Deere & Co. Q3 2025 Earnings: A Deep Dive into the 10-Q Filing

Deere & Co., the iconic manufacturer behind John Deere equipment, recently released its financial results for the third quarter of fiscal year 2025. In this post, we'll dive into the numbers from their latest 10-Q filing with the SEC to see how the agricultural and construction giant is navigating a challenging economic landscape.

Overall, the quarter reveals a company facing significant headwinds. Total net sales and revenues for the three months ending July 27, 2025, fell 9% year-over-year to $12.0 billion. The impact on profitability was even more pronounced, with net income attributable to the company dropping 26% to $1.3 billion. The nine-month figures show a similar trend, with revenues down 18% and net income down 32%.

The flow of revenue to profit for the latest quarter is visualized below, showing how sales are distributed across various costs and expenses.

A Tale of Three Segments

A closer look at Deere's business segments reveals where the pressure is most intense. The equipment operations, which are the core of the business, are feeling the squeeze from lower demand and higher costs.

Production and Precision Agriculture (PPA), the segment responsible for large-scale farm machinery like tractors and combines, saw the sharpest decline.

• Net sales dropped 16% to $4.3 billion.
• Operating profit plummeted 50% to $580 million.
• The segment's operating margin was nearly halved, falling from 22.8% to 13.6%.

Deere attributes this to lower shipment volumes in the U.S., driven by high interest rates, elevated levels of used equipment on the market, and general global uncertainty. The company also had to offer more sales incentives, which negatively impacted price realization, a term for the actual revenue collected after discounts.

The Construction and Forestry (CF) division faced a similar, though slightly less severe, situation.

• Net sales decreased by 5% to $3.1 billion.
• Operating profit fell a steep 47% to $237 million.
• The operating margin compressed significantly from 13.8% to 7.7%.

Again, the primary culprits were unfavorable pricing due to competitive pressures and the added burden of higher import tariffs.

In contrast, the Small Agriculture and Turf (SAT) segment, which includes smaller tractors and lawn care equipment, showed more resilience. Its net sales and operating profit were nearly flat compared to the previous year, with lower U.S. volumes being offset by stronger performance in Europe and India.

Navigating Economic Headwinds

The Management's Discussion and Analysis (MD&A) section of the filing provides crucial context for these numbers. Deere explicitly states it is facing an "unfavorable" period in the agricultural market cycle. Key challenges include:

• Higher Tariffs: The direct cost of incremental import tariffs amounted to approximately $300 million in the first nine months of 2025, a direct hit to the company's cost of sales.
• Elevated Interest Rates: High borrowing costs are deterring customers from purchasing big-ticket equipment.
• "Right to Repair" Lawsuit: A new legal challenge from the Federal Trade Commission (FTC) and several states alleges Deere has unlawfully restricted the ability of farmers and independent shops to repair their equipment. While Deere cannot yet estimate the potential impact, it represents a significant regulatory and reputational risk.

The Bottom Line

Deere & Co.'s third-quarter results paint a clear picture of a market leader contending with a cyclical downturn. While the Small Ag & Turf segment provides a degree of stability, the core large equipment divisions are grappling with lower volumes and margin pressure. The Financial Services arm provided a bright spot with a 34% increase in net income, but this was largely due to a lower provision for credit losses rather than growth in its financing portfolio.

Looking ahead, the company's performance will depend on its ability to manage production costs, navigate complex trade policies, and weather the continued impact of high interest rates on its customers. For a company so tied to the cycles of farming and construction, weathering these economic seasons is part of the business.