To The Moon

A traditional giant with a high-tech twist

When most investors think of artificial intelligence, they picture chipmakers, data centres, or subscription software. But I’d argue one of the most compelling AI transformations right now isn’t happening in Silicon Valley — it’s unfolding in the fields of Iowa. Deere & Company is evolving from an iconic machinery brand into a precision agriculture powerhouse, and it’s doing so with financial discipline that puts many pure-play tech names to shame.

Where machine meets mind: AI is Deere’s new horsepower

Deere isn’t shouting about AI; it’s quietly embedding it into tractors, combines, and sprayers. We’re talking real-time computer vision, autonomous driving, and sensor-fed analytics that tell a farmer exactly how deep to plant, how much to spray, and when to harvest. It’s not speculative — it’s operational. And that’s where the magic lies: AI is driving hard cost savings, measurable productivity gains, and, crucially, margin expansion that compounds.

Precision pays: AI in the driver’s seat

Let’s be clear — this isn’t some distant promise. Deere’s autonomous 8R tractor and See & Spray Ultimate technology are already in farmers' hands, cutting herbicide use by up to 66% while improving yield precision. That translates into immediate ROI for customers, and recurring revenue for $Deere(DE)$ as software and data analytics become subscription-based layers atop physical equipment.

Despite a 16.2% drop in quarterly revenue — driven by a normalisation in equipment demand — Deere still posted a robust EBITDA margin above 20%. That margin resilience is powered by automation, not volume. While old-school machinery relied on selling more units to grow profits, Deere’s new model monetises intelligence and services — a shift that’s structurally improving its long-term earnings profile.

Cash-rich and capital-wise

There’s something uniquely reassuring about a company that doesn’t need to pitch futuristic visions to attract capital. Deere has historically generated over $10 billion in annual operating cash flow. The most recent trailing twelve months came in slightly lower, at $8.86 billion, reflecting softness in agricultural machinery cycles — not a flaw in the model. That still provides ample firepower to invest in AI, automation, and R&D without leaning on debt or diluting equity.

And yes, that 275% debt-to-equity ratio might make a nervous investor twitch — but here’s the context: most of that leverage sits within Deere’s in-house financing arm, which provides loans for equipment purchases. On an industrial basis, Deere remains conservatively geared, with a healthy current ratio of 2.14 and $6.86 billion in cash on hand. Put simply, the balance sheet supports innovation — without flirting with financial risk.

Don’t overlook the weeds: risks and competition

Still, no investment thesis is bulletproof. Agriculture is notoriously cyclical. Lower crop prices, rising input costs, or tightening farm credit can all pressure equipment sales — and the latest revenue contraction is a timely reminder of that sensitivity. While Deere’s recurring revenue helps buffer against downturns, it can’t fully escape the gravitational pull of global agricultural economics.

Then there’s the competitive front. While Deere dominates traditional machinery, tech giants like $Alphabet(GOOGL)$ and $Amazon.com(AMZN)$ are circling the agtech space — not to build tractors, but to offer data platforms, climate intelligence, and AI tools that could challenge Deere’s data moat. Execution also matters. Integrating machine learning into industrial hardware at scale is tricky — and farmer adoption of high-tech tools isn’t always linear.

Volatility’s in the rear-view mirror—Deere’s riding a tight, bullish channel

Valuation with teeth — and tech upside

Deere’s current valuation reflects some of this risk, but not all of its upside. At 22.3x forward earnings and 15.4x EV/EBITDA, Deere trades at a premium to peers like $CNH Industrial N.V.(CNH)$ and $AGCO Corp(AGCO)$, which hover around 12–15x earnings. But here’s the thing — Deere deserves the multiple. It’s the only player in the group turning AI into revenue today, not just PowerPoint slides.

Deere may not plough headlines like tech stocks—but it’s outpacing rivals with surprising horsepower.

With an operating margin of 18.6% and a return on equity nearing 24%, Deere’s financial metrics already rival some of the mid-cap software names chasing AI dreams. Its PEG ratio of 1.54 isn’t cheap, but it's grounded in durable earnings — not speculative growth. If adoption of precision tech accelerates, that multiple could compress meaningfully as earnings scale faster than expected.

An insight investors may have missed

What’s less appreciated is just how much optionality Deere is building outside the farm. Its AI tools for predictive maintenance and real-time diagnostics could easily extend into construction, mining, and even energy sectors — all of which face similar challenges in workforce shortages and efficiency mandates. Deere isn’t just transforming farming; it’s building a blueprint for smart, self-aware industrial fleets — and that could become a surprisingly valuable second growth engine.

This expansion beyond the farm deserves a wider lens — literally and figuratively.

Deere’s reach is growing — and not just in the fields

Sowing the seeds of a smarter portfolio

Deere & Company may not fit the classic profile of an AI stock, but that’s precisely what makes it so compelling. It’s generating high-margin outcomes from machine learning in the real world, not in backtest models or theoretical codebases. With a strong balance sheet, dominant market share, and real AI-powered operational leverage, Deere is positioned to outperform — even if Wall Street hasn’t fully priced it in.

While most investors are staring up at the cloud, I’m happy watching the fields — because sometimes, the smartest investments wear work boots, not hoodies.

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