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December 19, 2025 • 4 min read
John Deere is synonymous with agriculture, but the iconic green and yellow machinery represents a complex industrial giant navigating a shifting global economy. Our goal today is to dig into the income statement from Deere & Company’s latest 10-K filing to see how things are going, understand the pressures on their bottom line, and what we can learn about the broader industrial sector.
Deere operates primarily through four segments: Production & Precision Agriculture (PPA) (large-scale farming equipment like combines), Small Agriculture & Turf (SAT) (tractors for dairy/livestock and lawn equipment), Construction & Forestry (CF), and Financial Services. Coming off record highs in previous years, 2025 proved to be a transitional period defined by cyclical normalization and macroeconomic headwinds.
To visualize how revenue flows through these segments down to the bottom line, I have included the following flow diagram for the fiscal year ended November 2, 2025:
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The headline story for fiscal year 2025 is the cyclical downturn in the agricultural market. Consolidated net sales and revenues decreased to $45.7 billion, down 12% from $51.7 billion in 2024. Consequently, net income attributable to Deere & Company fell to $5.0 billion, a significant decline from $7.1 billion the prior year.
The sharpest contraction occurred in the Production & Precision Agriculture (PPA) segment. Operating profit for PPA plummeted 41% to $2.7 billion. This was driven by a 30% decrease in shipment volumes in the U.S. and Canada. This decline reflects "challenging farm fundamentals"—essentially, lower crop commodity prices mean farmers have less income to invest in expensive new machinery. While volume dropped, Deere managed to maintain positive price realization (raising prices on goods sold) of 1% in North America, demonstrating the company's pricing power even in a down market.
The Construction & Forestry (CF) segment faced similar struggles, with operating profit essentially halving to $1.0 billion (down 49%). Demand for earthmoving equipment softened due to high interest rates earlier in the year and a slowdown in commercial real estate construction.
A notable expense detailed in the filing is the impact of trade policy. As a net exporter from the U.S., Deere is sensitive to global trade friction. The company noted a direct impact of approximately $600 million in incremental tariffs incurred during 2025. These costs, combined with production inefficiencies resulting from lower manufacturing volumes, squeezed margins significantly.
Despite the downturn in equipment sales, Financial Services net income actually increased by 28% to $890 million. This was aided by special items, including a favorable measurement related to the deconsolidation of their Brazilian banking subsidiary, Banco John Deere S.A., alongside favorable financing spreads.
Management remains focused on their "Smart Industrial Operating Model." This strategy involves shifting from selling pure hardware (iron) to selling a lifecycle of technology solutions—think AI-driven weed sprayers and autonomous tractors. This pivot is critical; by selling software subscriptions and precision tech, Deere aims to dampen the harsh effects of the agricultural business cycle in the future.
The filing also highlights a specific non-trivial risk: the "Right to Repair." On January 15, 2025, the FTC filed a lawsuit alleging monopolization regarding repair tools. While the outcome is uncertain, this represents a significant regulatory challenge to Deere's dealer-centric business model.
In summary, Deere & Company is currently managing a classic inventory correction phase amidst a softer agricultural economy. While facing stiff competition from global players like AGCO and CNH Industrial, Deere’s ability to maintain healthy profitability ($5 billion) during a distinct downturn speaks to their structural resilience. As they look toward 2026, the focus will remain on managing dealer inventory levels and navigating a "subdued" large agriculture market in North America.
Last updated: December 19, 2025