Deere’s Q2 earnings get lift from IEEPA tariff refunds as construction demand offsets ag softness

Deere & Company said its fiscal second-quarter results reflected a mixed operating picture, with weaker sales in its large agriculture business offset by strength in construction and forestry equipment. Net income for the quarter ended May 3, 2026, was $1.773 billion, or $6.55 per diluted share, compared with $1.804 billion, or $6.64 per diluted share, a year earlier. Total net sales and revenues rose 5% to $13.37 billion.

The company attributed part of the quarter’s improvement to a tariff-related recovery connected to the International Emergency Economic Powers Act (IEEPA). Deere said the U.S. Supreme Court issued a decision on February 20, 2026, invalidating tariffs imposed under IEEPA, and that it recorded a $272 million recovery for refund claims that were filed and accepted by U.S. Customs and Border Protection.

On the operations side, Deere’s Production and Precision Agriculture segment, which covers tractors, combines, and precision ag tools, generated $4.50 billion in second-quarter net sales, down 14% from the prior year period. Operating profit in that segment fell to $706 million, down 39%, with Deere pointing to lower shipment volumes and higher production costs as key drivers.

Deere’s Construction and Forestry segment, by contrast, reported strong growth. Net sales climbed 29% to $3.79 billion, while operating profit rose 48% to $561 million. Deere said the segment’s results were driven primarily by higher shipment volumes and favorable pricing, partially offset by higher production costs. In its outlook for fiscal 2026, the company projected construction and forestry sales growth of roughly 20% year over year, including assumptions for U.S. and Canada construction equipment up about 5%, compact construction equipment up about 5%, global roadbuilding up about 10%, and global forestry down about 5%.

In investor comments summarized by Manufacturing Dive, Deere’s executives pointed to continued momentum in construction spending and data-center buildouts. CFO Brent Norwood said construction demand remains robust, supported by infrastructure spending, rental activity, and accelerating data center investments, with data center construction expected to top $100 billion in 2026 and to grow further in 2027. Deere’s director of investor relations, Christopher Seibert, also described farm customer sentiment as muted despite some grain price improvements, reinforcing that agriculture weakness is not yet fully reversed.

Manufacturing Dive reported that Deere’s $272 million IEEPA refund lifted margins by about 2.5 percentage points during the quarter. In the same reporting, Deere said its direct tariff exposure for the year is essentially unchanged at $1.2 billion, reflecting the shift from invalidated IEEPA tariffs to newer tariff regimes and adjustments, and that total tariff costs are expected to total about $900 million for the year. The company also noted that the market outlook did not include the impact of a subsequent presidential proclamation cutting tariffs on certain agricultural equipment and adjusting tariffs on some construction equipment when imported from certain trade-deal countries.

Deere did not provide in its earnings release additional detail on how quickly refund cash is expected to land beyond stating the $272 million recovery was tied to claims filed and accepted by U.S. Customs and Border Protection. The company also did not break out whether any remaining IEEPA-related claims could change future quarters’ results beyond the recognition already recorded. In related materials, Deere described the tariff refunds as reflecting recovery of IEEPA tariffs previously paid, including statutory interest, and the refund of tariff surcharges collected from customers, implying ongoing accounting treatment as claims move through the process.

Looking ahead, investors are likely to focus on whether construction strength continues to offset agricultural cyclicality, and how consistently the tariff recovery supports earnings without being repeated in the same way next quarter. On the demand side, Deere’s guidance for fiscal 2026 implies that management expects construction and forestry to remain the faster-growing segment, while Production and Precision Agriculture remains under pressure. Watch for updates on shipment volumes, order trends in construction equipment, and any further disclosures about the scale and timing of remaining tariff refund claims.