revenues. 

Wal-Mart stayed on top as its sales crept closer to half-a-trillion dollars. Apple moved into the top five. And UnitedHealth Group continued its steady climb. 

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Deere (commonly known as John Deere) is an agricultural giant that manufactures and sells tractors, harvesters, loaders, and other equipment used by farmers worldwide. Founded in 1837 as a maker of steel plows pulled by horses, the company has expanded into heavy machinery used for golf course maintenance, snow removal, and logging. The company introduced a self-driving tractor in 2022 and is pushing into machine learning to help increase agricultural production. As of 2024, it was among a small number of companies that have been on the Fortune 500 every year since the list’s inception in 1955.

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Deere (DE): Company Profile, Stock Price, News, Rankings

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Good morning, welcome to Deere & Company's Second Quarter Earnings Conference Call. I would now like to turn the call over to Mr. Josh Beal, Director of Investor Relations. Thank you. You may begin.

Hello. Welcome, and thank you for joining us on today's call. Joining me on the call today are Brent Norwood, Chief Financial Officer, and Chris Seibert, Manager Investor Communications. Today, we'll take a closer look at Deere's second quarter earnings, then spend some time talking about our markets and our current outlook for fiscal 2026. After that, we'll respond to your questions. Please note that slides are available to complement the call this morning.

They can be accessed on our website at johndeere.com/earnings. First, a reminder, this call is broadcast live on the internet and recorded for future transmission and use by Deere & Company. Any other use, recording, or transmission of any portion of this copyrighted broadcast without the express written consent of Deere is strictly prohibited.

Participants in the call, including the Q&A session, agree that their likeness and remarks in all media may be stored and used as part of the earnings call. This call includes forward-looking statements concerning the company's plans and projections for the future that are subject to uncertainties, risks, changes in circumstances, and other factors that are difficult to predict.

Additional information concerning factors that could cause actual results to differ materially are contained in the company's most recent Form 8-K, Risk Factors in the annual Form 10-K, as updated by reports filed with the Securities and Exchange Commission. This call also may include financial measures that are not in conformance with accounting principles generally accepted in the United States of America, GAAP.

Additional information concerning these measures, if any, including reconciliations to comparable GAAP measures, is included in the release and posted on our website at johndeere.com/earnings under Quarterly Earnings and Events. I will now turn the call over to Chris Seibert.

Good morning, and thank you for joining us today. In John Deere's second quarter, we delivered year-over-year net sales growth of 5% and an equipment operations margin of 16.9%, reflecting solid execution and a strong, diversified portfolio of businesses spanning multiple industries and geographies. The quarterly results also benefited from recording a recovery for refund claims relating to IEEPA tariffs, which we'll discuss in more detail later in the call.

Our Construction and Small Ag & Turf business units continue to benefit from supportive industry fundamentals. Notably, robust infrastructure spending and rental fleet replacement are driving increased demand for construction and road-building equipment, while Small Ag & Turf is benefiting from a recovery in turf end markets and healthy cash flow in the dairy and livestock sector. Our large ag business consumption of ag commodities continues to grow, supported in part by increased biofuel use and higher energy prices.

We see the potential for tighter ag commodity supplies in upcoming crop years as higher fertilizer costs potentially impact production levels. However, customer sentiment remains muted despite recent grain price increases as growers' margins face headwinds from elevated and volatile input costs and high interest rates.

Amidst this backdrop, Deere continues to strengthen its position in advance of the large ag cycle recovery with low levels of new field inventory, continued improvement in used inventory, and robust introductions of new products and technology solutions that are driving market share gains and are expected to enable future growth as markets recover. As an enterprise, we remain confident in our ability to bring increased value to customers and deliver structurally higher performance for Deere across the cycle.

The diversification of our business segments, evidenced in 2026 with all three operating at different points in the cycle, provides increased resilience and enhanced growth opportunities for the organization. As a result, this quarter, we maintain our overall net income outlook for fiscal 2026 while continuing to progress towards our 2030 Leap Ambitions. Slide three opens with our results for the second quarter. Net sales and revenues were up 5% to $13.369 billion, while net sales for the equipment operations were up 5% to $11.778 billion.

Net income attributable to Deere & Company was $1.773 billion, or $6.55 per diluted share. Turning to our individual segments, we begin with the production and precision ag business on slide four. Net sales of $4.503 billion were down 14% compared to the second quarter last year, primarily due to lower shipment volumes that were partially offset with favorable currency translation impacts.

Price realization was positive by about a point. Currency translation was also positive by roughly 3 points. Operating profit was $706 million, resulting in a 15.7% operating margin for the segment. The year-over-year decrease was primarily due to the lower shipment volumes and higher production costs that were partially offset by the favorable effects of currency exchange.

Moving now to Small Ag & Turf on slide five. Net sales increased 16% to $3.485 billion in the second quarter, driven by higher shipment volumes and favorable currency translation. Price realization was positive by around 1.5 points. Currency translation was also positive by roughly 2.5 points. Operating profit of $719 million was also up for the quarter, resulting in a 20.6% operating margin. The improvement in operating profit was primarily a result of the higher shipment volumes and the effects of favorable price realization.

Slide six gives our industry outlook for ag and turf markets globally. We continue to expect large ag equipment industry sales in the U.S. and Canada to decline 15%-20%, driven by elevated input costs and ongoing global market uncertainty. However, robust commodity demand and projections for tightening supply have supported improvements in crop prices while U.S. government programs continue to provide liquidity support for farmers.

Recent biofuels policy support, including approval of the RVO and potential year-round E15, should help provide greater stability and support future demand for U.S. growers. For Small Ag & Turf in the U.S. and Canada, industry demand is expected to remain steady, ranging from flat to up 5%. We're projecting modest strengthening in the turf markets as demand has expanded following several years of industry decline. The dairy and livestock sector also continues to maintain strong margins, supporting ongoing product demand.

In Europe, industry demand remains relatively stable and is expected to range from flat to up 5%. While elevated interest rates continue to affect purchasing decisions, customer profitability and replacement activity are relatively stable. Although the arable sector remains a bit muted, favorable dairy margins continue to support the broader industry outlook. Moving to South America. Industry sales of tractors and combines are now expected to decline about 15%.

While production and yield performance remain strong alongside improving crop prices, elevated interest rates, higher input costs, and a stronger Brazilian real are pressuring customer profitability and reducing equipment demand in the near term. Industry sales in Asia are now projected to be roughly flat year-over-year, mainly driven by modest improvements within the India market. Next, our segment forecasts begin on slide seven.

For Production & Precision Ag, our net sales forecast is unchanged and remains down between 5%-10% for the full year. This forecast now reflects roughly 1 point of positive price realization for the full year, as well as just under 3 points of favorable currency translation. Our full-year forecast for the segment's operating margin is also unchanged and remains between 11% and 13%. Slide eight shows our forecast for the Small Ag & Turf segment. We continue to expect net sales to be up approximately 15% for the full year. This guide includes 1.5 points of positive price realization, as well as roughly 1 point of favorable currency translation. The segment's operating margin guide remains between 13.5% and 15%. Shifting over to Construction & Forestry on slide nine.

Net sales for the quarter increased by 29% year-over-year to $3.79 billion as a result of higher shipment volumes and favorable currency translation. Price realization was favorable by more than 2.5 points. Currency translation was also favorable by a little more than 3 points. Operating profit of $561 million was also up year-over-year, resulting in a 14.8% operating margin. This improvement was a result of higher shipment volumes and favorable price realization, which were partially offset by unfavorable production cost. Slide 10 describes our Construction & Forestry industry outlook.

Industry sales projections for earth-moving equipment in the U.S. and Canada remain unchanged, with both construction equipment and compact construction equipment expected to be up around 5%. The fundamentals behind the Construction industry remain favorable, with healthy customer backlogs being supported by infrastructure and large project spending that is more than offsetting softness in residential construction.

Global Forestry markets are expected to decline 5%, reflecting continued pressure from weak residential construction activity and low log and lumber prices. We now expect global road building markets to grow approximately 10% year-over-year, supported by elevated road construction spending across multiple geographies. Moving on to the C&F segment outlook on slide 11. The 2026 net sales are now forecasted to be up approximately 20% for the full year.

This net sales guidance for the year includes two and a half points of favorable price realization and approximately two points of favorable currency translation. The segment's operating margin has also been increased and is now projected to be between 10% and 12% for the full year. Transitioning to our financial service operations on slide 12. Worldwide financial services net income attributable to Deere & Company in the second quarter was $190 million.

The year-over-year increase is a result of favorable financing spreads and favorable derivative valuation adjustments, partially offset by the impact of a lower average portfolio. For fiscal year 2026, we raised our full-year outlook to $860 million, primarily driven by favorable fair value adjustment and improved provision for credit losses. And finally, slide 13 outlines our guidance for net income, effective tax rate, and operating cash flow.

For fiscal year 2026, our net income forecast remains unchanged between $4.5 billion and $5 billion. Next, our guidance now incorporates an effective tax rate between 24%-26%. And lastly, cash flow from the equipment operations remains projected between $4.5 billion and $5.5 billion. This concludes our formal remarks. I will now turn the call over to Brent Norwood for opening comments before we cover a few quarter-specific topics.

Thanks, Chris. I spent several years on Deere earnings calls in my prior time in investor relations, but I've been away for a while working in our Construction & Forestry business. It's great to be back, and I look forward to re-engaging with our investors and analysts in my new role. As you noted earlier, we continue to operate in a highly dynamic business environment.

However, the resilience of our team and the diversification of our business has enabled us to maintain our financial expectations for the current fiscal year while also setting us up well for the years to come. As mentioned, our business segments are performing at different points in the cycle. While Large Ag is operating below trough levels, Small Ag & Turf is progressing towards mid-cycle, and Construction & Forestry is slightly above mid-cycle.

Even so, it's important to keep in mind that we are delivering double-digit margins across all segments, and we expect to grow our top line by more than 5% this year as we progress towards the 2030 growth targets outlined during our investor event at the New York Stock Exchange last December. In the nearer term, a lot has transpired over the past quarter in the global economy, most notably the conflict in Iran and the associated impacts. However, our baseline view remains that 2026 will represent the bottom of the ag cycle. We've managed field inventories tightly of new equipment and made significant progress on used. All the while, machine hours continue to accrue, aging out the fleet and driving a base-level need for replacement.

The pace of recovery from that point on will, of course, depend on several factors, including geopolitical developments, underlying ag fundamentals, and policy outcomes. At the same time, our customers continue to navigate persistent challenges, including labor scarcity, input cost pressure, and tight operating windows to get critical jobs done. Regardless of the cycle or macro environment, our focus remains steadfast, helping them to do more with less and supporting them efficiently and profitably to overcome these challenges.

What gets me really excited is the way we've structurally improved the performance of our business from cycle to cycle. We are delivering structurally higher levels of profitability compared to the last time we were at a similar point in the cycle, despite the headwind that comes from tariffs. This enables us to sustain record investment across cycles to make these value-generating solutions a reality for our customers and the industries they serve.

Thanks a lot, Brent. We're excited to have you back. Pivoting to a few thoughts about the business. Let's begin with this quarterly performance. Net sales increased sequentially as expected given seasonality, and we are also up 5% year-over-year. Equipment operations margins came in just under 17% in Q2. Josh Beal, can you lead off with a breakdown of the quarter?

Sure, Chris. First and foremost, it's important to mention the unexpected item for the quarter, which was IEEPA tariff refunds. As you noted earlier, we recognized a recovery of $272 million related to refund claims associated with IEEPA tariffs that were filed and accepted by U.S. Customs and Border Protection, which benefited our production cost this quarter and lifted margins by nearly 2.5 points.

Outside of tariff refunds, our second quarter came in largely in line with expectations for both top line and margin across all business segments, with the overall equipment operations achieving margins of 16.9%. Noting the diversification comment you made earlier, Small Ag & Turf delivered margins over 20% in the quarter, and the relative strength in SAT markets is helping to offset some of the pressures being felt by large ag producers.

Shifting to some of the larger year-over-year changes for the quarter, let's start with price. As you noted, Chris, price realization was positive for all three business segments in Q2. We saw particular strength in C&F price realization, which came in stronger than we had forecasted, particularly in the road building business. Foreign currency was also a tailwind in the quarter versus last year, largely driven by a weaker U.S. dollar, which favorably impacts the margins on U.S. products exported to overseas markets.

Regarding headwinds, we did see higher year-over-year production costs in the second quarter, excluding the impact from tariff refunds. Without accounting for tariff refunds, year-over-year direct tariff expense was approximately $200 million of the headwind, with the remainder largely driven by higher material and freight costs.

Thanks, Josh. That leads to my next question, which is likely top of mind for many, given trade policy dynamics following our Q1 earnings call. As you noted, we benefited from a one-time tariff tailwind in the second quarter. What should we expect from here, and how is that reflected in our guidance for the rest of the year?

First, I'd start by reminding everyone of the timing of our Q1 earnings release, which occurred just prior to the Supreme Court ruling on IEEPA. Since that decision, we've seen the invalidation of IEEPA tariffs, the introduction of new Section 122 tariffs, and adjustments to Section 232 tariffs. The cumulative impact of these changes is that on a full year basis, our direct tariff exposure remains essentially unchanged at approximately $1.2 billion, which is approximately a 3% margin headwind. Net of the refunds, our forecast now includes approximately $900 million of tariff costs for the year. Brent, anything additionally you'd like to add there?

Sure, Josh. I'd start by recognizing the tremendous effort across the organization to manage what continues to be a very dynamic trade environment. It's worth noting that we've been disciplined and measured regarding net price realization given this backdrop, keeping in mind the inflationary pressures that our customers are experiencing.

Recall that last fiscal year, we did not take additional price actions or introduce surcharges following the tariff orders. For fiscal year 2026, our implied net price realization for the equipment operations is between 1.5% and 2% for the year, which is consistent with general inflation levels that we are experiencing, excluding the impact of tariffs. To help manage the impact of tariffs, we continue to have teams across the organization working diligently to quantify exposures and identify mitigation opportunities.

These actions include product certification and exemption submissions, as well as identifying cost reduction opportunities and sourcing adjustments where clear no-regret solutions exist. Overall, we believe we are executing well against these opportunities and remain confident in our ability to manage through the current tariff environment effectively. Lastly, as a reminder, approximately 80% of John Deere's U.S. complete good sales are produced at our U.S. manufacturing facilities, and roughly 75% of those components used at those facilities are sourced from U.S.-based suppliers.

We remain deeply committed to U.S. manufacturing and continue to invest in and expand upon our domestic footprint. For example, this quarter, we recently started building Deere-designed excavators in Kernersville, North Carolina, following a $70 million expansion investment to bring U.S.-designed and manufactured excavators to the market. We continue to stand behind our commitment towards $20 billion of investments in U.S. manufacturing over the next 10 years.

Thanks for that context, Josh and Brent. Let's turn to the current market environment. Since our last earnings call, we have seen the start of the conflict in Iran and the associated inflationary impact on products like oil and fertilizer. Considering that in your response, can you provide an update on broader ag market conditions and how they are reflected in our industry guidance, maybe starting with South America?

Yeah, sure, Chris. As you mentioned earlier, we revised our South American ag industry outlook to down 15% from down 5%, primarily reflecting incremental softness in Brazil. Since the start of our fiscal year in November, Deere retail sales in Brazil have declined less than the broader tractor and combine industry, which has declined about 15% in six months in the country, in line with our revised industry guide.

Small and mid-size tractors have been more resilient, while large tractors and combines have declined more than the industry overall. The situation in Iran is affecting Brazilian growers at a particularly sensitive point in their production cycle as they prepare to plant a new crop in the September timeframe. While farmers in other parts of the world have largely locked in inputs for this growing season, Brazilians have more exposure to current spot prices.

Interest rates in the country remain high, and despite recent easing, expectations for additional cuts later in the year have been reduced given the anticipated inflationary environment. At the same time, the strengthening of the real against the U.S. dollar is adding incremental margin pressure for growers. Improved crop prices and strong production are positives, but overall, the margin outlook for Brazilian growers has been pressured due to these headwinds. As a result, we expect the market to remain cautious through the remainder of the fiscal year.

This is Brent. One comment. While the industry in Brazil is certainly challenged in the near term, I would like to add a few points about our performance in this market. Our team in the region continues to do an excellent job navigating volatility and improving the business. We continue to see year-over-year market share growth across all tractor categories while also maintaining our strong position in combines. At the same time, we are delivering positive price realization, we are accelerating portfolio innovation, and we are generating double-digit margins in Brazil, even at trough levels.

To be clear, we could not do this without the upstanding work of our dealers, who have also managed the cycle and the high interest rate environment very well and very profitably, supported by strong owner equity. Machine hours are building, and fleets are aging, which should support replacement demand once the market stabilizes. Collectively, these results highlight the strength of our team and the quality of our portfolio and channel, and they reinforce my confidence in the long-term opportunity in Brazil.

Thanks for the additional color, Brent. It is really exciting to think about the growth prospects for Deere in South America. Josh Beal, could you share some thoughts on the ag markets in other geographies?

Yeah, absolutely, Chris. First, input costs, particularly fuel and fertilizer, have increased globally and will contribute to higher inflation across the ag economy. As we noted earlier, our customers in North America and Europe largely purchased these inputs ahead of the spring planting season when costs were lower. At the same time, commodity prices have moved higher over the past few months, which helps relieve some near-term pressure.

We've also seen encouraging developments on the policy front in the U.S. Higher renewable volume obligations have been approved, which supports incremental consumption of soybeans. In addition, supplemental disaster relief program payment factors have been increased from 35% to 70%, and the House recently passed year-round E15, which we view as a positive step forward. Today, roughly one-third of U.S. corn production goes to ethanol, and broader E15 adoption could, over time, meaningfully expand corn demand as blending infrastructure comes into place.

Overall, we don't expect these developments to meaningfully adjust demand levels this fiscal year, and as a result, our ag industry guides outside of South America remain largely unchanged. Brent, maybe moving beyond ag, any thoughts on construction markets?

Yeah, absolutely. Construction demand remains robust, supported by infrastructure spending, rental activity, and accelerating data center investments. Reflecting that strength, we've increased our year-over-year net sales guide to up about 20%. In the U.S. and Canada, our order book continues to strengthen, up more than 60% since November, now at its highest level since April of 2024, with over 80% of production slots filled for the year.

At CONEXPO in 2026, we generated a lot of buzz around the new John Deere excavator and a fully integrated job site vision with Tenna, Virtual Superintendent, and the Operations Center, enabling a smarter and safer job site. We had over 140,000 contractors in attendance, and I'm proud to report that nearly all of the production slots for the new John Deere excavator are spoken for at this point.

During the second quarter, we visited with numerous customers who have confidence that incremental demand will extend into 2027. Data center construction is expected to top $100 billion in 2026, with additional double-digit growth into 2027. This is great for our customers in both large-scale site prep, but also water and utility contractors who also support these projects. Beyond data centers, we are also seeing infrastructure funded by IIJA, robust activity in oil and gas, and continued investment in warehousing. Lastly, road building performance also remains stellar, driven by higher year-over-year infrastructure spending. Notably, we increased our industry guide for the segment given the strength that we've seen year to date.

Hey, thank you both. Maybe let's turn to inventory management. Can we talk about what we've seen this quarter for both new but also used ag inventory?

Yeah, definitely, Chris. As you may recall, last quarter we discussed improving inventory trends across all regions, particularly in high horsepower tractors. I'm pleased to share that those trends have continued this quarter, with inventories remaining favorably positioned and order books healthy. Starting with large ag in North America, our new inventory levels remain favorable. Inventories for both high horsepower tractors and combines are down more than 50% from their mid-2024 peak, with inventory to sales ratios in line with historical averages.

With these improvements, our plan for the year is to continue to manage production in line with retail demand. We've also made meaningful progress on North American used inventories. Combine inventories are now down by mid-teens from their March 2024 peak, reflecting the benefits of proactive inventory management throughout this industry cycle. Years North American high horsepower tractor used inventories are similarly improving.

Used tractor inventory is down mid-teens from this cycle's peak and down low single digits sequentially during the quarter, which is a period that we typically see seasonal inventory builds. Notably, model year 2022 to model year 2023 8R tractors are now down around 45% from their peak levels last year. Other North American product lines, including sprayers and planters, have also seen meaningful used inventory improvement, with sprayer inventory down approximately 30% and planter inventory is down roughly 50% from recent peak levels.

Shifting to our order books in North America, order velocity continues to track in line with our expectations. Model year 2026 production of seasonal products is largely set by our early order programs, which have been closed for several months now. We're just launching EOPs for model year 2027 spring products, which will begin production in the last few months of the fiscal year.

Regarding Waterloo large tractors, order books are well into the fourth quarter as we look to close out our model year 2026 production. Overall, order books remain healthy and consistent with our retail-driven production plans. Within Small Ag & Turf in North America, favorable inventory levels are being maintained following last year's underproduction, and we continue to execute against our plan to build in line with retail demand this fiscal year.

Outside of North America, inventory levels in Europe and South America are in good shape following significant reductions in FY 2024 and FY 2025. In Europe, 2026 production is largely aligned with retail demand, while in Brazil we expect to underproduce retail demand, most notably in combines. Order visibility in both regions now extends through the third quarter and into the fourth.

Thank you, Josh. We've covered a lot of different aspects of the business, from quarterly results to tariffs to market conditions around the world. Can you help us to put this all together for us in terms of what it means for adjustments to the sales margin and income guides for the fiscal year?

Yeah, absolutely. While the outlook reflects a mix of tailwinds and headwinds, overall performance remains well-balanced, supporting an unchanged enterprise net income guide. All three business units benefited from a one-time lift from tariff refunds, which helped offset ongoing inflationary pressures on materials and freight.

As discussed, within ag, the dynamics continue to vary by segment. Within large ag, the Brazilian market is navigating elevated uncertainty driven by higher input costs and political factors. At the same time, our Small Ag and Turf business continues to show solid momentum with sustained strength in underlying demand and modest growth in turf. Both PPA and SAT modestly adjusted full-year price realization expectations by approximately half a point, primarily reflecting slightly lower expectations for overseas markets.

Construction & Forestry continues to perform well, with increased strength in end market demand, resulting in an increase in both the net sales and margin expectations for that segment. Taken all together, these dynamics highlight the resilience and balance of our portfolio, supporting a stable and consistent overall net income outlook for the company.

Thanks, Josh. One thing I would add is that as you consider the financial outlook for the rest of the year, we would expect slightly higher revenue in the back half, with the fourth quarter being higher than the third quarter. In addition, we would expect to see our most favorable cost comparisons in the fourth quarter as well.

That's a good point, Brent. Thank you. Hey, one final topic. Last quarter, we've highlighted innovation in our C&F business through the launch of our new excavators and the Tenna acquisition. We didn't spend much time on ag innovation. Can you update us on the latest progress across our portfolio and precision ag solutions?

Yeah, it's an exciting topic, Chris. We've continued to strongly invest in the ag business, and we're delivering meaningful portfolio expansion, product enhancements, and the continued build-out of our technology stack. As customers navigate a challenging market environment, it only further reinforces the importance of our commitment to through-cycle investment, advancing innovation, and delivering customer value when it matters most.

Over the past year, we've launched multiple new products and solutions to strengthen our leadership across each major step of the ag production cycle. Just highlighting a few of these, within tractors, we've launched six new 8R and 8RX tractor models featuring additional high horsepower options. These were developed through a ground-up redesign focused on improving performance, maneuverability, and versatility for large-scale operations.

The new lineup expands the 8 Series with 440, 490, and 540 horsepower offerings, each powered by a JD14 engine and enhanced intelligent power management. These tractors are autonomy-ready and fully integrated with advanced precision technologies and connectivity solutions, and are designed to help farmers cover more acres efficiently throughout the crop cycle.

In planting, new offerings have enabled furrow optimization through our ExactDepth solution, which is designed to provide individual row unit depth calibration from the cab while on the go, and also through downforce automation, which is enabled by our recently released FurrowVision technology. When these furrow optimization solutions are paired with our automated fertilizer placement solutions of ExactShot with an ExactRate, farmers can be better positioned to maximize yield potential while reducing rising input costs within tight planting windows. For the application job step, our See & Spray technology continues to advance.

Recent software enhancements have expanded the targeted application capabilities across a broader range of crops for both new and existing systems, including the notable additions of wheat, barley, and canola. In addition, our recently announced See & Scout capabilities leverage the same camera platform to capture field-level data and generate new agronomic insights for growers, such as weed pressure and stand count maps.

As weed resistance continues to be a challenge across various crop production systems, precision and flexibility are critical for farmers, and we're excited to have the preeminent solution to help our customers manage these challenges cost-effectively while also improving yield outcomes. This expansion in portfolio and technology offerings is making a global impact as well. Earlier this quarter, we held Casa John Deere in Brazil.

This event brought together over 3,000 customers from over 25 countries and marked the largest product launch ever held by Deere in Brazil, with over 20 new product and technology solutions being released across both ag and construction. Recall that just a year ago in the spring, we were talking about our largest product launch in Brazil ever, and we've exceeded that product introduction this year.

Importantly, all of these product enhancements are underpinned by our industry-leading precision guidance technologies with products such as Precision Essentials and connectivity solutions. To provide reliable data access in areas with limited or no cell coverage, we continue to leverage our partnership with Starlink for satellite-based connectivity across our global footprint.

Since launching that solution in the second half of 2024, we've sold more than 12,500 JDLink Boost kits and achieved 25% growth within the last quarter alone, expanding our connected fleet and increasing the value of our digital and SaaS offerings. Taken together, this combination of job step innovation, integrated technology, and expanding connectivity positions us well to continue driving productivity for our customers while supporting recurring high-value revenues across the ag cycle.

I'd also note that while engaged acres in John Deere Operations Center increased about 10% year-over-year, highly engaged acres have grown at an even stronger pace. The quantity of monthly active digital users continues to grow, now reaching nearly 440,000.

Thank you both. Brent, before we open the line for questions, do you have any final comments?

Yes. Thanks, Chris. In the second quarter, our organization demonstrated strong execution, resulting in nearly a 17% margin for our Equipment Operations division. For our large ag division, we made meaningful progress in improving used inventory levels while diligently managing new inventory across the business. For Small Ag & Turf and Construction & Forestry, on the other hand, we've capitalized on favorable demand trends driving growth for the enterprise.

These results reflect the discipline of our operating teams and the focus they continue to bring each day, and I'm incredibly proud of what they've accomplished. Over the course of the fiscal year, we launched a significant number of new products and technologies, reinforcing our commitment to innovation and long-term customer success. Looking ahead, we will continue to invest across the portfolio and in technologies that matter the most to our customers.

With sustained levels of R&D and capital investment through the cycle, we are positioning the business to help customers reduce inputs, improve productivity, and ultimately drive stronger outcomes in their operations. We also remain committed to disciplined capital allocation. During the quarter, we returned $635 million to shareholders through a combination of share repurchases and dividends, reflecting both the strength of our financial performance and our confidence in the business. As I mentioned earlier, we expect our business to continue growing this year while delivering strong returns. More importantly, we believe we are building a stronger foundation for the future, one that positions us well not only for the remainder of this year, but for the years ahead.

Thank you, Brent. Let's open the line to questions from our investors.

We're ready to begin the Q&A portion of the call. The operator will instruct you on the polling procedure. In consideration of others and to allow more of you to participate in the call, please limit yourself to one question. If you have additional questions, we ask that you rejoin the queue. Operator, ready for our first question.

Thank you. If you would like to join the queue, please press star one. Our first question comes from Paddy Bogart from Melius Research.

Hi, guys. Thanks for the question. This year, obviously, construction's been starting out strong, and I know Deere has some tailwinds from past underproduction, but the industry forecast at up 5% compared to your sales growth thus far is a pretty big gap. Are you guys seeing healthy industry growth, and do you see Deere gaining a lot of share?

Yeah. Thanks for the question, Paddy. You're right, and you set up the question correctly. We did some underproduction last year in our earthmoving segment, really in the front part of the year, particularly. As we build alignment with retail demand this year, you do get that natural lift just from that change. On top of that, we've talked about our industry guides up 5% in the earthmoving segments, continued strength in road building as well. That industry is lifting us. On top of that, we have seen some pickup in share over the past 12 months. Particularly in the last six or so, as we've made some pricing adjustments at the end of last year, we're seeing some share gains as well. Thanks, Paddy.

Our next question comes from Steve Volkmann Fisher from Jefferies.

Hey, thanks. It's actually Chirag Patel on for Steve this morning. Just wanted to touch on the tariff piece of the pie here just quickly. Wanted to get a better sense of the baseline margin in each of the businesses. If you could break down that 272 a little bit between the segments, that'd be super helpful.

Deere (DE) Q2 2026 Earnings Call Transcript

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