Why Deere Is Becoming an Unexpected Data-Centre Construction Play
$Deere(DE)$’s fiscal third quarter produced its first year-over-year profit increase in three years even though the large-farm-equipment downturn continued. The surprise came from construction and forestry, where spending on infrastructure and artificial-intelligence data centres helped offset weak demand for high-horsepower tractors and combines.
Deere reported on August 20 for the quarter ended July 26. Worldwide net sales and revenue increased 5% to $12.61 billion, while net income rose 7% to $1.379 billion, or $5.10 per share. Construction and Forestry sales increased 18% and operating profit rose approximately 84% to $436 million. By contrast, Production and Precision Agriculture sales declined 6%. Deere’s official third-quarter investor materials contain the release, financial schedules and presentation.
The bullish thesis is diversification. Deere supplies earthmoving and road-building equipment required before a data centre can operate, giving it exposure to AI capital spending without manufacturing chips or servers. Small Agriculture and Turf sales also rose 12%, helped by healthier economics for livestock and dairy customers. Management raised the lower end of expected 2026 net income to $4.75 billion from $4.5 billion while retaining the $5 billion upper end.
There are also early signs that the agricultural cycle may be bottoming. Management cited improving early orders, lower used-equipment inventories and continued adoption of precision technology. If dealer stocks are normalising, future factory shipments should align more closely with end demand. Deere’s installed base and dealer network can then support recurring parts, service and software revenue.
The bearish evidence is that the core large-farm market has not recovered. Lower crop prices, expensive financing and high input costs still discourage equipment replacement. Construction demand is cyclical too: hyperscaler projects can be delayed, and non-residential building can weaken when interest rates rise. Deere recorded a $110 million tariff refund during the quarter but expects net tariff costs near $750 million in 2026 and approximately $1 billion in 2027. Reuters’ August 20 report details the segment trends and tariff estimates.
Deere gained 6.9% to $620.94 after ranging from $578 to $638 on roughly 3.2 million shares. The positive gap confirms improved expectations.
DE Weekly Chart
Technically, DE has already broken out from the prior $515–$535 base and subsequently cleared the descending trendline from the February peak, leaving the broader weekly structure constructive. Price is now consolidating inside a higher range between roughly $580 and $640, with the latest earnings reaction testing the upper boundary but failing to close above it; a decisive weekly close above $640 would confirm another breakout and could open the way toward the February high around $665–$675, while $580 now represents the key near-term support that bulls need to defend.
For a trader willing to own Deere at a lower effective price, a 30–45 DTE cash-secured put around the $550–$560 strike, preferably near 0.10–0.20 delta, could offer an attractive premium-selling setup if price continues to hold above $580, placing the strike below the current consolidation and closer to the prior breakout structure. A sustained weekly break below $580 would weaken the setup and increase the probability of a deeper retest toward the $515–$535 support zone.
The evidence leans moderately bullish. Construction, small agriculture and guidance improved enough to offset the continuing large-equipment slump. The view would be invalidated by construction orders slowing, the agricultural trough being pushed into 2027, tariff costs compressing margins more than expected or the stock closing the earnings gap while estimates fall. This is personal opinion for education and is not financial advice.
@Tiger_SG @Tiger_comments @TigerStars @TigerClub @CaptainTiger @Daily_Discussion
Disclaimer: This article is for informational and educational purposes only and does not constitute financial, investment, or trading advice. The views expressed are personal opinions based on publicly available information and are subject to change without notice. Investors should conduct their own research and consider their financial situation, risk tolerance, and investment objectives before making any investment decisions. I do not guarantee the accuracy or completeness of the information presented.
Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.
