Deere Raises 2026 Profit Outlook on Construction Strength

What happened

Deere delivered fiscal Q3 2026 results that beat analyst expectations, reporting net income of $1.38 billion ($5.10 per share) versus consensus of $4.72 per share. Total net sales and revenue rose 5% to $12.61 billion. The company's construction and forestry segment posted 18% revenue growth, with operating profit nearly doubling due to higher prices. This performance more than offset a 6% sales decline in the production and precision agriculture division, Deere's largest segment. The small agriculture and turf business also delivered double-digit sales growth driven by higher volumes and prices. Following these results, Deere raised the lower end of its full-year 2026 net income guidance range to $4.75 billion from $4.5 billion, leaving the upper bound at $5 billion.

Why it matters

The results show Deere is diversifying its revenue base beyond traditional agricultural cycles, capturing demand tied to infrastructure spending and data centre construction. The construction and forestry segment's strong performance reflects underlying demand for heavy earthmoving equipment, helping the company defend margins even as farmers delay major equipment purchases amid low crop prices and elevated input costs. Management's confidence that 2026 marks the bottom of the ag equipment cycle signals potential for recovery in fiscal 2027, supported by improving used-equipment inventories, early order program trends, and increasing customer adoption of precision agriculture technologies. Deere also recovered $382 million in tariff impacts over the nine-month period, demonstrating effective cost management.

Bigger picture

The agricultural equipment industry remains in a cyclical trough, with U.S. tractor sales down 13% year-to-date through July. Deere continues to expect annual sales in U.S. and Canada production agriculture to fall 15–20% and revised its South America outlook downward to a 15–20% decline. Grain prices have been climbing-wheat recently hit its highest level since 2024 due to heat, drought, and geopolitical tensions-which could eventually improve farmer spending power. Rival CNH Industrial raised its outlook citing a sector rebound in 2027 driven by fleet ageing, while Agco Corp trimmed its estimates. Deere's construction segment is benefiting from secular tailwinds including AI-driven data centre construction, offsetting near-term agricultural headwinds.

What to watch

Investors should monitor crop price trends, particularly for wheat and corn, as sustained increases could boost farmer income and equipment demand. Early order program trends for spring 2027 will be a key leading indicator of demand recovery. Watch for further progress in used-equipment inventory normalisation and adoption rates of Deere's advanced precision agriculture technologies. Regional sales trends in South America and Europe remain under pressure, so any stabilisation could signal a broader turnaround. Additionally, track construction spending data and infrastructure investment tied to data centres, as this segment is proving critical to offsetting ag cycle weakness.