DE
Q1 FY2026 Earnings: All Signals Confirmed — Guidance Raised, Tail Risk De-escalating
NI guidance raised to $4.5-5.0B (from $4.0-4.75B), cash flow +$500M. All 8 signals unchanged but evidence strengthening: technology adoption accelerating (99% harvest automation take rate, highly engaged acres +25% YoY), buybacks resumed ($750M Q1), FS credit improving. 'Perfect Storm' tail risk reduced from 8-15% to 3-8%. FTC right-to-repair not discussed. South America softened.
Read the full analysis"Deere's technology moat is widening, but the FTC is suing to pry open the very proprietary tools that create switching costs -- with revenue down 25% and a $2.4B tariff+labor headwind, is this a structural buy or a regulatory trap?"
Deere & Company is the world's largest agricultural equipment manufacturer with $45.7B in FY2025 revenue (down 25% from peak), a $64.7B financial services portfolio, and record $2.31B R&D investment in precision agriculture technology. The company faces an active FTC right-to-repair lawsuit (motion to dismiss denied June 2025), $1.2B in tariff costs, a CFO departure, and cyclical trough conditions -- while simultaneously deepening its technology ecosystem across 500M+ engaged acres.
Executive Summary
Cross-lens roll-up assessment
Deere & Company enters FY2026 as a structurally improved but cyclically compressed industrial franchise facing an unprecedented convergence of regulatory, macroeconomic, and policy headwinds. The five-lens analysis reveals a DEFENSIBLE competitive position built on two independent moat layers (technology ecosystem and physical distribution), but the near-term and medium-term risk profile is materially ELEVATED. The FTC right-to-repair lawsuit -- identified by all four analytical lenses as the central risk vector -- sits at the intersection of moat durability, aftermarket revenue, and regulatory trajectory. Financial flexibility is STRETCHED but adequate, with the 450bps structural margin improvement vs. 2016 providing meaningful downside protection that has not yet been stress-tested against compound failure scenarios.
Deere's long-term competitive position appears defensible with genuine structural improvements vs. prior cycles. Q1 FY2026 results confirmed the cyclical trough thesis with guidance raised to $4.5-5.0B NI and strengthening order books across SAT and C&F. However, the FTC right-to-repair lawsuit (not discussed on Q1 call) remains the central risk vector and swing variable. Financial stress is moderating (FS credit improving, buybacks resumed, cash flow guidance raised $500M) but regulatory uncertainty demands continued elevated scrutiny. Key upcoming catalysts: FTC discovery milestones, Q2 FY2026 earnings (May 2026), permanent CFO appointment, CONEXPO product reception.
Key Takeaways
- •COMPETITIVE_POSITION is DEFENSIBLE (E3, unanimous) -- two independent moat layers (technology ecosystem + physical distribution) with ~150-250bps of moat-specific through-cycle margin improvement. However, moat depth is highly uneven: only 20-30% of customers are deeply engaged with precision ag (high switching costs), while 70-80% have shallow engagement tied to dealer relationships.
- •REGULATORY_EXPOSURE is ELEVATED (E3, reinforced by 2 lenses) -- active FTC right-to-repair lawsuit (MTD denied June 2025), DOJ statement of interest in parallel private class action, 5 state co-plaintiffs, independent state legislation, and $1.2B tariff headwind. Material but not existential: core equipment business is not built on regulatory arbitrage.
- •REVENUE_DURABILITY is CONDITIONAL (E2-E3, reinforced by 2 lenses) -- core equipment revenue (~75-85%) is structurally durable, but 50%+ of equipment revenue swings 25-30% with the agricultural commodity cycle, and aftermarket (est. 15-25%) faces direct FTC pressure. Revenue is recoverable but not stable in any 2-year window.
- •FUNDING_FRAGILITY is STRETCHED (E2) -- Equipment Operations generates $5B+ cash flow (resilient), but the $64.7B Financial Services portfolio amplifies rate/credit sensitivity. The $2.4B combined tariff+labor headwind compresses flexibility to historically tight levels. A 1-notch rating downgrade is plausible (30-40%) under sustained stress.
- •CAPITAL_DEPLOYMENT is MIXED (E2) -- counter-cyclical R&D discipline ($2.31B, protected through 25% revenue decline) is strongly positive. Pro-cyclical buyback program (heavy at peak, paused at trough) and CFO transition during trough are negatives.
- •TAIL_RISK_SEVERITY is MATERIAL (E2) with three compound failure scenarios at 5-15% probability each. The 'Perfect Storm' scenario (extended trough + FS amplification + tariff escalation + dividend freeze) is the most concerning at SEVERE impact if materialized. Worst plausible scenario creates 30-50% value impairment.
Key Tensions
- •The same proprietary technology ecosystem that creates competitive advantage (Moat Mapper: DEFENSIBLE, widening trajectory) is the target of regulatory action (Regulatory Reader: ELEVATED) -- FTC remedy scope determines whether these assessments coexist or conflict
- •Financial Services acts as a shock absorber under moderate stress (Gravy Gauge: stabilizing) but may become a shock amplifier under severe compound stress (Stress Scanner: $160-295M annual downgrade cost) -- scenario severity determines which characterization is correct
- •The 2016 cyclical analog is cited by 3 lenses as evidence of structural resilience, but 2026 has 4 additional stress vectors not present in 2016 (tariffs, FTC lawsuit, larger FS portfolio, CFO transition) -- the analog is valid for margin floor evidence but less valid for recovery pattern evidence
Moat Mapper
Is the advantage durable?
Key Metrics
Key FindingsClick to expand details
Signal AssessmentsClick for full context
| Signal | Scale | Assessment | Evidence |
|---|---|---|---|
Competitive Position | — | DEFENSIBLE | 3Triangulated |
Model Debates
Cross-Lens Insights
Where Lenses Agree
- Regulatory Exposure: ELEVATED (Reinforced by 2 Lenses)
- Revenue Durability: CONDITIONAL (Reinforced by 2 Lenses with Different Conditionalities)
- Right-to-Repair as Central Risk Vector (All 4 Analytical Lenses)
- Structural Margin Improvement: 450bps vs. 2016 (Validated by 2 Lenses)
- Counter-Cyclical R&D Discipline (Validated by 2 Lenses)
- Aftermarket Revenue Opacity (Identified by All 4 Lenses as Critical Data Gap)
Where Lenses Differ
COMPETITIVE_POSITION vs. REGULATORY_EXPOSURE
The same proprietary technology ecosystem that creates competitive advantage is the target of regulatory action. Both assessments are valid simultaneously -- the question is whether the FTC remedy is narrow (coexistence) or broad (trajectory shifts to narrowing).
Structural Improvement Durability
The Moat Mapper partially resolves this by decomposing the 150-250bps moat-specific component, but the remaining ~200-300bps is uncertain.
Financial Services Role
Both views are valid depending on scenario severity. In moderate stress, FS stabilizes; in severe compound stress, FS amplifies.
The following publicly available documents were collected and extracted into a structured fact dossier that powered this analysis.
SEC Filing
- Annual Report (10-K) -- FY2025 (Nov 2, 2025)
- Quarterly Report (10-Q) -- Q3 FY2025 (Jul 27, 2025)
- Quarterly Report (10-Q) -- Q2 FY2025 (Apr 27, 2025)
- Quarterly Report (10-Q) -- Q1 FY2025 (Jan 26, 2025)
- Quarterly Report (10-Q) -- Q3 FY2024 (Jul 28, 2024)
- Current Reports (8-K) -- 10 filings, FY2025-2026
- Proxy Solicitation (DEFA14A) -- Jan 14, 2026
Earnings Transcript
- Q4 FY2025 Earnings Call Transcript (Nov 26, 2025)
- Q3 FY2025 Earnings Call Transcript
- Q2 FY2025 Earnings Call Transcript
- Q1 FY2025 Earnings Call Transcript
Research Document
- FTC Right-to-Repair Lawsuit Summary
- Bull/Bear Thesis Compilation (Insider Monkey, Primary Ignition, AInvest, Morningstar)
- Strategic Pivot Analysis (Primary Ignition, Jan 2026)
- CourtListener Litigation Search (10 cases)