Deere’s AI Business Is Growing Even as Farm Equipment Demand Weakens

Deere & Company entered 2026 facing a softer agricultural market. In its fiscal second quarter, the company’s Production and Precision Agriculture division reported a 14% decline in sales as farmers continued pulling back on large equipment purchases amid lower crop prices and elevated financing costs. Deere still expects large agriculture equipment sales in the U.S. and Canada to fall 15%–20% this year, according to its Q2 FY2026 earnings materials.

But inside the downturn, another part of Deere’s business continued expanding.

During the quarter, Deere highlighted growing adoption of its AI-enabled precision agriculture tools, particularly its See & Spray system, which uses computer vision and machine learning to identify weeds and reduce herbicide application. The company said the platform expanded from covering 1 million acres in its first year to 5 million acres globally last year. Management also said returning customers are using the system across more acres this season after seeing roughly 50%–60% herbicide savings.

The contrast stood out across Deere’s earnings discussion. Farmers may be delaying purchases of large machinery, but many are still investing in software, automation, and precision systems that directly lower operating costs.

That distinction is becoming increasingly important for Deere as it moves deeper into connected equipment, recurring software products, and embedded automation tools tied to its installed machinery base.

AI Adoption Continues Even as the Farm Cycle Weakens

The broader agricultural environment remained difficult during Deere’s fiscal second quarter. Production and Precision Agriculture sales fell to $4.5 billion from $5.2 billion a year earlier, according to the company’s Q2 earnings release.

Large agriculture demand has remained under pressure from lower farm income expectations, elevated borrowing costs, and weaker commodity pricing. Deere maintained its full-year guidance despite those conditions, signaling that the company does not expect a near-term rebound in large machinery demand.

Even so, Deere continued emphasizing growth in its precision agriculture offerings.

On the earnings call, management pointed to continued expansion in See & Spray adoption as well as steady demand for Precision Essentials, the company’s bundled precision agriculture subscription package. Deere said it received nearly 10,000 Precision Essentials orders in the first half of the fiscal year, while renewal rates remained in the 70% range, according to Q2 transcript coverage.

Instead of broadly upgrading fleets, many customers appear to be prioritizing technologies that deliver measurable savings on existing operations. In Deere’s case, management repeatedly tied adoption to operational economics rather than future autonomy narratives.

See & Spray was presented primarily as a cost-control tool. Deere said customers using the system have reduced herbicide usage by roughly half in real-world deployment. That matters in a market where chemical costs remain volatile and margins across farming operations have tightened.

The company also noted that returning customers are covering more acreage with the technology this year compared with the same period last season, according to the earnings call. That suggests adoption is moving beyond initial trials into larger operational deployment.

Industrial companies are increasingly evaluating AI systems based on measurable operating outcomes rather than experimental capabilities or long-term automation promises. In Deere’s case, the operational metrics centered on lower chemical usage, higher utilization, recurring renewals, and expanded acreage coverage.

Deere Uses Software and Automation to Defend Margins

The second-quarter earnings report also showed how important Deere’s software and precision agriculture business is becoming to its financial resilience.

Despite the decline in Production and Precision Agriculture sales, the segment still delivered a 15.7% operating margin.

The company also maintained its fiscal 2026 net income outlook of $4.5 billion to $5 billion even as large agriculture demand remained weak.

During the earnings discussion, management repeatedly emphasized pricing discipline, technology investments, and operational efficiency. The company continued investing in connected machinery, precision systems, and software-enabled agriculture products despite operating in what executives described as a highly dynamic market environment.

That strategy is gradually changing how Deere generates value from its equipment base. Historically, agricultural machinery manufacturers relied heavily on large one-time equipment purchases tied closely to commodity cycles and farm profitability. Deere’s recent earnings suggest the company is generating more revenue from subscriptions, connected software systems, and precision agriculture tools tied to existing machinery.

Precision Essentials provides one example of that shift. The subscription package combines guidance, connectivity, and precision agriculture features into a recurring software offering rather than a single equipment transaction.

During downturns, systems that reduce fuel, herbicide, or labor costs can remain attractive even when broader equipment spending slows.

The recurring nature of those software relationships also provides Deere with a steadier revenue stream than traditional one-time machinery purchases.

The quarter also showed that Deere’s technology investments are becoming increasingly tied to customer retention rather than standalone hardware sales. Returning customers expanding their usage of precision systems provides Deere with a more stable operational relationship than purely transactional equipment purchases.

Deere’s AI Strategy Becomes More Practical and Measurable

One of the more notable aspects of Deere’s Q2 earnings call was what management did not emphasize.

The discussion contained little of the futuristic rhetoric that often surrounds AI announcements. Executives spent far more time discussing acreage, operating margins, chemical savings, renewal rates, and utilization than autonomy timelines or generative AI systems.

That framing reflects how industrial AI adoption is evolving across sectors like manufacturing, logistics, and agriculture.

In many enterprise environments, the strongest adoption is increasingly centered on systems that reduce waste, improve efficiency, or optimize existing workflows rather than fully replacing human labor. Deere’s precision agriculture strategy fits squarely into that category.

Its AI systems are embedded directly into operational infrastructure, including machine vision tools that identify weeds, software that manages field-level application rates, connected systems tied to existing machinery fleets, and automation products integrated into day-to-day farm operations.

For Deere, the second quarter suggested that AI and automation are becoming more about practical tools that help customers operate existing farms more efficiently during difficult market conditions.