Deere & Company's Construction & Forestry segment posted its strongest quarterly performance in over a year, reinforcing sustained momentum in non-residential and infrastructure building activity. The company reported total net sales and revenues of $13.37 billion for the second fiscal quarter ended May 3, 2026, a 5% increase from the prior year, while earnings per share of $6.55 beat analyst forecasts of $5.70.
Background
Deere's quarterly results are closely watched by construction professionals and equipment buyers as a leading indicator of project activity and capital investment cycles. The company's Construction & Forestry division supplies earthmoving, road-building, and compact construction equipment to contractors, rental fleets, and infrastructure operators globally. Heading into the quarter, the construction equipment market had been buoyed by federal infrastructure outlays and a surge in data center development, even as residential construction remained constrained by elevated borrowing costs and tight housing supply.
Details
In the Construction & Forestry segment, net sales jumped to $3.79 billion - a 29% gain - with the company crediting increased shipment volumes and improved price realization. Operating profit surged 48% to $561 million. The 14.8% operating margin was the segment's highest in recent memory, according to the earnings call.
Construction demand remains robust, supported by infrastructure spending, rental activity, and accelerating data center investments, Deere executive Brent Norwood said. Data center construction is expected to top $100 billion in 2026, with additional double-digit growth into 2027, Norwood noted, adding that the benefit extends to site-preparation contractors and utility operators servicing those projects.
Order book data underscores the breadth of demand. Deere's U.S. and Canada construction order book increased more than 60% since November 2025 and reached its highest level since April 2024, with more than 80% of production slots filled for the year. Industry sales projections for earthmoving equipment in the U.S. and Canada remain unchanged, with both construction equipment and compact construction equipment expected to rise approximately 5%. Global road-building markets are now expected to grow approximately 10% year-over-year, supported by elevated road construction spending across multiple geographies.
Construction industry fundamentals remain favorable, with healthy customer backlogs supported by infrastructure and large-project spending more than offsetting softness in residential construction.
Deere also moved to deepen its position in construction technology. The company acquired Tenna LLC, a construction equipment tracking solutions provider, for $439 million in February 2026, assigning it to the Construction & Forestry segment. The purchase signals growing manufacturer interest in digital asset management as contractors seek tighter visibility over fleet utilization and project scheduling - areas directly tied to BIM integration and site productivity tools.
On the supply chain side, Deere's direct tariff exposure stands at approximately $1.2 billion on a full-year basis, representing roughly a 3-percentage-point margin headwind. The company has not introduced tariff surcharges for customers and is instead pursuing mitigation efforts including resourcing, reshoring, exemption submissions, and USMCA compliance. Net of partial refunds from IEEPA tariff claims, the company's forecast includes approximately $900 million of tariff costs for the year.
Despite the construction strength, weakness in the large agriculture segment - where industry volumes are projected to drop 15% to 20% for the full fiscal year - meant construction and Small Ag & Turf had to offset continued large-ag declines. Deere maintained its full-year net income guidance of $4.5 billion to $5.0 billion.
Outlook
Deere now forecasts Construction & Forestry net sales up approximately 20% for the full year, with the segment's operating margin projected between 10% and 12%. For construction firms and technology vendors, the order book trajectory and data center pipeline suggest continued equipment demand through the second half of 2026, though tariff-driven cost pressures and any softening in public infrastructure disbursements remain key variables. Lenders and equipment financiers tracking Deere's performance as a proxy for project starts may find the data supportive of maintaining construction credit lines, even as residential market weakness limits broader equipment cycle recovery.
