Episode summary
Deere Plunges as Struggling Farmers Delay Machinery Rebound | Bloomberg Intelligence
Bloomberg Intelligence
· · 21 min · Hosts: Paul Sweeney, Lisa Mateo · Guests: Christopher Ciolino, Woo Jin Ho, Matthew Schettenhelm, Tom Metcalf
Summary
Deere’s weaker-than-expected quarter reinforced a still-muted farm recovery. The guest said the company’s guidance cut was driven more by construction weakness and tariff costs than by a meaningful change in farm demand, but he still expects earnings to bottom this year and recover only gradually in 2026. He pointed to deteriorating crop prices, high interest rates, and trade uncertainty as the main reasons farmers are delaying equipment purchases, even as Deere has been managing inventories well.
Cisco’s outlook was read as cautious rather than alarming. The guest said investors were disappointed that the company’s guidance showed it is still tied to IT spending, but he argued the numbers reflected prudent conservatism and tariff awareness. He expects AI revenues to keep growing, helped by cloud demand, enterprise adoption, and Cisco’s partnership with Nvidia, though competition remains intense across networking, optics, and servers.
The discussion then turned to Nvidia and AMD’s 15% revenue-sharing arrangement on some China chip sales, where the guest said there is a plausible legal challenge under export-control rules and the Constitution. The episode closed on bank work-from-home policy, where the host and a guest noted a clear split: about three days a week in Europe versus four in the US, with big American banks pushing a stricter return-to-office stance than their European peers.
Key takeaways
- The guest said Deere’s earnings likely bottom this year, but he expects only a gradual recovery in 2026 as crop prices and farm cash receipts stay weak.
- Deere is still underproducing retail demand to reduce inventories, but used tractor stocks remain elevated and are forcing more merchandising support.
- The guest said Cisco’s fiscal-year guide was conservative because the company still depends on IT spending and lacks visibility beyond December.
- He expects Cisco’s AI revenue to grow at least another 50% from here, helped by cloud orders and future enterprise adoption.
- The analyst said a 15% government take on Nvidia and AMD China sales could face legal challenges under export-control law and the Constitution.
- Tom Metcalf said US and Canadian banks are bringing staff back faster than European rivals, roughly four days a week versus three.
Notable quotes
“there's really no signs or I would, you know, say green shoots yet that we're at this inflection point”
“the guidance was a reminder that they are still tied to IT spending”
“I wouldn't be surprised if uh AI revenues grow at least another 50% from here”
“I think there is a very plausible legal case that could be made”
How the episode opens
Bloomberg Audio Studios podcasts radio news. You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10 a.m.
Eastern on Apple CarPlay and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts or watch us live on YouTube. Looking at deer, um they reported numbers uh guidance a little bit weaker than expected, but it's still up about 11 12% uh year to date.
Let's check in Chris Chelino, Bloomberg Intelligence. He covers all the big machinery companies. Chris, what's the takeaway from um from deer today?
They called out the US farmers uh facing some economic challenges here that guess that's impacting their businesses. What what did you learn?
Yeah, listen, I mean this really wasn't a particularly great quarter. Um three key results were mixed at best. Um it was really a lowquality earnings beat um primarily driven by a lower tax rate and as you alluded to they did cut their 20 to 25 guidance.
Um but to be honest I don't think that really changes the investment thesis here. Um you know we still expect earnings to bottom this year. We're still looking at a very you know gradual recovery as 2026 unfolds.
The reduction in the outlook was really driven by weakness in their construction business. Um, and it appears to us that it was really more of a function of uh some of the higher tariffs and costs coming through. We knew that construction forestry was really going to bear the brunt of the tariff impact, but this quarter just came in, you know, a little bit more of a headwind than we anticipated.
It doesn't appear to be that there's been much of a change in terms of, you know, farm fundamentals and and their appetite to go out and buy equipment.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- deere earnings outlook
- farm machinery demand
- cisco forecast
- nvidia amd export lawsuits
- bank return to office
Companies and tickers mentioned
- DE
- CSCO
- NVDA
- AMD
- Deere
- Cisco Systems
- Nvidia
- AMD
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Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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