Home Depot Q2 Earnings Beat on 5.7% Sales Growth as Guidance Holds

A clean beat in a housing market that isn't helping

Home Depot's fiscal second-quarter report did what investors wanted on the surface. The world's largest home improvement retailer beat Wall Street estimates for both revenue and earnings. The harder question, which analysts are still arguing about almost two months later, is whether the beat matters much while the housing market stays stuck.

In the quarter ended Aug. 2, 2026, Home Depot reported sales of $47.9 billion. That is $2.6 billion, or 5.7%, more than a year earlier.11 Net earnings rose to $4.8 billion, or $4.79 per diluted share, from $4.6 billion, or $4.58 per share. Adjusted diluted EPS came in at $4.92, up from $4.68.11 CFO Richard McPhail said the results beat the company's own internal expectations and described demand as broad-based, with customers mostly taking on smaller projects.11

Against consensus, the result was a clear beat. CNBC put the expectation at $4.73 in adjusted EPS on $47.27 billion in revenue.12 The estimates differ slightly depending on who compiled them: FactSet's revenue figure was $47.24 billion20, and Zacks had $47.23 billion, which makes the revenue surprise about 1.33% and the EPS surprise 4.46%.4 Whichever number you use, Home Depot beat on both lines. The beat is also part of a pattern. Zacks notes the company has topped revenue estimates in each of the last four quarters and EPS estimates in three of them.4

Where the revenue growth actually came from

The 5.7% headline growth needs to be read alongside the comparable-sales figure, which tells a more modest story. Same-store sales rose 1.7% companywide and 1.3% in the U.S.13 That beat the StreetAccount estimate of 0.9%. McPhail said it was the company's best comp since the third quarter of fiscal 2022.12 Comps also improved through the quarter: up 1.2% in May, 1.5% in June and 2.3% in July.17

The gap of about four percentage points between total growth and comp growth comes mostly from acquisitions. The quarterly 10-Q credits the specialty building-products distributor GMS and HVAC distributor Mingledorff's, together with positive comps, for the revenue increase.15 Those deals build on the earlier SRS Distribution purchase and push Home Depot further toward professional contractors.1 Pro sales grew faster than do-it-yourself sales in the quarter.14 By one estimate, Pro accounts for roughly 55% of total sales.19

The consumer data points to a cautious customer. Transactions fell while the average ticket rose to $92.50 from $90.01.13 Reports disagree slightly on the size of the transaction decline. Some put it at 1.0%14 and others at 0.8%, to 443.2 million.16 Either way, the growth came from customers spending more per visit, not from more visits. Big-ticket purchases above $1,000 did rise 2.4%, and 13 of 16 merchandising departments posted positive comps.14 Online sales grew 11%, the fifth straight quarter of double-digit growth.14 E-commerce made up roughly 16.6% of net sales.15

Margins: better gross profit, more expense

The earnings beat doesn't come with across-the-board margin gains. Gross margin rose about 25 basis points to 33.7%.14 On the call, management attributed that mainly to an IEEPA tariff refund, which was largely cancelled out by higher fuel, energy and input costs and by the lower-margin mix that came with GMS.17 Management called the underlying gross margin performance in line with expectations.17 In other words, without the one-time refund, gross margin would have been roughly flat.

Further down the income statement, SG&A grew 8.5%, faster than sales, and operating income grew only 4.3%.11 Operating margin slipped to 14.3% from 14.5%. Adjusted operating margin fell to 14.7% from 14.8%.14 Return on invested capital dropped to 24.8% from 27.2%.17 That decline is what you would expect after a large acquisition spree, and it is one of the less-noticed costs of buying growth when organic demand is weak.

Cash generation was a clear positive. Operating cash flow for the first half reached $11.4 billion, up from about $9.0 billion a year earlier.16 The company also paid about $2.3 billion in dividends during the quarter.17

Why the guidance didn't move

Despite the beat, Home Depot kept its fiscal 2026 outlook unchanged rather than raising it.13 It still expects total sales growth of about 2.5% to 4.5%, comps between flat and 2%, about 15 new stores, and adjusted operating margin of 12.8% to 13.0%.11 Adjusted EPS is expected to grow between flat and 4% from fiscal 2025's $14.69.16 That works out to $14.69 to $15.28, a range that brackets the $14.96 consensus.1

The choice was deliberate. CNBC's headline focused on management's reference to "frozen housing market conditions."12 AP-syndicated coverage described the housing sector as still stuck in a slump.20 In our reading, the unchanged guidance is the most important part of the report. First-half sales growth was about 5.3%15, yet the full-year range tops out at 4.5%. That arithmetic implies a slower second half. Management is pocketing the upside without betting on a recovery.

The market's verdict, then and now

Early reaction was mixed. One report had shares up about 0.75% in premarket trading16, and Investing.com reported that shares rose.14 The Motley Fool's same-day analysis, however, showed the stock down 2.85%.1 Those figures were probably captured at different points in the session, but none of them suggests the market treated the beat as a turning point.

The stock has had a tough year. Seeking Alpha calculates a roughly 25% drop from $380 on Feb. 27, when the Iran war began, to $286 on Oct. 6.3 Shares opened near $295.64 on Oct. 9, against a 52-week range of $277.15 to $397.63.5

The buy case divides on valuation and timing

This is where the coverage disagrees most, and the disagreement mostly comes down to price and patience.

The Motley Fool's verdict, published on earnings day, was skeptical. It said the stock trades at about 22 times this year's earnings, roughly the same multiple as the S&P 500. It concluded Home Depot is not a buy until it gets much cheaper or housing recovers, and suggested an index fund instead.1

The stock has since fallen, and the valuation picture has changed. CNBC's Investing Club now puts Home Depot at about 18 times forward earnings, below its five-year average of about 24. The stock sits only about 4.5% above its five-year closing low and roughly 34% below its December 2024 record close of $431.8 Melius Research started coverage with a buy rating and a $397 target. Its thesis is that the existing-home market, which drives repair and remodeling demand, is close to a turning point, even though new-home supply remains a headwind.8 CNBC said plainly that this is a call to buy because conditions look unlikely to get much worse, not because they are good.8

The wider analyst community leans positive without much conviction. MarketBeat counts 18 buys, 13 holds and one sell, with an average target of $375.93.5 After the report, Truist raised its target to $373 and Argus reiterated a $400 target.5 RBC trimmed its target to $342 and kept a sector-perform rating.2 Zacks rates the stock #3 (Hold) and expects it to perform roughly in line with the market.4 Its consensus calls for $15.02 in EPS this year and $16.04 next year.4

Insider activity offers no encouragement. GuruFocus notes $6.7 million of insider selling over the past year and no purchases.6

Our read

The second quarter shows Home Depot executing well in a market that isn't cooperating. Comps returned to growth, online sales kept compounding, and the Pro strategy is delivering. But the revenue growth relies heavily on acquisitions, the gross-margin improvement was helped by a one-time refund, and returns on capital are falling as the company absorbs those deals.

At roughly $295, the bear case that Home Depot is priced like the market no longer applies. The stock is cheaper than its own history, and the dividend pays investors to wait. What the shares lack is a catalyst the company controls. Commentators across the spectrum agree that lower mortgage rates and higher home turnover are what would unlock bigger projects.39 For long-term investors, the current price looks like a reasonable entry point. Anyone expecting the next quarterly beat to drive the stock higher should note that this one didn't.