John Deere beats forecasts as AI infrastructure boom drives construction sales surge
The agricultural giant’s fiscal third-quarter results were lifted by an 18% jump in construction and forestry revenue, offsetting a downturn in its core farming equipment division.
John Deere reported fiscal third-quarter revenue of $11 billion, a 6.2% increase year over year, while income rose 7% to $1.4 billion. Both figures exceeded Wall Street expectations, prompting a 6.94% rise in the company’s shares following the announcement. The performance highlights a significant shift in the company’s revenue drivers, with its construction business emerging as a primary growth engine amidst a cyclical slowdown in agriculture.
The construction and forestry segment saw sales increase by 18% to $3.6 billion, driven by robust demand for heavy equipment required for artificial intelligence infrastructure buildout. Chris Seibert, the company’s Investor Relations Director, noted on an analyst call that customer backlogs for construction equipment now extend well into fiscal year 2027. This surge aligns with broader market projections, with Goldman Sachs estimating $1 trillion in global AI spending this year, of which $800 billion is expected to come from US hyperscalers.
Conversely, Deere’s largest unit, the agriculture division, experienced a 6.4% decline in sales to $4 billion. Executives attributed the drop to reduced capital spending by farmers, who have cut back on purchases of tractors and harvesters. Farm incomes have fallen from record highs set in 2022, creating a lull in demand that has been further exacerbated by soaring diesel fuel and fertilizer prices linked to the war in Iran.
Looking ahead, Deere’s full-year industry outlook forecasts that large agriculture equipment volumes in the US and Canada will decline by 15% to 20% this year. In contrast, the company expects construction equipment volumes to rise by 5% to 10%. CEO John May indicated that 2026 is expected to mark the end of the current downcycle in agriculture equipment, stating that the manufacturer is well positioned for long-term value creation.
The results underscore how Deere is leveraging its diverse portfolio to navigate sector-specific challenges. While the agricultural division faces headwinds from budget constraints and input costs, the construction segment is benefiting from the physical demands of the AI boom, which requires extensive infrastructure development.
