HD · Q1 2026 Earnings
CautiousHome Depot (The)
Reported May 19, 2026
30-second summary
30-second take: Revenue grew 4.8% to $41.8B in Q1 with comparable sales +0.6% (U.S. +0.4%) — at the low end of the FY flat-to-+2.0% range and underneath the implied Q1 bar after McVale telegraphed a soft Q1. Gross margin of 33.0% missed the FY 33.1% guide by ~10bps, operating margin of 11.9% missed the 12.4–12.6% FY range by 50–70bps, and adjusted operating margin of 12.3% missed the 12.8–13.0% range by 50–70bps. Net income was $3.29B ($3.30 diluted EPS). Management reaffirmed every line of the FY2026 guide unchanged despite the Q1 margin shortfall — meaning the back nine months now need to absorb the entire Q1 deleverage, or the next cut is queued for Q2.
Headline numbers
EPS
Q1 FY2026
$3.43
Revenue
Q1 FY2026
$41.80B
+4.8% YoY
Gross margin
Q1 FY2026
32.9%
Free cash flow
Q1 FY2026
$5.20B
Operating margin
Q1 FY2026
11.9%
Key financials
Q1 FY2026| Metric | Q1 FY2026 | Q1 FY2025 | YoY | Q4 FY2025 | QoQ |
|---|---|---|---|---|---|
| Revenue | $41.80B | $39.86B | +4.9% | $38.20B | +9.4% |
| EPS | $3.43 | $3.56 | -3.7% | $2.72 | +26.1% |
| Gross margin | 32.9% | 33.8% | -90bps | 32.6% | +30bps |
| Operating margin | 11.9% | 12.9% | -100bps | 10.1% | +180bps |
| Free cash flow | $5.20B | $3.52B | +47.8% | — | — |
Guidance
Guidance is issued for both next quarter and the full year. Both may appear below.
Actuals vs prior guidance
| Metric | Period | Prior guide | Actual | Δ | Result |
|---|---|---|---|---|---|
| Comparable Sales Growth | Q1 FY2026 | approximately flat to 2.0% | 0.6% | in-line | Met |
| Gross Margin | Q1 FY2026 | approximately 33.1% | 32.9% | -0.2 pts below guide | Missed |
| Operating Margin | Q1 FY2026 | approximately 12.4% to 12.6% | 11.9% | -0.5 to -0.7 pts below guide | Missed |
| Adjusted Operating Margin | Q1 FY2026 | approximately 12.8% to 13.0% | 12.3% | -0.5 to -0.7 pts below guide | Missed |
Reaffirmed unchanged this quarter: Total Sales Growth (approximately 2.5% to 4.5%), Comparable Sales Growth (approximately flat to 2.0%), Adjusted Diluted EPS Growth (approximately flat to 4.0% from $14.69 in fiscal 2025), Gross Margin (approximately 33.1%), Operating Margin (approximately 12.4% to 12.6%), Adjusted Operating Margin (approximately 12.8% to 13.0%), New Store Openings (approximately 15), Effective Tax Rate (approximately 24.3%), Net Interest Expense (approximately $2.3 billion)
Platform metrics
Q1 FY2026| Segment | Q1 FY2026 | Q1 FY2025 | YoY |
|---|---|---|---|
| Comparable Sales Growth | 0.6% | — | — |
| Comparable Customer Transactions Growth | -1.3% | — | — |
| Comparable Average Ticket Growth | 2.2% | — | — |
| Average Ticket | $92.76 | — | — |
| Customer Transactions | 391.1 million | — | — |
| Total Retail Stores | 2,361 | — | — |
Profitability
Q1 FY2026| Segment | Q1 FY2026 | Q1 FY2025 | YoY |
|---|---|---|---|
| Adjusted Operating Margin | 12.3% | — | — |
Other KPIs
Q1 FY2026| Segment | Q1 FY2026 |
|---|---|
| U.S. Comparable Sales Growth | 0.4% |
Management tone
Narrative arc: Q1 "best positioned to win" → Q2 "notable improvement in underlying demand" → Q3 "consumer uncertainty disproportionately impacting demand" → Q4 "no catalyst for inflection in housing activity" → Q1 FY2026 "underlying demand relatively similar to fiscal 2025."
The honesty about underlying demand sharpened, and it is not flattering. In Q4, Decker said adjusting for storms underlying demand was "relatively stable throughout 2025" — that was the moment the weather alibi was retired. This quarter goes one step further: "The underlying demand in our business was relatively similar to what we saw throughout fiscal 2025, despite greater consumer uncertainty and housing affordability pressure." That is management telling investors the Q1 +0.6% comp is what their business looks like without a meaningful storm headwind and with a 55bps FX tailwind. Strip those out and underlying is running near zero — exactly the level Q4 admitted FY2025 ran at. The "no catalyst for inflection" framing from Q4 has been operationalized into the new operating assumption.
The "softer engagement in larger discretionary projects" phrase is now in its sixth consecutive quarter, re-anchored as a Q1 storyline. Bastic in Q1 FY2026: "larger discretionary projects remain under pressure." This phrase has appeared verbatim or near-verbatim across Q4 2024, Q1, Q2, Q3, Q4 FY2025, and now Q1 FY2026. It has migrated from contextual observation to permanent operating assumption to baseline financial planning input. The prior brief watched whether a fifth verbatim quarter would mark the assumption permanent; this is the sixth.
Pro outperformance is now sourced from spend, not demand. In Q2 FY2025, pro outperformance was framed as broad-based engagement across complex purchase occasions. By Q4 it was framed as share gain in a flat market. This quarter Bastic frames pro growth as "The investments we are making are resonating with our pros as we see increased engagement" — language emphasizing investment-driven engagement rather than autonomous demand lift. The $400M cross-sell run-rate disclosed in Q&A (Gutman exchange) is mostly guaranteed contracts, including SRS roofing HD-owned warehouses — internal cross-sell, not external market expansion. This is share extraction inside a stagnant TAM, not market growth.
Margin compression from GMS migrated from "structural impact" to "Q1 deleverage that the FY guide must absorb." In Q3 FY2025 GMS was framed as adding ~40bps gross margin pressure and ~20bps operating margin pressure on a structural pro-forma basis — disclosed as a known, modeled item. This quarter the FY guide held unchanged after a 50–70bps margin miss, meaning the additional Q1 deleverage (beyond what was already modeled) needs to be made up over Q2–Q4. McVale did not address the math; he reiterated that demand was "in line with our expectations." The disconnect between margin disappointment and unchanged FY guide is exactly the setup that preceded the Q3 FY2025 capitulation.
The Lasser exchange on capital allocation was a notable defensive line in the sand. Asked directly whether management considered cutting guidance given rising rates and energy prices, and whether a prolonged downturn would trigger buyback suspension, McVale held the comp guide while Decker handled the capital allocation question — "we're not contemplating changing how we're allocating capital certainly to the core business." The Q4 brief flagged buyback resumption telegraphed for H1 2027; this quarter management explicitly stated capital allocation is not under review. That commitment was made before the Q1 margin miss had been digested in the call; it is now load-bearing.
Recurring themes management leaned on this quarter:
Risks management surfaced:
Q&A highlights
Seth Sigman · Barclays
Asked about drivers of demand improvement in H2, specifically how Home Depot benchmarks pro strategy progress across key verticals given challenging backdrop and modest comp growth.
Management emphasized pro is a $700B addressable market with no competitor having Home Depot's scale. Pro outperformed consumer again this quarter; complex purchase occasions (remodelers, small home builders) showing strongest traction. Gaining share by building field sales, enhanced delivery, and trade credit capabilities.
Michael Lasser · UBS
Asked whether management considered lowering guidance given rising interest rates and energy prices; followed up on whether prolonged housing affordability challenges would trigger capital allocation changes and stock buyback suspension.
Management reaffirmed flat-to-2% comp guidance, citing ability to manage through any environment and take share. Acknowledged more volatile external environment but noted it's still early (one quarter in) with largest selling weeks ahead in Q2. Maintained commitment to long-term strategy (core business, interconnected offering, pro), stating they're not contemplating changing capital allocation. Noted healthy dividend continues.
Christopher Horvers · J.P. Morgan
Asked about Q1 weather impacts (April precipitation in north), storm headwind carryover from H2 2024, and whether consumer stimulus or higher rates are affecting project demand.
Management noted strong engagement in February-March and again in early May despite late April weather pressure. Q1 saw 56 basis points storm headwind impact that will dissipate through year. Emphasized consumer resilience: PCE growth stable YoY, employment hanging in, wage growth strong, core customer own homes with home value appreciation and portfolio gains. Uncertainty around large projects but increased engagement across departments. Modest market share gains vs. negative comps in manufacturing, distribution, retail.
Simeon Gutman · Morgan Stanley
Asked what success looks like in wholesale/SRS distribution business and whether cross-selling across platforms (roofing, drywall, HVAC) is required; followed up on geographic comp spread between best and worst markets.
Management stated first priority is exceptional performance of each specialty platform within its vertical; SRS beat competition by hundreds of basis points in Q1. Long-term goal is cross-sell and CRM integration to leverage Home Depot enterprise scale across fragmented $700B TAM. Early days on cross-sell (mostly manual today); expect $400M cross-sell run rate this year with most guaranteed contracts. Example: SRS doing roofing on HD warehouses, targeting to double next year. Comp spread between best and worst markets remains narrow, almost entirely driven by weather.
Jihan Ma · Bernstein
Asked about ticket vs. traffic trends as tariff pricing lapses through the year and what drivers would turn traffic positive; followed up on Mingledorf acquisition and whether more HVAC acquisitions planned.
Management noted tariff-driven pricing increases from late Q1/Q2 last year are lapsing; 3% pricing identified as settled into market. Great spring engagement observed; largest selling weeks still ahead. For traffic: acknowledged pressure from tariff comparisons but didn't specify when traffic turns positive. On Mingledorf: leverage SRS model to build HVAC as fifth vertical; parts business can be sold nationwide vs. equipment which has regional distribution rights. Expect modest acquisitions to add geographies of key manufacturers to HVAC platform.
Answers to last quarter's watch list
What to watch into next quarter
Q2 adjusted operating margin vs. ~13.0% implied: With Q1 at 12.3% and FY guided to 12.8–13.0%, Q2–Q4 needs to average ~13.0–13.2%. Watch whether Q2 prints at or above 13.0% — Q2 is HD's seasonally strongest quarter with the largest selling weeks, so this is the easiest margin quarter of the year. A Q2 print below 13.0% would put the FY guide at immediate risk and likely trigger a cut on the Q2 call, replaying the Q3 FY2025 sequence.
Q2 gross margin vs. 33.1% FY guide: Q1 missed by ~10bps; the FY 33.1% guide now requires Q2–Q4 to average ~33.1%+. Watch the Q2 gross margin print specifically against 33.1% — a second consecutive quarter below the FY guide would confirm the GMS annualization headwind is biting harder than modeled and force a gross margin guide cut.
Comp transaction inflection or capitulation: Q1 transactions at -1.3% with ~3% pricing largely lapped means H2 needs transactions to inflect positive for ticket-driven comp support to survive. Watch whether Q2 transactions return to flat or worsen — sustained -1% or worse with tariff pricing lapsed means the comp itself collapses.
Big-ticket maintenance/repair vs. discretionary disclosure: Watch whether Q2 prepared remarks provide any explicit breakdown of big-ticket >$1,000 into maintenance/repair vs. discretionary. Continued vague "discretionary remains under pressure" framing into a seventh quarter signals management has stopped tracking inflection altogether.
SRS organic comp disclosure: With Mingledorf adding to acquisition stack and $400M cross-sell run-rate disclosed, watch whether Q2 introduces a same-store SRS comp, SRS+GMS combined organic figure, or any framing that lets investors isolate organic HD-core performance from acquired growth. Continued vagueness signals organic comps are running below the +0.6% headline.
Mingledorf size and HVAC pipeline: Deal size was not disclosed. Watch the Q2 10-Q for purchase price disclosure and whether management announces additional HVAC tuck-ins. The HVAC vertical buildout is the new growth narrative — concrete sizing matters.
Buyback resumption timeline: Decker held the line on capital allocation under pressure in Q&A. Watch whether Q2 commentary explicitly reaffirms the H1 2027 buyback resumption or stays silent. Silence is a soft pushout.
Effective tax rate trajectory: Q1 printed 24.9% vs. FY guide of ~24.3%. Not material on its own but worth tracking whether Q2 normalizes or the FY tax assumption needs to widen.
Sources
- Home Depot Q1 FY2026 Press Release, filed 2026-05-19 — https://www.sec.gov/Archives/edgar/data/354950/000035495026000101/hd_exhibit991x05032026.htm
- Home Depot Q1 FY2026 earnings call commentary (Decker, Campbell, Bastic, McVale) — as cited in tone and Q&A inputs.
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