AI Data Center Boom Provides New Growth Engine for Deere as Farm Equipment Demand Remains Weak

Deere & Company shares traded higher Thursday after the company's third-quarter fiscal results beat Wall Street expectations and it raised its full-year net income outlook.

Deere reported net income of $1.379 billion, or $5.10 per diluted share, compared with $1.289 billion, or $4.75 per share, in the same period last year.

Earnings per share of $5.10 beat the $4.70 estimate. Net sales and revenue rose 5% to $12.608 billion, exceeding the $10.73 billion estimate.

Segment Results

Production & Precision Agriculture net sales fell 6% to $3.998 billion. Operating profit declined 9% to $527 million, with operating margin narrowing from 13.6% to 13.2%.

Favorable pricing and currency effects partially offset lower shipment volumes and higher production costs.

Small Agriculture & Turf net sales rose 12% to $3.383 billion. Operating profit increased 28% to $622 million, with margin expanding from 16% to 18.4%.

Construction & Forestry net sales jumped 18% to $3.618 billion. Operating profit surged 84% to $436 million, with margin improving from 7.7% to 12.1%.

Reuters reported that increased U.S. infrastructure spending and AI-driven data center construction are boosting construction equipment demand, providing Deere with a key growth engine, while demand for large tractors and combines remains weak.

Financial Services net income rose 7% to $219 million.

Cash Flow & Special Items

Operating cash flow for the first nine months of the fiscal year totaled $3.250 billion. Deere ended the quarter with $8.928 billion in cash and cash equivalents.

The company reported short-term borrowings of $17.115 billion, short-term securitization borrowings of $6.095 billion, and long-term borrowings of $40.626 billion.

Deere recorded $110 million in tariff recoveries during the quarter, bringing the year-to-date total to $382 million. The year-ago quarter included a $61 million pretax non-cash impairment charge.

The company also completed its $439 million acquisition of Tenna LLC, expanding its construction technology capabilities.

Deere Raises 2026 Outlook

Deere raised its fiscal 2026 net income outlook to $4.75 billion to $5.0 billion. It expects equipment operations net operating cash flow of $5.0 billion to $5.5 billion.

The company expects capital expenditures of approximately $1.3 billion, with research and development spending anticipated to increase slightly.

Production & Precision Agriculture sales are expected to decline approximately 10%, with margins of 11% to 12%. Small Agriculture & Turf sales are expected to grow approximately 15%, with margins of 14.5% to 15.5%.

Construction & Forestry sales are expected to grow approximately 20%, with margins of 10.5% to 11.5%.

Deere expects U.S. and Canada large agriculture industry production to decline 15% to 20%. Construction equipment production is expected to grow 5% to 10%, while global roadbuilding production is expected to grow approximately 10%.

The company said early order trends, improved used equipment inventories, and higher technology adoption support its view that 2026 will mark the bottom of the agricultural equipment cycle.

"Looking ahead, we continue to believe fiscal 2026 will be the bottom of the current agricultural equipment cycle," said Chairman and CEO John C. May.

"Across our businesses, early order program trends, improved used equipment inventories, and increased customer adoption of our advanced technology give us confidence Deere is well-positioned for long-term value creation."

DE Stock Performance: At the time of Thursday's release, Deere shares were up 2.76% at $596.67.