Deere raised its full-year net income forecast and posted its first quarterly profit increase in three years, as an AI-driven construction equipment boom and a tariff refund offset a continued slump in its farm equipment business. Shares jumped nearly 9% on the news.
Deere's shares jumped nearly 9% on Thursday, marking their best day in six months, after the company raised its 2026 profit outlook and reported its first rise in quarterly profit in three years. The gains came from a surge in construction equipment demand tied to the AI data-center buildout, plus a tariff refund.
Construction demand offsets a weak farm cycle
Rising U.S. government and private infrastructure spending, combined with the AI-driven data-center buildout, has lifted demand for construction machinery. Deere's construction and forestry segment, now its fastest-growing business, posted an 18% rise in quarterly net sales from a year earlier. According to Reuters, Director of Investor Relations Chris Seibert told analysts "customer backlogs now extend well into fiscal year 2027."
That strength has helped Deere weather a prolonged downturn in demand for its large tractors and combine harvesters amid rising costs for farmers and falling agricultural yields. Quarterly revenue at its mainstay Production & Precision Agriculture segment dropped 6% from a year earlier, though CEO John C. May said the company continues to believe 2026 will mark the bottom of the current ag equipment cycle.
Third Bridge analyst Ryan Keeney cautioned that commodity pricing softness limits any major sales recovery, adding it remains to be seen whether rivals AGCO and CNH will push discounts that could weaken the environment further before any recovery. Deere's Small Ag & Turf segment, which serves dairy farming with low-horsepower tractors, still posted a 12% rise in quarterly net sales, aided by improving milk and beef prices.
Tariff refund and raised guidance
The company recorded a $110 million tariff refund during the quarter, but finance chief Brent Norwood said Deere still expects net tariff costs of about $750 million in 2026 and about $1 billion in 2027. Profit per share came in at $5.10 for the quarter, up from $4.75 a year earlier and above analysts' estimate of $4.70, according to data compiled by LSEG.
Total quarterly revenue rose 6% to $11 billion, beating expectations of $10.73 billion. Deere now expects 2026 net income of $4.75 billion to $5 billion, up from its earlier projection of $4.5 billion to $5 billion — a midpoint in line with Wall Street expectations.
Source: Investing.com
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