AGCO Corporation (AGCO) Income Statement

The revenue trajectory shows a sharp deceleration from 2024Q1's -12.1% to 2025Q1's -30.0%, with a partial recovery in 2026Q1 (+14.3%) and 2026Q2 (-1.0%). This pattern indicates that while the worst may be over, demand remains weak, particularly in North America and Europe. The sequential improvement in 2026Q1 could reflect easier comparables or early signs of stabilization, but the overall trend is still negative, and the lowered guidance suggests continued softness.

Despite a 13.5% revenue decline, gross margin has only contracted by about 120 basis points from its peak, indicating that AGCO has managed to protect pricing, likely due to the premium Fendt brand and a favorable mix shift. However, the structural gap to Deere (36.5%) highlights AGCO's lower pricing power in the mass market. The sustainability of this margin depends on continued cost discipline and the success of the PTx precision ag software, which carries higher margins.

The drop in operating margin from 9.5% to 5.8% over the past two years shows that SG&A and R&D expenses have not been cut proportionally to revenue. While management's cost efficiency initiatives helped Q2 2026 EPS beat, the absolute operating income of $151.9M is well below the $279.5M in 2024Q1. This suggests that any revenue recovery would provide significant operating leverage, but until then, margins will remain under pressure.

The reduction in SG&A is notable, but R&D spending has remained relatively stable, reflecting AGCO's commitment to precision agriculture and the PTx JV. This suggests that management is prioritizing long-term technology investments over short-term cost savings. However, the absolute level of R&D as a percentage of revenue has risen from 4.5% in 2024Q1 to 5.4% in 2026Q2, which could pressure margins if revenue continues to decline.