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DEERE & CO (DE)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 FY2025 delivered resilient execution amid tariff uncertainty: revenue $12.76B, EPS $6.64, and net income $1.804B; equipment net sales were $11.17B with equipment operations margin “just under 19%” sequentially stronger .
  • Results were broad-based: PPA margin 22.0%, SAT margin 19.2%, and C&F margin 12.9%, with lower volumes offset by production cost favorability and price realization; financial services net income was $161M .
  • Strong beats versus S&P Global consensus: EPS $6.64 vs $5.62*, revenue $12.76B vs $10.79B*, and EBITDA $2.92B vs $2.26B*; management widened FY2025 net income guidance to $4.75–$5.50B due to fluid tariff environment (was $5.0–$5.5B) .
  • Strategy and catalysts: Deere highlighted precision tech adoption (Precision Essentials renewals near two-thirds YTD), See & Spray utilization scaling, Wirtgen tech integration, Brazil growth, and a planned $20B U.S. investment over the next decade; dividend maintained at $1.62/quarter .

What Went Well and What Went Wrong

  • What Went Well

    • “Exceptional execution” delivered favorable production costs and higher-than-expected volumes; equipment operations margin improved sequentially to ~19% despite ~$100M tariff headwind in Q2 .
    • Precision tech traction: nearly 10,000 Precision Essentials orders in H1 and ~70% first-year renewal target with ~two-thirds renewed; See & Spray orders >1,000 with rising utilization; engaged acres +15% to ~475M .
    • Wirtgen roadbuilding tech and record orders at Bauma; extending Deere’s centralized tech stack (operations center) to roadbuilding for digitalization and automation .

  • What Went Wrong

    • Tariffs and pricing: Q2 incurred ~$100M pretax tariff costs; full-year tariff impact forecast ~>$500M, with heavier back-half weighting pressuring margins; C&F price realization negative (~1.5 pts) .
    • Volume/mix headwinds: PPA sales -21% YoY and C&F -23% YoY; margins compressed YoY (e.g., C&F margin 12.9% vs 17.4% prior year) due to lower shipment volumes and unfavorable mix .
    • Used inventory and demand uncertainty: high-horsepower tractor used inventory pace remains uncertain, with macro volatility and rates weighing on replacement demand; turf and CUE softness in U.S. impacted SAT outlook .

Financial Results

MetricQ2 2024Q4 2024Q1 2025Q2 2025
Revenue ($USD Billions)$15.24 $11.14 $8.51 $12.76
Equipment Net Sales ($USD Billions)$13.61 $9.28 $6.81 $11.17
Net Income ($USD Billions)$2.37 $1.25 $0.87 $1.80
Diluted EPS ($)$8.53 $4.55 $3.19 $6.64
SegmentQ4 2024 Net Sales ($B)Q1 2025 Net Sales ($B)Q2 2025 Net Sales ($B)Q4 2024 Op Margin (%)Q1 2025 Op Margin (%)Q2 2025 Op Margin (%)
Production & Precision Ag (PPA)$4.31 $3.07 $5.23 15.3 11.0 22.0
Small Ag & Turf (SAT)$2.31 $1.75 $2.99 10.1 7.1 19.2
Construction & Forestry (C&F)$2.66 $1.99 $2.95 12.3 3.3 12.9
KPIsQ4 2024Q1 2025Q2 2025
Financial Services Net Income ($USD Millions)$173 $230 $161
Dividends Declared ($/share)$1.47 $1.62 $1.62
Estimates vs Actual (Q2 2025)EstimateActual
Revenue ($USD Billions)$10.79*$12.76
Primary EPS ($)$5.62*$6.64
EBITDA ($USD Billions)$2.26*$2.92

Values with asterisk (*) retrieved from S&P Global.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Income (Attributable to Deere & Co.)FY2025$5.0–$5.5B $4.75–$5.50B Widened lower bound (more conservative)
Effective Tax RateFY202520–22% 20–22% Maintained
Net Operating Cash Flow (Equipment Ops)FY2025$4.5–$5.5B $4.5–$5.5B Maintained
PPA Net SalesFY2025Down 15–20%; -2.5% FX; +1.0% price Down 15–20%; -1.5% FX; +1.0% price FX translation improved
PPA Operating MarginFY202516–17% 15.5–17.0% Lowered midpoint (tariff impact)
SAT Net SalesFY2025Down ~10%; -1.5% FX; +0.5% price Down 10–15%; ~Flat FX; +0.5% price Softer demand in U.S. turf/CUE
SAT Operating MarginFY202513–14% 11.5–13.5% Lowered (tariffs + demand mix)
C&F Net SalesFY2025Down 10–15%; ~Flat FX; ~Flat price Down 10–15%; ~Flat FX; -1.0% price Price realization turned negative
C&F Operating MarginFY202511.5–12.5% 8.5–11.5% Lowered (tariffs + pricing)
Financial Services Net IncomeFY2025~$750M ~$750M Maintained
DividendCurrent—$1.62 per share payable Aug 8, 2025 Affirmed dividend cadence

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2024, Q1 2025)Current Period (Q2 2025)Trend
Tariffs/MacroFY2025 tax rate & guidance set; rising uncertainty and workforce/program adjustments ~$100M Q2 tariff cost; ~$500M FY impact; heavier back-half margin pressure; mitigation via certifications and trade flow optimization Deteriorated; mitigation actions accelerating
Precision Tech (SaaS)Strategy buildout; platforms and subscriptions outlined Precision Essentials orders ~10k H1; ~2/3 renewal rate YTD; See & Spray orders >1k; engaged acres >475M (+15% YoY) Strengthening adoption and utilization
Roadbuilding/Wirtgen TechIntegration progress noted Record Bauma orders; Operations Center launched for roadbuilding; extending tech stack across systems Positive momentum
Regional TrendsU.S./Canada large ag down ~30%; Europe down ~5–10% Similar outlook; Europe sentiment improving; Brazil investor day and “invest in Brazil for Brazil,” India tractor outlook favorable Europe/Brazil stabilizing; U.S. large ag subdued
Used Inventory/Dealer HealthCombines progress; tractors elevated High-HP tractor used pace uncertain; dealer pools and funds supporting used normalization Gradual normalization
Regulatory/LegalFTC/state AG self-repair lawsuit referenced Continued risk disclosure in PR/8-K risk factors Ongoing

Management Commentary

  • “We are prepared to invest $20 billion in the U.S. over the next decade as we spearhead new product development, cutting-edge technologies and more advanced manufacturing.” — John May, CEO .
  • “Margins exceeded projections despite tariff headwinds due to better-than-expected sales and favorable production costs stemming from efficiency gains.” — Josh Jepsen, CFO .
  • “It’s important to contextualize that equipment operations results were net of roughly $100 million in incremental tariff headwinds [in Q2].” — Josh Beal .
  • “We successfully certified eligible products for USMCA and ag-use-only exemptions… and are optimizing global trade flows.” — Josh Jepsen .

Q&A Highlights

  • Precision tech SaaS pipeline: foundational digital licenses (G5, Precision Essentials), usage-based solutions (See & Spray), and future autonomy offered as SaaS; bundling expected to simplify customer adoption .
  • Tariff impact and margin protection: total FY tariff headwind ~>$500M, with intent to protect margins via cost actions and measured pricing; early order programs structured in phases to retain price flexibility .
  • Large ag decrementals and back-half margins: lower price favorability and less material tailwinds, combined with back-half tariff weighting, drive softer implied margins despite smaller YoY sales changes .
  • Used inventory dynamics: high-HP tractors remain elevated; progress depends on macro stability, farm bill certainty, and commodity demand drivers (e.g., ethanol); dealer support funds in place .

Estimates Context

  • Beat across key metrics versus S&P Global consensus: revenue $12.76B vs $10.79B*, EPS $6.64 vs $5.62*, EBITDA $2.92B vs $2.26B*; 17 EPS estimates and 9 revenue estimates underpin consensus breadth. Adjustments likely move higher for SAT and PPA margins given cost favorability but back-half tariffs temper FY margin trajectory .
    Values with asterisk (*) retrieved from S&P Global.

Key Takeaways for Investors

  • Core beat: Substantial revenue/EPS/EBITDA beats reflect operational execution and cost control; the widened FY guide is a function of tariff uncertainty, not demand collapse .
  • Margin resilience: Sequential margin improvement to ~19% equipment operations despite ~$100M tariff cost in Q2 suggests mitigating levers (production cost, sourcing) are working .
  • Tech growth vector: Precision Essentials renewals, See & Spray scaling, and Wirtgen tech integration should support multi-year monetization via SaaS and utilization; mid-cycle valuation could re-rate as adoption compounding continues .
  • Segment outlook reset: PPA and SAT margin guides trimmed primarily on tariffs; C&F price realization negative near-term. Watch early order program pricing phases for ’26 visibility .
  • Regional stabilization: Europe sentiment improving; Brazil growth and investor day (June 10) are incremental positives; U.S. large ag remains cyclical but used normalization and policy clarity are catalysts .
  • Capital returns intact: Dividend maintained at $1.62 with balanced use-of-cash priorities; liquidity strong; EO cash flow guide steady .
  • Trading implications: Near-term—stock should respond to consensus beat and margin resilience; medium-term—monitor tariff trajectory, early order pricing, used inventory turnover, and precision tech KPIs for estimate revisions and multiple support .