Deere & Company has raised its full-year profit forecast after stronger construction equipment demand helped the manufacturer deliver its first year-over-year quarterly profit increase in three years, even as the market for large agricultural machinery remains under pressure.
The latest results highlight an increasingly important shift inside Deere’s business. For years, large tractors, combines and precision agriculture equipment were the clearest drivers of the company’s earnings story. In 2026, construction is doing much more of the heavy lifting.
Demand tied to U.S. infrastructure investment, industrial construction and the rapid expansion of data centers has pushed Deere’s Construction & Forestry business into its fastest-growing major equipment segment.
At the same time, farmers remain cautious about committing capital to expensive new machinery, particularly at the upper end of the horsepower and harvesting markets.
Deere Raises 2026 Profit Forecast
Deere now expects fiscal 2026 net income of between $4.75 billion and $5 billion, narrowing and lifting the lower end of its previous $4.5 billion to $5 billion forecast.
For the latest quarter, Deere reported earnings of $5.10 per share, compared with $4.75 a year earlier. The result also exceeded the approximately $4.70 per share expected by analysts tracked by LSEG.
Quarterly revenue increased 6% year over year to about $11 billion, ahead of market expectations of approximately $10.73 billion.
The improvement is notable because Deere entered 2026 facing a difficult agricultural equipment cycle. Earlier in the year, the company had already been forecasting substantially stronger performance in construction than in large agriculture. Deere’s second-quarter outlook called for fiscal-year Construction & Forestry sales to rise about 20%, while Production & Precision Agriculture sales were expected to decline between 5% and 10%.
Construction Sales Jump 18%
Construction & Forestry net sales increased 18% from a year earlier during the quarter, making the division Deere’s clearest growth engine.
The strength is being driven by several overlapping investment cycles.
Federal and private infrastructure spending continues to support demand for earthmoving and roadbuilding equipment, while data-center construction has added another unusually capital-intensive source of demand.
The connection with artificial intelligence is indirect but increasingly important for equipment manufacturers. AI companies and cloud providers require enormous computing capacity, which in turn requires large data centers, electrical infrastructure, access roads, utilities and extensive site preparation.
Those projects create demand for excavators, loaders, dozers and other construction machines long before the servers are installed.
Deere says customer order backlogs in the construction business now stretch well into fiscal 2027.
That is particularly significant because the segment was already accelerating earlier in the year. Deere reported a 34% year-over-year increase in Construction & Forestry sales during its first fiscal quarter of 2026, to $2.67 billion.
Large Farm Equipment Still Weak
The picture remains considerably softer in Deere’s core large-agriculture business.
Production & Precision Agriculture quarterly sales declined 6% from a year earlier as farmers remained reluctant to replace high-value tractors, combines and other major equipment.
High machinery prices, borrowing costs and weaker farm economics continue to extend replacement cycles. Commodity prices have not improved enough to produce the kind of broad purchasing recovery that normally follows a downturn in large agricultural equipment.
CEO John May said Deere continues to believe that 2026 will represent the bottom of the current agricultural equipment cycle.
That may prove correct, but reaching the bottom of a cycle does not necessarily mean a rapid rebound will follow.
For manufacturers of 8R and 9R tractors, large combines and high-spec precision equipment, the more important question is how quickly farm cash flow improves enough to justify another round of major capital expenditure.
Deere itself previously estimated that the U.S. and Canadian large-agriculture equipment market could decline 15% to 20% in fiscal 2026.
Small Tractor Sales Improve
Not every part of Deere’s agricultural portfolio is moving in the same direction.
Small Ag & Turf net sales increased 12% during the quarter.
This business includes lower-horsepower tractors and equipment serving livestock operations, property owners, commercial users and other customers who are less directly exposed to the economics driving purchases of $500,000-plus row-crop tractors and combines.
Improving beef and dairy prices have also provided more support for livestock producers.
The result reinforces an important feature of the current machinery market: weakness is concentrated most heavily in large, capital-intensive agricultural equipment rather than across every tractor category.
Tariffs Remain a Major Cost
Deere also benefited from a $110 million tariff refund during the quarter, although tariffs remain a substantial expense for the manufacturer.
Chief Financial Officer Brent Norwood said Deere expects approximately $750 million in net tariff costs during fiscal 2026.
That figure could increase to roughly $1 billion in fiscal 2027.
This makes the current earnings improvement more impressive, but it also creates an important risk for the next fiscal year.
Manufacturers can offset part of a tariff increase through pricing, sourcing changes and production adjustments, but agricultural customers already facing weak economics have limited tolerance for additional equipment price inflation.
Deere therefore has to balance margin protection against the risk of making new machinery even harder for farmers to justify.
Deere’s Construction Hedge Is Working
The most important takeaway from these results is not simply that Deere beat earnings expectations.
It is that the company’s diversification is working exactly when the agricultural machinery cycle is working against it.
A manufacturer dependent almost entirely on large tractors and combines would currently have few places to hide. Deere instead has meaningful exposure to construction, roadbuilding, forestry, compact equipment and smaller agricultural machinery.
That has given the company a powerful internal hedge.
There is also a strategic irony in the current situation. Much of the investor attention surrounding Deere in recent years has focused on agricultural automation, See & Spray, precision farming and autonomous tractors. Yet one of the strongest short-term contributors to earnings is coming from another technology boom entirely: the physical infrastructure required to support artificial intelligence.
That does not mean Deere is becoming a construction company rather than an agricultural machinery company. Production agriculture remains central to the brand and to its long-term technology strategy.
But the results demonstrate why Deere’s construction portfolio matters much more than it sometimes receives credit for.
If the agricultural cycle begins recovering in 2027 while construction backlogs remain strong, Deere could eventually have both major businesses moving in the same direction. That would represent a significantly stronger earnings environment than the company faces today.
The risk is that construction demand cools before large-ag equipment recovers. For now, however, infrastructure and data-center investment are giving Deere valuable time to wait for farmers’ machinery budgets to improve.
About John Deere
John Deere is the principal equipment brand of Deere & Company, headquartered in Moline, Illinois. The business traces its history to 1837, when blacksmith John Deere developed his first commercially successful steel plow in Grand Detour, Illinois.
Deere operates across agricultural machinery, construction and forestry equipment, turf equipment, power systems, precision technology and financial services.
In fiscal 2025, Deere reported approximately $45.68 billion in consolidated net sales and revenues, including about $38.92 billion in equipment net sales.
The company maintains a particularly large U.S. manufacturing footprint. Deere says it currently employs approximately 30,000 people across more than 60 U.S. factory and office locations in more than 16 states. It has also announced plans for more than $1 billion in U.S. excavator design and manufacturing investment over the next decade, including approximately $800 million in research and development and $300 million in capital investment through 2030.
