Deere Q3 FY2026 Earnings: $1.38B Profit From a Tractor Maker With a $70B Bank

Deere & Company builds tractors, combines and excavators, and the largest asset on its balance sheet is none of them. At August 2, 2026 it was $49.2 billion of financing receivables: the loans and leases its own finance arm writes so that farmers and contractors can buy the equipment. That lending business holds $70.3 billion of assets before intercompany eliminations, in a group whose consolidated total is $107.6 billion, and carries $54.5 billion of its $63.8 billion of debt. In the quarter that ended that day, Deere earned $1.379 billion on $12.608 billion of net sales and revenues, up 7% and 5%, while its biggest segment, large farm equipment, shrank.

Every third-quarter figure below is from the Form 10-Q that Deere filed on August 27, 2026, a week after its earnings release. Deere's fiscal year is 52 or 53 weeks ending on the last Sunday in the reporting period, near the end of October. The third quarter is the 13 weeks from May 4 to August 2, 2026. The company reports in whole millions of dollars. This quarter is the current picture of the company until it reports its full fiscal year.

The Headline Numbers​

"Total revenue" is the line Deere's income statement calls total net sales and revenues. It adds three things: sales of equipment, finance and interest income (nearly all of it earned by the finance arm), and other income such as extended warranty premiums. Deere prints no gross profit and no operating income on its consolidated statement, so the table follows the statement's own lines. The ratio of cost of sales to net sales is the one the 10-Q gives.

Two movements stand out. Pre-tax income rose 17.6% on a 4.9% revenue gain, which is the kind of leverage a manufacturer shows when price and volume both help. Then the tax line took a good part of it back. The provision rose 56%, which the 10-Q attributes to "current year unfavorable discrete items", and net income grew 7.0%. The filing puts the quarter's net income increase at $90 million, "primarily due to favorable price realization of $286 ($403 pretax), partially offset by unfavorable tax impacts of $114 and increased production costs of $89 ($126 pretax)", all in millions.

Revenue Deep Dive​

Deere reports three equipment segments and Financial Services.

Production & Precision Agriculture is the large-tractor and combine business, and it is the one in a downturn. Sales fell 6% on "lower shipment volumes (primarily in Brazil and Europe)", with price realization adding three points and currency two. For the full year the 10-Q is direct: "Large agriculture sales are expected to remain subdued in North America and to soften in South America". It expects demand for large farm equipment in the U.S. and Canada to fall "as elevated farm input costs, commodity price volatility, and ongoing market uncertainty continue to pressure demand for equipment." The release's segment outlook is a sales decline of about 10% for fiscal 2026.

Small Agriculture & Turf grew 12% on "higher shipment volumes (primarily in the U.S.) and favorable price realization" and earned the highest margin in the company, 18.4% against 16.0% a year earlier. The 10-Q explains the outlook this way: "Solid margins in the dairy and livestock sector and steady demand in residential and commercial mowing continue to support the outlook."

Construction & Forestry did the most. Sales rose 18% and operating profit 84%, with price realization of eight points, the largest of the three segments. The filing's explanation of demand is specific: "Favorable industry fundamentals are supported by infrastructure, data center, and energy-related projects, as well as continued investment in rental fleets." The margin moved from 7.7% to 12.1%.

The three equipment segments together earned $1,585 million of operating profit, against $1,302 million a year earlier. Financial Services added $271 million of operating profit and $219 million of net income, up 7%. The mix behind that number changed: the segment that used to lead fell, and the two smaller ones more than covered it. That is what the release means by "continued resilience across our portfolio."

The release also makes a claim about the cycle, and it is the main forward-looking statement in the document: "we continue to believe 2026 will mark the bottom of the current ag equipment cycle." It supports that with "early order program trends, improving used-equipment inventories, and increasing customer adoption of our advanced technologies." None of the three comes with a number. The 10-Q is more reserved on the last one: "revenue from SaaS products did not represent a significant percentage of our revenues in the periods presented."

The Margin Story​

Cost of sales was 72.2% of net sales, down from 73.1%. The 10-Q lists three causes: material costs (unfavorable), tariffs net of recoveries (favorable in the quarter) and production efficiencies (favorable).

The tariff item needs a closer look. After the Supreme Court invalidated the tariffs imposed under the International Emergency Economic Powers Act, Deere booked refunds it expects to receive. The 10-Q says: "We recorded tariff recoveries in the third quarter and first nine months of 2026 of $110 and $382, respectively, as we concluded the refunds are probable and reasonably estimable." The recoveries were recorded as a decrease in cost of sales, and about 80% of the amount had been received by August 2.

Without the $110 million, cost of sales would have been 73.2% of net sales, slightly worse than last year's 73.1%, and pre-tax income would have been $1,772 million, up 10.8% instead of 17.6%. Both of those are our arithmetic from the filed figures. So the recovery accounts for the whole improvement in the cost ratio, and for $110 million of the $282 million gain in pre-tax income. Tariffs remain a net cost even after the refunds: the 10-Q puts the direct impact of incremental tariffs at $502 million for the first nine months of fiscal 2026, net of the recovery, against about $300 million in the same period a year earlier.

The rest of the pre-tax gain came from price. Deere says price realization added $403 million pre-tax in the quarter, more than three times the $126 million rise in production costs. On pricing the filing's wording is consistent across segments: "favorable price realization" appears in the explanation for all three. That claim is supported by the numbers, since net sales rose 6.2% while the large-agriculture segment shipped fewer machines.

Below cost of sales, expenses were flat. Research and development rose 2.0% and selling, administrative and general expenses 0.2%. Interest expense fell 10.6%, "primarily due to lower average borrowing rates and lower average borrowings." That line belongs mostly to the finance arm, which is the next subject.

The One Big Question: Is This a Manufacturer or a Lender?​

It is both, and the filing shows each side. Alongside the consolidated statements, Deere gives unaudited supplemental data that splits the group into equipment operations and Financial Services.

The finance arm owns 61% of the two sides' combined assets and earned 16% of the quarter's net income. It runs on borrowed money. The 10-Q gives its ratio of interest-bearing debt to equity as 8.6 to 1, on equity of $6,953 million. That is a normal shape for a lender and an unusual one for a manufacturer. Consolidated, it means Deere reports $63.8 billion of borrowings, most of which funds customers' loans and leases instead of factories. The two interest lines in the table add up to $760 million, against $710 million on the consolidated statement, because $50 million of interest between the two sides is eliminated. And the table's borrowings are 7.8 times the arm's equity by our division, not 8.6: the filed ratio is consistent with also counting the $5,364 million the arm owes the equipment operations.

Three facts describe the state of the loan book this quarter.

It is shrinking a little. Financing receivables and equipment on operating leases fell $2,814 million over twelve months, which the filing ties to "lower agriculture and turf retail customer receivables reflecting reduced demand in recent years and lower wholesale receivables." Finance and interest income fell 5.1% as a result.

It is earning more on less. Financial Services net income rose 7% to $219 million "primarily due to favorable financing spreads, partially offset by the impact of a lower average portfolio." Its interest expense fell 8% while its revenue fell 3%.

Credit losses are small and stable. The allowance for credit losses was $268 million against $49,444 million of financing receivables before the allowance, about 0.5% by our division. The quarter's provision was $80 million and write-offs were $94 million, against $82 million and $98 million a year earlier. The filing does warn that weak large-agriculture conditions may bring "lower sales volumes, higher sales incentives, and elevated receivable write-offs" in 2026, and it says the allowance rose slightly over nine months "due to higher expected losses on construction retail accounts."

One more line connects the two businesses. Trade receivables, which the fiscal 2025 10-K says "arise from sales of goods and services to dealers", stood at $7,723 million, $1,620 million more than a year earlier. Deere attributes the increase to higher sales volumes. Relative to the prior twelve months' net sales the balance was 19%, up from 16%. A company calling the bottom of a cycle while its customers owe it more for equipment already shipped is making a bet that those machines sell through. Inventories on Deere's own books were nearly unchanged, $7,811 million against $7,713 million.

Tracking a $107.6 Billion Balance Sheet in Plain Text​

A consolidated statement like Deere's is hard to read because one total mixes two businesses. Double-entry bookkeeping does not separate them, but it does force every caption to be accounted for, so the lender's lines are visible next to the manufacturer's. Our Deere ledger follows how we model every company, with a few extra accounts for the finance arm. We chart CarMax, another seller with a lender inside, the same way.

Here is the third quarter's income statement as it sits in the ledger. In Beancount, income is negative (a credit) and expenses are positive (a debit), and the transaction must sum to zero.

; Check: −12,608 + 8,049 + −110 + 567 + 1,220 + 710 + 290 + −24 + −2 + 529 + 1,379 = 0 ✓
2026-08-02 * "Deere & Company" "FY2026Q3 Income Statement"
  Income:Revenue                             -12608 MUSD  ; total net sales and revenues: net sales 10,999 + finance and interest income 1,353 + other income 256
  Expenses:CostOfRevenue                       8049 MUSD  ; cost of sales before the tariff recoveries (filed 7,939 + 110; not printed as such)
  Expenses:CostOfRevenue                       -110 MUSD  ; tariff recoveries recorded in the quarter, 'decreasing cost of sales' (10-Q MD&A, Global Trade Policies)
  Expenses:ResearchAndDevelopment               567 MUSD  ; research and development expenses
  Expenses:SellingGeneralAdministrative        1220 MUSD  ; selling, administrative and general expenses
  Expenses:Interest                             710 MUSD  ; interest expense — the filing's own line, mostly the funding cost of the financing arm
  Expenses:OtherNet                             290 MUSD  ; other operating expenses — the filing's own line (it includes depreciation of equipment on operating leases)
  Expenses:OtherNet                             -24 MUSD  ; equity in income of unconsolidated affiliates — the filing's own line, printed after the provision for income taxes
  Expenses:OtherNet                              -2 MUSD  ; net loss attributable to noncontrolling interests, added back as the filing does
  Expenses:IncomeTax                            529 MUSD  ; provision for income taxes
  Equity:Adjustments                           1379 MUSD  ; net income attributable to Deere & Company offset (retained earnings set by balance assertion)

Revenue is one posting equal to the filing's total, with the split between equipment sales and finance income in the comment. The tariff recovery is its own labeled line, so the cost of sales the company would have reported without it can be read directly. Interest expense has its own account because for Deere it is a main operating cost, not a footnote.

The balance sheet lines that carry the story are the receivables and the debt behind them:

2026-08-02 balance Assets:NonCurrent:Loans                                 42860 MUSD  ; financing receivables – net
2026-08-02 balance Assets:NonCurrent:LoansSecuritized                       6316 MUSD  ; financing receivables securitized – net
2026-08-02 balance Assets:NonCurrent:EquipmentOnOperatingLeases             7400 MUSD  ; equipment on operating leases – net
2026-08-02 balance Liabilities:Current:FundingDebt                         -6095 MUSD  ; short-term securitization borrowings
2026-08-02 balance Liabilities:Current:ShortTermDebt                      -17115 MUSD  ; short-term borrowings
2026-08-02 balance Liabilities:NonCurrent:LongTermDebt                    -40626 MUSD  ; long-term borrowings

The second and fourth lines are a pair. Deere transfers retail notes into special purpose entities that issue debt secured by them. Because the transfers do not qualify as sales, both the $6,316 million of securitized receivables and the $6,095 million of borrowings stay on the balance sheet. One caveat on the account names: Deere's balance sheet is unclassified, with no current and non-current subtotals, so those words come from our standard chart and not from the filing.

The Multi-Year Arc​

The cost ratio is our division of two filed lines, and financing receivables is the sum of the two balance sheet captions. Fiscal 2025 had 53 weeks; the other four had 52.

The table shows two cycles. The equipment cycle peaked in fiscal 2023, when net sales reached $55.6 billion and net income $10.2 billion. Two years later net sales were 30% lower and net income had halved, and fiscal 2025's sales were below fiscal 2021's. The cost ratio followed, from 67.9% at the peak back to 72.4%.

The lending cycle ran on a different clock. Financing receivables kept growing for a year after equipment sales peaked, because loans written in a boom stay on the books for years. Interest expense more than tripled between fiscal 2021 and fiscal 2024 as rates rose, and Financial Services net income fell to $619 million in fiscal 2023, the factories' best year of the five. It then recovered to $890 million in fiscal 2025, the factories' worst year of the five. The two businesses offset each other, which is part of why Deere stays solidly profitable at the bottom of a farm cycle.

One more five-year figure, from the equity section of the ledger: treasury stock went from $20,533 million at the end of fiscal 2021 to $37,029 million at August 2, 2026. Treasury stock at cost grew by $16.5 billion through a boom and a downturn, while retained earnings rose by $25.7 billion.

The Verdict: Bull vs. Bear​

Bull Case

• Price is holding in a downturn. Price realization added $403 million pre-tax in the quarter and was positive in all three equipment segments, including the one whose volumes fell.
• Construction & Forestry and Small Agriculture & Turf together grew operating profit by $336 million, more than six times the $53 million decline in large agriculture.
• The finance arm is earning more on a smaller book. Its net income rose 7% and its interest expense fell 8%, and the allowance for credit losses is about 0.5% of receivables.
• The release says net income guidance "improved" to $4.75 billion to $5.00 billion for fiscal 2026 and that order book trends "reinforce 2026 as the bottom of the ag equipment cycle."
• Net income of $3,808 million for nine months came with $2,013 million returned to shareholders and cash and marketable securities of $10.3 billion.

Bear Case

• The forecast range tops out below last year. Fiscal 2025 net income was $5,027 million, so even the high end of $5.00 billion is a second straight annual decline. By our subtraction it implies a fourth quarter of $0.94 billion to $1.19 billion, against $1.07 billion a year earlier.
• The cycle-bottom claim rests on order programs, used-equipment inventories and technology adoption, and the release gives no figure for any of them. The 10-Q still expects large-agriculture demand to fall in North and South America.
• Without $110 million of tariff recoveries the cost ratio would have been slightly worse than last year's. Recoveries are finite; the tariffs that remain cost $502 million net in nine months.
• Trade receivables are up $1,620 million from a year ago and stand at 19% of trailing net sales, against 16%. If that equipment does not sell through, the next step is the "higher sales incentives" the 10-Q names as a risk.
• Deere carries $63.8 billion of borrowings. The finance arm's 8.6-to-1 leverage works while credit losses stay near 0.5%, and the filing itself flags "elevated receivable write-offs" as a possible effect of the farm downturn.

Our Take

Deere's quarter was better than its largest market. The large-agriculture segment sold less and earned less, and the company still grew pre-tax income 17.6%, because construction and small-agriculture volumes rose, prices held everywhere, and the lending arm widened its spread. Take out the tariff recoveries and the growth is 10.8%, which is still a good result for a company that says it is at the bottom of its cycle. We think the claim that matters is the one that cannot yet be checked. Management says 2026 is the trough, but its own full-year forecast is below 2025, its own filing expects large-agriculture demand to keep falling, and its trade receivables are $1.6 billion higher than a year ago. The plain-text ledger makes one thing easy to watch from here: Assets:Current:AccountsReceivable against net sales, and Assets:NonCurrent:Loans against the allowance. If the trough is real, the first should fall and the second should stay quiet.