10-K: Deere & Co. Reports 2025 Earnings Decline Amidst Market Headwinds

Deere & Company's net income and sales decreased in fiscal year 2025, primarily due to challenging market conditions, despite strategic investments in technology and a refined Smart Industrial Operating Model.

Summary

• Net income attributable to Deere & Company decreased to $5,027 million in 2025 from $7,100 million in 2024, a 29.2% decline.
• Diluted Earnings Per Share (EPS) fell to $18.50 in 2025 from $25.62 in 2024.
• Net sales for equipment operations decreased by 17% in 2025, driven by lower sales volumes due to declining market conditions.
• Production & Precision Agriculture (PPA) net sales decreased by 17% to $17,311 million, with operating profit down 41% to $2,671 million.
• Small Agriculture & Turf (SAT) net sales decreased by 7% to $10,224 million, with operating profit down 26% to $1,207 million.
• Construction & Forestry (CF) net sales decreased by 12% to $11,382 million, with operating profit down 49% to $1,028 million.
• Financial Services (FS) net income increased by 28% to $890 million, primarily due to special items, lower selling, administrative and general expenses, favorable financing spreads, and a lower provision for credit losses.
• The company incurred approximately $600 million in incremental import tariffs in 2025, excluding impacts on suppliers and market demand.
• A consolidated multidistrict class action lawsuit and a lawsuit by the FTC and several State Attorneys General allege monopolization and unfair competition in the market for repair services for John Deere agricultural equipment.
• The company refined its Leap Ambitions in December 2025, focusing on automation, autonomy, digitalization, lifecycle solutions, and Solutions as a Service (SaaS) to drive sustained growth towards 2030.
• Cash returned to shareholders decreased by $2.8 billion in 2025, reflecting a reduction in share repurchases to manage cash flows during the declining business cycle.

Sentiment

Score: 3

Explanation: The overall sentiment is negative due to significant declines in net income, EPS, and equipment sales across all major segments. While Financial Services performed better and strategic initiatives are in place, the current market conditions, increased costs from tariffs, and ongoing legal challenges present substantial headwinds. The future outlook is cautious, with expectations of subdued sales in key agricultural markets.

Positives

• Financial Services net income increased by 28% to $890 million in 2025, driven by special items, lower selling, administrative and general expenses, favorable financing spreads, and a lower provision for credit losses.
• PPA sales volumes in Brazil increased by 22%, with price realization up 4% in the region due to strong demand.
• SAT sales volumes increased by 26% in India and 5% in Europe.
• The company maintains a strong liquidity position with cash, cash equivalents, and marketable securities increasing to $8,276 million and $1,411 million respectively in 2025.
• Unused credit lines increased to $7.3 billion, indicating robust access to capital.
• The company successfully renewed a revolving credit agreement for securitization programs with a capacity of $2,500 million in November 2025.
• The company continues to invest in research and development, with expenses of $2,311 million in 2025, to improve product quality, develop new technologies, and integrate sustainable solutions.
• The company's Health and Safety Management System has made progress in injury prevention, reporting a total recordable incident rate of 1.45 and a lost time frequency rate of 0.61 in fiscal year 2025.

Negatives

• Net income attributable to Deere & Company decreased by 29.2% to $5,027 million in 2025 from $7,100 million in 2024.
• Diluted EPS declined to $18.50 in 2025 from $25.62 in 2024.
• Net sales for equipment operations decreased by 17% in 2025, primarily due to lower sales volumes driven by declining market conditions.
• Operating profit for Production & Precision Agriculture (PPA) decreased by 41% to $2,671 million.
• Operating profit for Small Agriculture & Turf (SAT) decreased by 26% to $1,207 million.
• Operating profit for Construction & Forestry (CF) decreased by 49% to $1,028 million.
• Sales volumes in U.S. and Canada for PPA decreased by 30%, and for SAT by 17%.
• Price realization for CF decreased by 3% in the U.S. and Canada due to incremental incentive programs.
• The company incurred approximately $600 million in incremental import tariffs in 2025.
• Elevated used inventory levels in late model-year machines impacted demand for products in North America, leading to lower price realization.
• The allowance for credit losses on retail notes and financing lease receivables increased in 2025 due to higher expected losses on agriculture and turf customer accounts and elevated delinquencies.
• Cash returned to shareholders decreased by $2.8 billion in 2025 due to reduced share repurchases.
• The company recorded a $95 million pretax litigation accrual in Q4 2025 related to antitrust lawsuits.
• A non-cash impairment charge of $61 million pretax was recorded in Q3 2025, primarily related to external overseas battery operations due to slowing external demand.

Risks

• Financial results are largely dependent on the unpredictable agricultural market business cycle, which is affected by farm income, international trade, commodity prices, and government policies.
• Sustained negative economic conditions, including high unemployment, high interest rates, inflation, and lower business investment, could weaken demand for equipment and services.
• International, national, and regional trade laws, regulations, and policies (e.g., tariffs, export controls, sanctions) could materially impair profitability and disrupt the supply chain.
• International operations expose the company to risks such as economic and political instability, currency fluctuations, inadequate intellectual property protections, and adverse consumer sentiment.
• Changing worldwide demand for food and renewable energy can impact farm commodity prices and equipment demand, potentially increasing R&D costs for new fuel requirements.
• Restructuring, rationalization, and relocation of manufacturing facilities may cause capacity constraints, inventory fluctuations, and reputational risks.
• Inability to accurately forecast customer demand and manage inventory could lead to unmet market demand, parts shortages, manufacturing delays, or excess inventory.
• Changes in the availability and price of raw materials, components, and whole goods, including reliance on rare earth minerals from China, could cause production disruptions and increased costs.
• Failure by the supply base to use ethical business practices and comply with laws could harm reputation and expose the company to litigation.
• Unexpected events like war, natural disasters, epidemics, or civil unrest could increase costs or disrupt operations.
• Changes in interest rates or market liquidity conditions, as well as government banking, monetary, and fiscal policies, could adversely affect financials and earnings.
• The financial services segment is vulnerable to customer defaults, credit losses, and residual value losses on leases.
• Changes in tax rates, tax legislation, or exposure to additional tax liabilities could negatively affect the business.
• Failure to realize anticipated benefits of the Smart Industrial Operating Model and Leap Ambitions, including slower-than-expected customer adoption of precision technology and SaaS.
• Risks associated with the introduction of new products and technologies, including meeting development schedules, intellectual property protection, and customer acceptance.
• Aggressive pricing or other strategies of competitors could adversely affect business.
• Equipment failures, warranty claims, post-sale repairs, and recalls could result in significant expense and harm the brand.
• Reliance on a network of independent dealers means their unsuccessful sales or operational issues could adversely affect overall sales and revenue.
• Acquisitions, joint ventures, and divestitures may not realize anticipated benefits or may take longer than expected.
• Negative publicity or claims across media channels could damage the company's reputation and brand.
• Inability to attract, develop, engage, and retain qualified employees could impair strategy execution.
• Disruptions from union activities, including work stoppages, could adversely affect business.
• Security breaches and other disruptions to information technology infrastructure could interfere with operations and compromise information.
• Unauthorized control or manipulation of product systems could result in a loss of confidence.
• Technical or regulatory limitations may impact the ability to effectively implement automation, autonomy, and artificial intelligence solutions.
• Legal proceedings, disputes, and government inquiries and investigations, particularly antitrust lawsuits, could harm the business and financial condition.
• Infringement or loss of intellectual property rights could adversely affect the business.

Future Outlook

For fiscal year 2026, large agriculture sales in North America are expected to remain subdued due to challenging farm fundamentals and elevated used equipment levels. Small agriculture & turf sales are anticipated to be flat to slightly up in the U.S. and Canada, supported by solid beef prices and a modest recovery in the turf sector. European agriculture industry sales are forecasted to be flat to slightly up, while demand in South America is expected to be flat, tempered by high interest rates and global crop yields. Construction & Forestry industry sales in the U.S. and Canada are projected to be flat to slightly higher, driven by record employment, strong construction backlogs, and government infrastructure spending, but partially offset by restrained private commercial sector investments. Global forestry and roadbuilding markets are expected to remain flat at strong levels. Financial Services net income is projected to decrease in 2026 due to unfavorable average portfolio and prior period special items, partially offset by favorable financing spreads. The company forecasts lower operating cash flows from equipment operations in 2026, driven by a decrease in net income, partially offset by higher cash flows from inventory reductions. Capital expenditures are forecasted to be $1.4 billion in 2026.

Management Comments

• Our Smart Industrial Operating Model aims to deliver greater value for our customers, accelerate our competitive advantage in advanced technologies, build on our fundamental manufacturing strengths and core values, and capitalize on opportunities that lie ahead by leveraging advanced technologies with our operational excellence.
• We continue to invest in the development and production of advanced technology through integrated agricultural solutions and precision technologies across our portfolio of equipment. We believe our investments in precision technology will transform our farmers equipment into smarter, more efficient machines.
• Our growth in Brazil is just one example of deploying capital to areas where we can unlock the greatest value for our customers – a hallmark of our Smart Industrial Operating Model.
• We anticipate fluctuations in our supply chain due to ongoing geopolitical and economic uncertainty, and regulatory and policy instability, including import tariffs and trade agreements.
• We continue to focus on structural profitability and strategically investing in solutions that deliver value to our customers.

Industry Context

The agricultural equipment industry is cyclical, heavily influenced by farm income, commodity prices, and government policies. The current environment is challenging, with lower sales volumes and elevated used equipment inventory impacting demand for new machines. However, innovations in machinery and technology, particularly precision agriculture, are driving purchases as farmers seek efficiency and productivity. The construction and forestry sectors are supported by infrastructure spending and employment levels, but face pressures from interest rates and private commercial sector investments. The industry is also seeing increased competition from global players and non-traditional technology companies, necessitating continuous investment in R&D and advanced solutions like automation and AI.

Comparison to Industry Standards

• The agricultural equipment industry is becoming more competitive with global players like AGCO Corporation, CLAAS KGaA mbH, CNH Industrial N.V., Kubota Tractor Corporation, and The Toro Company.
• In construction and forestry, global competitors include Caterpillar Inc., CNH Industrial N.V., Doosan Infracore Co., Ltd., Fayat Group, GOMACO Corporation, Hitachi Construction Machinery, Komatsu Ltd., Kubota Tractor Corporation, LGMG, Liugong, Ponsse Plc, SANY Group Co., Ltd., SDLG, Terex, Tigercat Industries Inc., Volvo Construction Equipment, and XCMG.
• The company's refined Leap Ambitions emphasize Solutions as a Service (SaaS), automation, autonomy, and digitalization, aligning with broader industry trends towards advanced technology integration for optimizing jobs and strengthening decision-making.
• The company's investments in precision technology aim to transform equipment into smarter, more efficient machines, a key competitive factor in the evolving agricultural environment where larger, more productive equipment is well accepted.

Management Changes

Corporate Governance

Legal Proceedings

• On January 15, 2025, the Federal Trade Commission (FTC), along with the Attorneys General of Illinois, Minnesota, Arizona, Michigan, and Wisconsin, filed a lawsuit alleging monopolization and unfair competition in the market for repair services for John Deere agricultural equipment.
• Plaintiffs seek a permanent injunction and other equitable relief to allow owners and independent repair providers access to repair tools and resources.
• The company filed a motion to dismiss the lawsuit on March 17, 2025, which was denied by the court.
• Preliminary discussions are ongoing with the FTC regarding a potential resolution, but the outcome or impact on the business is currently unpredictable.
• The company is subject to various other unresolved legal actions and investigations related to product liability (including asbestos-related liability), employment, patent, trademark, and antitrust matters (including class action litigation).
• The total accrued losses on unresolved legal matters were approximately $175 million as of November 2, 2025, including a $95 million increase in Q4 2025 related to the antitrust lawsuit.

Related Party Transactions

• The financial services segment provides financing for a significant portion of the company's sales worldwide, with retail notes acquired by sales companies immediately sold to financial services operations.
• The equipment operations are the financial services operations' major source of business.
• The financial services operations generally receive compensation from the sales companies at approximate market interest rates for periods during which finance charges are waived or reduced on retail notes or leases.
• The company has an agreement with John Deere Capital Corporation (Capital Corporation) to make payments such that its consolidated ratio of earnings to fixed charges is not less than 1.05 to 1 for any four consecutive fiscal quarterly period.
• The company is committed to owning at least 51% of the voting shares of Capital Corporation and maintaining its consolidated tangible net worth at not less than $50 million.
• In February 2025, the company completed a transaction with Banco Bradesco S.A. (Bradesco) for Bradesco to invest and become a 50% owner of Banco John Deere S.A. (BJD), which was a former wholly-owned subsidiary. The company retained a 50% equity interest in BJD and accounts for it using the equity method.
• The company provides guarantees to banks for the retail financing of John Deere equipment in certain international markets, with a notional value of $135 million at the end of 2025.
• The company also had guarantees to BJD (a VIE) totaling $157 million at the end of 2025.

Stakeholder Impact

• Shareholders: Experienced a significant decrease in net income and diluted EPS, impacting total shareholder returns. Share repurchases were reduced to manage cash flow, and future dividends are subject to earnings and capital requirements.
• Customers: Face challenging market conditions, including high interest rates and elevated used equipment inventory, affecting demand for new products. The company's focus on precision technology and lifecycle solutions aims to improve customer profitability and sustainability.
• Employees: Employee-separation programs were implemented in 2024, potentially impacting morale and institutional knowledge. The company emphasizes attracting, developing, and retaining qualified employees, and is subject to union activities and collective bargaining agreements.
• Dealers: Face pressures from lower demand and elevated used inventory levels, impacting their equipment purchases from the company. The company relies on dealers for distribution and support of new technologies, and provides sales incentives and support programs.
• Suppliers: The company's complex global supply chain is vulnerable to disruptions, price changes, and ethical business practices of suppliers, which could affect delivery and costs.
• Regulatory Authorities: The company is subject to various complex and changing laws and regulations, including environmental, trade, and antitrust laws, leading to potential fines, penalties, and legal proceedings.

Next Steps

• Continue to monitor developments in the United States Supreme Court case regarding tariffs imposed under the International Emergency Economic Powers Act (IEEPA) for potential tariff relief and recovery of amounts previously paid.
• Engage in preliminary discussions with the FTC regarding a potential resolution for the antitrust lawsuit concerning repair services.
• Implement refined Leap Ambitions with long-term financial and operational goals, emphasizing automation, autonomy, digitalization, lifecycle solutions, and Solutions as a Service (SaaS).
• Manage cash flows through the declining business cycle, including considering share repurchases after meeting other cash requirements.
• Negotiate new collective bargaining agreements as existing ones expire between 2025 and 2027.
• Assess the effect of new accounting standards (ASU 2025-10, ASU 2025-06, ASU 2024-03, ASU 2023-09) on consolidated financial statements and disclosures in future periods.
• Pay a quarterly dividend of $1.62 per share on February 9, 2026, to stockholders of record on December 31, 2025.

Key Dates

Recommendation

Deere & Company is navigating a challenging market environment, as evidenced by the significant decline in net income and equipment sales in fiscal year 2025. While the Financial Services segment showed resilience and the company is strategically investing in advanced technologies and refining its operating model, the near-term outlook for large agriculture sales remains subdued. The ongoing antitrust litigation regarding repair services presents a material uncertainty. The company's strong balance sheet, commitment to innovation, and long-term strategic vision (Leap Ambitions) provide a foundation for future recovery. However, the current headwinds, including tariffs, high interest rates impacting customer demand, and elevated used equipment inventory, suggest a 'hold' recommendation. Investors should monitor the effectiveness of strategic initiatives, resolution of legal matters, and improvements in agricultural market fundamentals before considering a more aggressive stance.

Keywords

Agricultural Equipment, Construction Equipment, Forestry Equipment, Financial Services, Precision Agriculture, Smart Industrial Operating Model, Leap Ambitions, SEC Filing, 10-K, Net Income, Sales Volume, Tariffs, Supply Chain, Interest Rates, Credit Losses, Antitrust Lawsuit, Right to Repair, Cybersecurity, Automation, Autonomy, SaaS, Share Repurchase, Dividends, Corporate Governance, Risk Factors