Deere Plunges as Struggling Farmers Delay Machinery Rebound

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2:01Bloomberg 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 Deere, they reported numbers. Guidance a little bit weaker than expected, but it's still up about 11%, 12 % year to date. Check in Chris Cialino, Bloomberg Intelligence. He covers all the big machinery companies. Chris, what's the takeaway from Deere today? They called out the U.S. farmers facing some economic challenges here.

2:42I guess that's impacting their businesses. What did you learn? Yeah, listen, I mean, this really wasn't a particularly great quarter. Three key results were mixed at best. It was really a low-quality earnings beat, primarily driven by a lower tax rate. And as you alluded to, they did cut their 2025 guidance. But to be honest, I don't think that really changes the investment thesis here. You know, we still expect earnings to bottom this year. We're still looking at a very gradual recovery as 2026 unfolds. The reduction in the outlook was really driven by weakness in their construction business.

3:17And it appears to us that it was really more of a function of 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 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 farm fundamentals and their appetite to go out and buy equipment. Hey, Chris, can you get more into the struggle that farmers are facing that's impacting deer? Sure. You know, we've been in this kind of prolonged downturn in the ag economy.

3:49Crop prices continue to deteriorate. Farm fundamentals remain weak. Interest rates remain high. We have the overhang or the uncertainty around the trade environment and export market access. There's really no signs or I would say green shoots yet that we're at this inflection point. I think the positive takeaway is that inventories are coming down. Deer's not going to have to massively underproduce retail demand next year. So even if we're looking at a flattish type of environment in terms of underlying retail demand, we're still looking at probably higher production and some pricing coming through, which should still generate some operating leverage in the business.

4:27So, Chris, when demand is down from their core farm equipment, what does deer typically do? Did they let inventories build? Did they get promotional to move inventory out the door? How do they usually manage that? Yeah, so this is it's a delicate balancing act, right? I mean, it's almost impossible to time the cycle. And what they've been doing, you know, for the better part of this year and even at the end of last year, they had been underproducing retail demand to bring down those elevated inventories. They've done really a commendable job on new equipment. The big issue right now is still on the used equipment inventory side, particularly on tractors, which are still quite elevated.

5:04And you're right, they are allocating more merchandising programs and pool funds to help address that issue and move the equipment. And I think you see that partly reflected in their production precision ag business this quarter, and pricing actually flipped negative, which was a surprise to us. It does appear that this is relatively transitory. We should expect pricing to bounce back next quarter. But yeah, they've done a real good job of managing inventories. It's just, you know, when you're slogging along through the bottom of the cycle here, it does become quite challenging. So then I got to follow up.

5:36Are you still cautious about the pace of their recovery? Yes. You know, I would say signs of recovery are still, you know, pretty elusive to us. And if you just look over the last couple of months, you know, you continue to see further downward pressure on crop prices, which at the end of the day is one of the bigger drivers of Deere's business and farmer cash receipts. We had a pretty ugly WASDE report this week. You know, it looks like we're going to get another year of record corn production. So those stockpiles continue to build, which is really going to keep somewhat of a ceiling on crop prices here in the near term.

6:10So we think this recovery is going to look much more modest or subdued than what we typically see during a normal cycle. Right now, we're still anticipating, you know, a modest, you know, flat to up 5 percent next year in terms of underlying retail demand for large ag, particularly in North America. Stay with us. More from Bloomberg Intelligence coming up after this.

7:01This is the Bloomberg Tech Minute brought to you by ChatGPT. Now with ChatGPT work. I'm Carol Masser. DoorDash, the largest food delivery company in the U.S., is building its own delivery drones and has gained the necessary FAA approvals to operate them commercially, the latest in its effort to delegate more orders to robots as a way of cutting delivery times. Bloomberg's Natalie Lung reports the company says it has been conducting pilot programs with various restaurants, some of which have seen their order volume grow during the test period. The effort marks an expansion of DoorDash's in-house robotics efforts to reduce reliance on human couriers for some orders, as their wages constitute a key expense to the business.

7:44Drones are also a way for DoorDash to cut delivery times on orders from more remote locations that some dashers may not want. That's the Bloomberg Tech Minute brought to you by ChatGPT. Put ChatGPT to work on your most ambitious ideas and projects. Get started at ChatGPT.com today by selecting Work Mode. Available on Plus and Pro Plans. Bite into a stacked sandwich made with hero bread or a fully loaded bagel. And the only thing you'll think is delicious. You won't think it's up to 19 grams of protein, but it is. You wouldn't believe it has 11 to 32 grams of fiber, but it does. Hero Bread makes loaves, buns, tortillas, bagels, and noodles packed with taste but without all the net carbs.

8:32We're talking 0 to 5 grams net carbs per serving. With Hero Bread, there are no compromises, just flavor. There's none of the stiff-baked goods you expect from Better For You brands. There's just the soft, fluffy bread you crave. Plus, small batch drops of indulgent favorites like the popular 2-gram net carb Hero Croissant and the 3-gram net carb Hero Pano Chocolat. And right now, Hero Bread is offering 10 % off your order. Go to Hero.co and use code IHEART at checkout. That's code IHEART at H-E-R-O dot C-O. All figures per serving of Hero Bread see nutrition facts on Hero.co. You're listening to the Bloomberg Intelligence Podcast.

9:14Catch 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. Let's go to earnings. We want to talk about Cisco Systems. So you had sales from its AI projects, right? They're beginning to pick up, but the problem was that it's forecast for the current fiscal year. Well, it was a little bit on the conservative side and that didn't, investors didn't like that very much. Let's find out why. So let's go to Woo Jin Ho, He's Bloomberg Intelligence Senior Technology Analyst. Joining us from Princeton.

9:47Wujan, thanks for joining us. I got to ask you right off the bat, what did investors, did they just think that they should be benefiting more from AI spending? What was the issue? Yeah, I think a couple of things. AI was one of them, but also there's this big product refresh cycle that investors were hoping would drive better growth. But at the end of the day, the guidance was a reminder that they are still tied to IT spending. And, you know, I viewed it as more prudent conservatism because they don't know what's happening on the second half of the year, given where we are. You know, we have little visibility in terms of rates as well as tariffs still.

10:24So the company recognized about one billion dollars in AI revenue in fiscal 2025. And I guess AI infrastructure orders for large from large cloud providers were over 800 million in the quarter. So where do we think these numbers can go? Yeah, look, Paul, they forecasted a billion dollars in orders for fiscal 25. They doubled that in fiscal 26, recognized a billion of it this year. I wouldn't be surprised if AI revenues grow at least another 50 % from here. And they're penetrating multiple pockets, right, not only into the cloud, but if you think about a longer term, when enterprise adoption really starts kicking in, there is going to be a growth driver.

11:06So we have to see where it'll be in 26 and 27 when enterprise grows. But the partnership with NVIDIA should be beneficial to them longer term. Well, is the AI sector, is it just too competitive? I mean, who are some of their peers? How are they doing against them? Well, if we think about it, well, they have multiple, they're in AI in multiple vectors, right? So from a networking space, Arista is one of the bigger competitors, competitors as well as a smaller company called Celestica. They're also very, very big on optical components and they're coming up against companies like Marvell as well as Sienna.

11:48They also provide AI servers and think about Dell and HPE. So look, is it competitive? Yes, but they're one of the few American vendors that can actually supply components all the way to the system hardware. Wooj, what are companies like Cisco and Dell and some of the other big American companies throughout the tech stack chain, what are they saying just about the environment in terms of demand from their customers? Are they sensing waning demand or wavering demand just to see how some of these, I don't know, tariffs or other economic policies may work out? Sure. Paul, you know, Cisco is one of the first hardware bellwethers that came out.

12:30I will tell you from the numbers that I've seen on the companies that have reported, the IT spending environment has actually been more resilient than I had thought. I went into the quarter with my mid-year outlook as being a little bit cautious and negative. And quite frankly, the results have come in better than I anticipated. The outlooks have come in better than I anticipated. But the fact of the matter is, I don't know what's going to happen past December. And I think Cisco's guidance reflect that. we'll have a better sense in a couple of weeks from now when companies like Dell and then HPE after Labor Day when they report.

13:05Did they talk about their guidance at all about the impacts? We mentioned tariffs quickly, but did the impact of tariffs, if so, like, did they intend to, how do they intend to lessen that impact from tariffs? You know, Cisco has been probably one of the better companies in terms of managing expectations of tariffs, as well as maneuvering the supply chain with the tariff. So in terms of managing expectations, they embedded tariff impact in their guidance. And because tariffs came in a little bit lower than we had anticipated, that actually helped EPS just a little bit. Going forward, all of the guidance includes the tariff impact.

13:46Now the one thing I will add, we're still waiting for the semiconductor rulings as it relates to Section 232. we'll see where it stands if we do have a negative ruling there that could not only affect Cisco's guidance and margins but also the rest of the electronic space so I'm looking at the stock which Cisco that is and it's up about 18 percent year to date so certainly beating the market and I look at the A &R function I see 16 buys 10 holds and one sell so kind of a little bit of a split out there on the street in terms of expectations what do you think the bull case is for Cisco from these levels?

14:26Yeah, the bull case is fairly easy, Paul. Faster than 5 % to 6 % growth driven by the product refresh cycle. Security as a main driver for Cisco, that's going to raise multiples. And if it's going to raise multiples, you have a higher stock from where it is today. So Chuck Robbins, Cisco CEO, I was going to be speaking with BTV anchors Ed Ludlow, Karen LaHide, just after 11 o 'clock. So if you were in that room, what would you ask? Yeah, what I would ask is when does a security story really start to take hold where it does affect the growth positively, right? Security offers faster hardware growth as well as software growth, as well as high margin recurring revenues.

15:16So it's turning into security at the end of the day. Stay with us. More from Bloomberg Intelligence coming up after this. This is the Bloomberg Tech Minute brought to you by ChatGPT. Now with ChatGPT work. I'm Carol Masser. DoorDash, the largest food delivery company in the U.S., is building its own delivery drones and has gained the necessary FAA approvals to operate them commercially. the latest in its effort to delegate more orders to robots as a way of cutting delivery times. Bloomberg's Natalie Lung reports the company says it has been conducting pilot programs with various restaurants, some of which have seen their order volume grow during the test period.

15:58The effort marks an expansion of DoorDash's in-house robotics efforts to reduce reliance on human couriers for some orders, as their wages constitute a key expense to the business. Drones are also a way for DoorDash to cut delivery times on orders from more remote locations that some dashers may not want. That's the Bloomberg Tech Minute, brought to you by ChatGPT. Put ChatGPT to work on your most ambitious ideas and projects. Get started at ChatGPT.com today by selecting Work Mode, available on Plus and Pro plans. Bite into a stacked sandwich made with Herobred or a fully loaded bagel. And the only thing you'll think is delicious.

16:41You won't think it's up to 19 grams of protein, but it is. You wouldn't believe it has 11 to 32 grams of fiber, but it does. Hero Bread makes loaves, buns, tortillas, bagels, and noodles packed with taste but without all the net carbs. We're talking 0 to 5 grams net carbs per serving. With Hero Bread, there are no compromises, just flavor. There's none of the stiff-baked goods you expect from Better For You brands. There's just the soft, fluffy bread you crave. Plus, small batch drops of indulgent favorites like the popular 2-gram net carb Hero Croissant and the 3-gram net carb Hero Pano Chocolat.

17:17And right now, Hero Bread is offering 10 % off your order. Go to Hero.co and use code IHEART at checkout. That's code IHEART at H-E-R-O dot C-O. All figures per serving of Hero Bread see nutrition facts on Hero.co. Wait! I came in for two things. How is this$47? All right, we're going to need a plan here. Just start simple with Bank of America Advantage Safe Balance Banking. No overdraft item fees, no monthly maintenance fee if you're under 25. Plus, as a new checking customer, you can earn$100 when you open an account and make qualifying Zelle or debit transactions. Oh, that's actually really simple.

17:55Safe Balance Banking. One less thing to figure out. Learn more at bfa.com slash earn100. Terms and conditions apply. Bank of America and a member FDIC. 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. All right, we shift from the markets to tech. And some have suggested that President Trump's novel export arrangement with NVIDIA AMD paying the U.S. government 15 percent of revenue from some chip sales in China.

18:29Well, it could violate federal law. And if it did, what would happen? That is the question of the latest article on the terminal. You have to check it out. Matthew Shuttlein is Bloomberg Intelligence Media Litigation Analyst. Matthew, first question right off the bat is, does it? Yeah, does it violate the law? It's an interesting question that I don't think people had thought about for a while. But there is this clause in the 2018 Export Control Reform Act that says that no fees can be charged for the processing of these export control licenses. There's also a clause in the U.S. Constitution going way back that says that taxes cannot be levied against articles exported from U.S.

19:19states. You put those two things together and you start to see some serious questions that could be raised about whether imposing a 15 percent effective tax on exports is actually legal or not. Now, no lawsuits have been filed yet and there would be some hurdles to filing them. But I think there is a very plausible legal case that could be made. If a lawsuit were to be filed, who would do it? What entity would do that? Yeah, so that's a great question. I mean, if you're NVIDIA or AMD, I don't think you want to run right into court after you negotiated a deal with President Trump and challenge it there.

20:02And so I think you would see a potential lawsuit come from a trade association that's concerned about the potential for this setting a precedent that goes forward after these particular deals. You could also envision shareholders of the companies who are upset about the company agreeing to something that might be inconsistent with federal law potentially filing lawsuits as well. And I like we keep saying if, if this were to happen, yes. What would be the timeline for something like this? Yeah, so it's hard to say exactly. We haven't seen the final agreements here between NVIDIA and AMD. And just a couple days ago, the White House said that the Commerce Department was still exploring the legality of how to do this, probably because they're looking at this precise statute we're talking about here.

20:52So timing's very much in flux for all of this. And it's going to be a question of whether we see this sort of approach going forward. But lawsuits could be filed any time. They would be filed in federal district courts. Probably you would seek injunctions trying to stop the imposition of these taxes, and it could be litigated up through the court system from there. But, I mean, to be clear, these were agreed to by the companies and the government. I guess the companies, Matt, the companies are just saying, hey, this is just the cost to do business in this country with this administration. Is that kind of what you think they were thinking?

21:28That's exactly it. And I think there would be hurdles to these companies suing for that reason. I suspect these agreements are going to include waivers of their particular right to sue. And it's better to access these markets than to not access the markets at all, even if it comes at a 15 percent price tag. Now, Nvidi, this whole deal, it starts to fuel some concern that the government could charge companies for a range of business activities with other countries. I mean, is that a viable concern? And then what questions could that bring up in the meantime? Yeah, that is really, I think, the big question here is, is this a one-off or is this how this administration is going to operate for all exports going forward?

22:15And if it's the latter, I think that raises much, much bigger concerns. Usually, you would look to Congress to set the standards here. And there is, as I said, a statute that says no fees for the processing of these export licenses. And so in a typical world, you would see Congress explore maybe setting the legality of something like this. But right now, we have a law from seven years ago that may or may not be challenged. Stay with us. More from Bloomberg Intelligence coming up after this. This is the Bloomberg Tech Minute brought to you by ChatGPT. Now with ChatGPT Work, I'm Carol Masser. DoorDash, the largest food delivery company in the U.S., is building its own delivery drones and has gained the necessary FAA approvals to operate them commercially.

23:08the latest in its effort to delegate more orders to robots as a way of cutting delivery times. Bloomberg's Natalie Lung reports the company says it has been conducting pilot programs with various restaurants, some of which have seen their order volume grow during the test period. The effort marks an expansion of DoorDash's in-house robotics efforts to reduce reliance on human couriers for some orders, as their wages constitute a key expense to the business. Drones are also a way for DoorDash to cut delivery times on orders from more remote locations that some dashers may not want. That's the Bloomberg Tech Minute brought to you by ChatGPT.

23:45Put ChatGPT to work on your most ambitious ideas and projects. Get started at ChatGPT.com today by selecting Work Mode. Available on Plus and Pro plans. Bite into a stacked sandwich made with hero bread or a fully loaded bagel. And the only thing you'll think is delicious. You won't think it's up to 19 grams of protein, but it is. You wouldn't believe it has 11 to 32 grams of fiber, but it does. Hero Bread makes loaves, buns, tortillas, bagels, and noodles packed with taste but without all the net carbs. We're talking 0 to 5 grams net carbs per serving. With Hero Bread, there are no compromises, just flavor.

24:28There's none of the stiff-baked goods you expect from Better For You brands. There's just the soft, fluffy bread you crave. Plus, small batch drops of indulgent favorites like the popular 2-gram net carb Hero Croissant and the 3-gram net carb Hero Pano Chocolat. And right now, Hero Bread is offering 10 % off your order. Go to Hero.co and use code IHEART at checkout. That's code IHEART at H-E-R-O dot C-O. All figures per serving of Hero Bread see nutrition facts on Hero.co. Wait! I came in for two things. How is this$47? All right, we're going to need a plan here. Just start simple with Bank of America Advantage Safe Balance Banking.

25:10No overdraft item fees, no monthly maintenance fee if you're under 25. Plus, as a new checking customer, you can earn$100 when you open an account and make qualifying Zelle or debit transactions. Oh, that's actually really simple. Safe Balance Banking. One less thing to figure out. Learn more at bfa.com slash earn100. Terms and conditions apply Bank of America and a member FDIC. 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.

25:45All right. Here's the story my eyes went to immediately this morning when I came in. U.S. and Canadian banks are summoning staffers back to their offices at a faster rate than European rivals. That was very interesting. And we've got lots of good data in their charts and stuff like that. But to me, it just went right to the difference between the U.S. and Europe as it relates to banking and investment banking, where it just seems like the U.S. banks have just dominated. And I know there's a lot of reasons why structurally, but this one just feels like a part of it. So we want to get right into it now.

26:16Tom Metcalf, finance editor for Bloomberg News. He's in our London office. Tom, what do you guys find? Are American bankers really coming back to the office more frequently than Europeans? Yeah, it's a very, very clear trend, actually. So what we did, we went back and looked at the biggest 15 U.S. and Canadian banks and then also the biggest 15 European. And the split basically simplifies down to it's about three days a week in Europe compared to four days a week in the U.S. And, of course, in the U.S. there's a lot of very notable examples who are back fully to five days, right? The JP Morgans, the Goldmans.