Caterpillar vs Deere: Heavy Machinery Legends Post Opposite Earnings Stories and the Gap Is Widening Fast

Caterpillar (NYSE: CAT) and Deere (NYSE: DE) both reported recent quarters that tell strikingly different stories. Caterpillar posted a record quarter on surging data center power demand. Deere beat a depressed earnings bar and raised guidance, positioning itself as a cycle-bottom recovery play in agriculture and construction.

Record Revenue for One, Recovery Signals for the Other

Caterpillar’s Q4 2025 revenue of $19.13 billion crushed the $16.2 billion consensus estimate, driven by a Power & Energy segment that grew 23% to $9.40 billion. Power generation alone surged 44% year-over-year on hyperscale data center buildouts. Caterpillar ended 2025 with a record $51 billion backlog, up 71% versus the prior year.

Deere’s picture is more complicated. Q1 fiscal 2026 revenue came in at $9.61 billion, up 13% year-over-year, and EPS of $2.42 beat the $2.10 estimate. But the Production & Precision Agriculture segment saw operating profit collapse 59% with margins falling to 4.4% from 11.0%, while Construction & Forestry operating profit more than doubled. The U.S. and Canadian large agriculture market is forecast down 15% to 20% in 2026.

Tariffs Hit Both, but From Different Angles

Caterpillar faces $2.6 billion in incremental tariff costs in 2026, up from $1.7 billion net in 2025, compressing Construction Industries and Resource Industries margins even as Power & Energy thrives. Deere projects $1.2 billion in pretax tariff expense for 2026, with Construction & Forestry bearing the heaviest impact. Deere’s longer-term answer is a $20 billion commitment to U.S. manufacturing over the next decade, including a new excavator factory in North Carolina.

Valuation and Momentum After Big Runs

Caterpillar is up 34% year-to-date and 130% over the past year. Deere has outpaced it recently, up 38% year-to-date, though its one-year gain of 35% is far more modest. Analyst consensus price targets sit at $709 for Caterpillar and $665 for Deere, both below current trading levels.

Why the Divergence in Thesis Matters

Caterpillar’s AI infrastructure angle looks more durable. The backlog depth and capacity expansion toward doubling large engine capacity by 2030 provide a growth runway most industrials cannot claim. The tariff bill is real, but secular data center power demand is absorbing it.

Deere is a different kind of opportunity. If agricultural markets bottom in 2026 and recover into 2027, the current valuation at roughly 35x trailing earnings could look reasonable in hindsight. The construction recovery is already visible, but the large ag drag is deep, and an FTC self-repair lawsuit adds regulatory uncertainty. Watch Deere’s large ag inventory trends and crop price trajectory before treating the cycle-bottom thesis as confirmed.