Earnings

Home Depot’s Smaller-Project Demand Signals Resilience in a Frozen Housing Market

Home Depot beat second-quarter revenue and earnings expectations as smaller projects, Pro demand and digital sales supported growth. But unchanged guidance shows that weak housing turnover and continued pressure on large renovations remain important constraints.

Luca Moschini

Luca Moschini

— 6 min read
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Home Depot Q2 earnings show stronger sales as customers focus on smaller home projects
Photo by Oxana Melis / Unsplash

Home Depot Beats Expectations Without Relying on a Housing Recovery

Home Depot (HD) delivered stronger-than-expected fiscal second-quarter results, with revenue rising 5.7% year over year to $47.86 billion. Adjusted earnings of $4.92 per share exceeded the $4.73 analyst estimate, while comparable sales increased 1.7% globally and 1.3% in the U.S.

The results showed customers continuing to spend on smaller home-improvement projects despite what management described as a "frozen" housing market. Home Depot nevertheless kept its fiscal 2026 outlook unchanged, reflecting continued uncertainty around larger discretionary projects, housing activity and input costs.

Key Points

  • Home Depot's Q2 revenue increased 5.7% to $47.86 billion, while adjusted EPS of $4.92 exceeded expectations of $4.73.
  • Comparable sales rose 1.7%, with smaller projects, Pro customers and digital growth supporting demand even as transactions declined 1%.
  • Home Depot reaffirmed its fiscal 2026 outlook as weak housing turnover, larger discretionary projects and higher input costs continued to limit visibility.

Smaller Projects Keep Home Depot Growing

Home Depot's second-quarter performance showed an improvement in demand without a meaningful recovery in the broader housing environment.

Comparable sales increased 1.7%, the company's strongest performance since the third fiscal quarter of 2022. U.S. comparable sales increased 1.3%, while 13 of 16 merchandising departments generated positive comps.

The composition of that growth is important. Customer transactions declined 1%, while the average ticket increased to $92.50 from $90.01 a year earlier. Big-ticket transactions above $1,000 increased 2.4%, helped by portable power and patio products, but management said larger discretionary projects, particularly those requiring financing, remained under pressure.

CFO Richard McPhail said customers have the financial capacity to spend but remain hesitant about larger projects. Instead, Home Depot saw broad-based demand for smaller improvements.

Professional customers also provided support. Pro comparable sales were positive across all cohorts, while SRS generated comps above the company average and growth across each of its verticals.

Digital operations added another source of strength. Online comparable sales increased 11%, marking the fifth consecutive quarter of double-digit growth. Home Depot also launched nationwide Express Delivery across tens of thousands of products, allowing customers to receive qualifying purchases within three hours without a subscription or membership.

Why Did Home Depot Stock Rise After Earnings?

The initial positive reaction to HD stock reflected a quarter that cleared a relatively low expectations bar while showing better comparable-sales performance.

Revenue of $47.86 billion exceeded expectations of roughly $47.2 billion to $47.3 billion. Adjusted EPS of $4.92 also came in above the $4.73 consensus estimate.

Net earnings increased to approximately $4.77 billion from $4.55 billion a year earlier, while operating income rose 4.3% to $6.83 billion.

Margins provided a more mixed signal. Gross margin increased 25 basis points year over year to 33.7%, helped by $685 million of IEEPA tariff refunds. However, higher fuel, energy and product-input costs, along with acquisition-related mix, offset much of that benefit. Adjusted operating margin slipped 10 basis points to 14.7%.

The earnings reaction therefore reflected more than headline revenue and profit. Home Depot demonstrated that it could generate positive comparable sales and gain share even while the housing market remained weak.

At the same time, the company stopped short of raising its full-year expectations, limiting the signal investors could take from one stronger quarter.

What Matters After Home Depot Reaffirmed Guidance?

Home Depot continues to forecast fiscal 2026 total sales growth of approximately 2.5% to 4.5%, with comparable sales ranging from roughly flat to 2% growth.

Adjusted EPS is expected to grow between flat and 4% from the fiscal 2025 level of $14.69, implying approximately $14.69 to $15.28 per share. Adjusted operating margin is expected to range between 12.8% and 13.0%.

The unchanged outlook highlights the divide between improving company-specific execution and a housing market that remains difficult.

Higher mortgage rates, elevated home prices and limited housing turnover have reduced a traditional catalyst for major home-improvement spending. Financing-dependent remodeling activity remains particularly soft.

Home Depot's ability to generate growth through Pro customers, smaller projects, digital sales, acquisitions and new locations therefore carries greater importance while those conditions persist. Total sales growth of 5.7% substantially exceeded comparable-sales growth during Q2, reflecting contributions from new stores, SRS branches, acquisitions and other growth initiatives in addition to organic demand.

Cost pressures also remain relevant. Home Depot expects tariff refunds to help offset higher fuel, energy and other product-input costs, but management expects those benefits to be absorbed by unplanned cost pressures over the full year.

What It Means for Investors

Home Depot's quarter offers a useful read on both the company and the broader home-improvement environment.

Consumers have not stopped spending on their homes. Instead, spending remains concentrated more heavily in smaller projects while larger, discretionary renovations face continued pressure. That distinction helps explain how Home Depot produced its best comparable-sales growth in several years without declaring a broader housing recovery.

Pro demand and digital growth provide additional context. Positive Pro comps, above-company-average performance from SRS and five consecutive quarters of double-digit online growth show that Home Depot has several sources of growth beyond traditional DIY traffic.

At the same time, declining transactions, weak financing-dependent projects and unchanged guidance show why the earnings beat did not materially change management's expectations for the year.

The next phase of the Home Depot story therefore remains tied to the composition of demand: whether customer traffic stabilizes, Pro and SRS momentum continues, digital growth remains strong and margins hold as input costs move through the business.

Conclusion

Home Depot's second quarter showed improving operating momentum in a difficult housing environment. Revenue and earnings exceeded expectations, comparable sales returned to stronger growth, and demand broadened across most merchandising departments.

But the quarter also illustrated the limits of that improvement. Customers continue to favor smaller projects, transactions declined, larger renovations remain pressured and management maintained its existing fiscal 2026 outlook.

For the stock market today, the earnings reaction reflects that balance. Home Depot demonstrated resilience without requiring a housing recovery, while its unchanged guidance underscored how much the broader home-improvement environment still constrains growth.

FAQs

Why did Home Depot stock rise after its Q2 earnings?

Home Depot stock rose after the company reported revenue and adjusted earnings above analyst expectations. Comparable sales also increased 1.7%, exceeding expectations and reaching their strongest level since the third fiscal quarter of 2022.

What were Home Depot's second-quarter earnings?

Home Depot reported second-quarter revenue of $47.86 billion, up 5.7% year over year. Adjusted earnings were $4.92 per share, while net earnings totaled approximately $4.77 billion, or $4.79 per diluted share.

Why didn't Home Depot raise its 2026 guidance?

Home Depot kept its guidance unchanged because management continues to see frozen housing conditions, economic uncertainty, higher input costs and weakness in larger discretionary projects despite stronger-than-expected second-quarter results.

What is driving Home Depot's current sales growth?

Smaller home-improvement projects, Pro customers, digital sales, SRS, new locations and acquisitions are supporting growth. Online comparable sales increased 11% during the quarter, while Pro comparable sales were positive across all cohorts.

What is Home Depot forecasting for fiscal 2026?

Home Depot expects total sales to grow approximately 2.5% to 4.5%, with comparable sales ranging from roughly flat to 2% growth. Adjusted EPS is expected to grow between flat and 4% from $14.69 in fiscal 2025.

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Smaller Projects Keep Home Depot Growing Home Depot's second-quarter performance showed an improvement in demand without a meaningful recovery in the broader housing environment. Comparable sales increased 1.7%, the company's strongest performance since the third fiscal quarter of 2022. U.S. comparable sales increased 1.3%, while 13 of 16 merchandising departments generated positive comps. The composition of that growth is important. Customer transactions declined 1%, while the average ticket increased to $92.50 from $90.01 a year earlier. Big-ticket transactions above $1,000 increased 2.4%, helped by portable power and patio products, but management said larger discretionary projects, particularly those requiring financing, remained under pressure. CFO Richard McPhail said customers have the financial capacity to spend but remain hesitant about larger projects. Instead, Home Depot saw broad-based demand for smaller improvements. Professional customers also provided support. Pro comparable sales were positive across all cohorts, while SRS generated comps above the company average and growth across each of its verticals. Digital operations added another source of strength. Online comparable sales increased 11%, marking the fifth consecutive quarter of double-digit growth. Home Depot also launched nationwide Express Delivery across tens of thousands of products, allowing customers to receive qualifying purchases within three hours without a subscription or membership. Why Did Home Depot Stock Rise After Earnings? The initial positive reaction to HD stock reflected a quarter that cleared a relatively low expectations bar while showing better comparable-sales performance. Revenue of $47.86 billion exceeded expectations of roughly $47.2 billion to $47.3 billion. Adjusted EPS of $4.92 also came in above the $4.73 consensus estimate. Net earnings increased to approximately $4.77 billion from $4.55 billion a year earlier, while operating income rose 4.3% to $6.83 billion. Margins provided a more mixed signal. Gross margin increased 25 basis points year over year to 33.7%, helped by $685 million of IEEPA tariff refunds. However, higher fuel, energy and product-input costs, along with acquisition-related mix, offset much of that benefit. Adjusted operating margin slipped 10 basis points to 14.7%. The earnings reaction therefore reflected more than headline revenue and profit. Home Depot demonstrated that it could generate positive comparable sales and gain share even while the housing market remained weak. At the same time, the company stopped short of raising its full-year expectations, limiting the signal investors could take from one stronger quarter. What Matters After Home Depot Reaffirmed Guidance? Home Depot continues to forecast fiscal 2026 total sales growth of approximately 2.5% to 4.5%, with comparable sales ranging from roughly flat to 2% growth. Adjusted EPS is expected to grow between flat and 4% from the fiscal 2025 level of $14.69, implying approximately $14.69 to $15.28 per share. Adjusted operating margin is expected to range between 12.8% and 13.0%. The unchanged outlook highlights the divide between improving company-specific execution and a housing market that remains difficult. Higher mortgage rates, elevated home prices and limited housing turnover have reduced a traditional catalyst for major home-improvement spending. Financing-dependent remodeling activity remains particularly soft. Home Depot's ability to generate growth through Pro customers, smaller projects, digital sales, acquisitions and new locations therefore carries greater importance while those conditions persist. Total sales growth of 5.7% substantially exceeded comparable-sales growth during Q2, reflecting contributions from new stores, SRS branches, acquisitions and other growth initiatives in addition to organic demand. Cost pressures also remain relevant. Home Depot expects tariff refunds to help offset higher fuel, energy and other product-input costs, but management expects those benefits to be absorbed by unplanned cost pressures over the full year. What It Means for Investors Home Depot's quarter offers a useful read on both the company and the broader home-improvement environment. Consumers have not stopped spending on their homes. Instead, spending remains concentrated more heavily in smaller projects while larger, discretionary renovations face continued pressure. That distinction helps explain how Home Depot produced its best comparable-sales growth in several years without declaring a broader housing recovery. Pro demand and digital growth provide additional context. Positive Pro comps, above-company-average performance from SRS and five consecutive quarters of double-digit online growth show that Home Depot has several sources of growth beyond traditional DIY traffic. At the same time, declining transactions, weak financing-dependent projects and unchanged guidance show why the earnings beat did not materially change management's expectations for the year. The next phase of the Home Depot story therefore remains tied to the composition of demand: whether customer traffic stabilizes, Pro and SRS momentum continues, digital growth remains strong and margins hold as input costs move through the business. Conclusion Home Depot's second quarter showed improving operating momentum in a difficult housing environment. Revenue and earnings exceeded expectations, comparable sales returned to stronger growth, and demand broadened across most merchandising departments. But the quarter also illustrated the limits of that improvement. Customers continue to favor smaller projects, transactions declined, larger renovations remain pressured and management maintained its existing fiscal 2026 outlook. For the stock market today, the earnings reaction reflects that balance. Home Depot demonstrated resilience without requiring a housing recovery, while its unchanged guidance underscored how much the broader home-improvement environment still constrains growth. FAQs Why did Home Depot stock rise after its Q2 earnings? Home Depot stock rose after the company reported revenue and adjusted earnings above analyst expectations. Comparable sales also increased 1.7%, exceeding expectations and reaching their strongest level since the third fiscal quarter of 2022. What were Home Depot's second-quarter earnings? Home Depot reported second-quarter revenue of $47.86 billion, up 5.7% year over year. Adjusted earnings were $4.92 per share, while net earnings totaled approximately $4.77 billion, or $4.79 per diluted share. Why didn't Home Depot raise its 2026 guidance? Home Depot kept its guidance unchanged because management continues to see frozen housing conditions, economic uncertainty, higher input costs and weakness in larger discretionary projects despite stronger-than-expected second-quarter results. What is driving Home Depot's current sales growth? Smaller home-improvement projects, Pro customers, digital sales, SRS, new locations and acquisitions are supporting growth. Online comparable sales increased 11% during the quarter, while Pro comparable sales were positive across all cohorts. What is Home Depot forecasting for fiscal 2026? Home Depot expects total sales to grow approximately 2.5% to 4.5%, with comparable sales ranging from roughly flat to 2% growth. Adjusted EPS is expected to grow between flat and 4% from $14.69 in fiscal 2025. Tags: Primary: Earnings Secondary: Business Trends, Economy Image Alt Text: Home Depot earnings show smaller-project demand despite a frozen housing market