HD · Q2 2025 Earnings

Cautious

Home Depot (The)

Reported August 19, 2025

30-second summary

30-second take: Q2 revenue grew 4.9% to $45.28B with comparable sales returning to positive territory (+1.0% global, +1.4% U.S.) after Q1's flat-to-negative print, and 12 of 16 merchandising departments posted positive comps — the broadest engagement in nearly two years. But management reaffirmed FY25 guidance unchanged across every line, and the math is telling: Q2 GAAP operating margin of 14.5% vs. a reaffirmed FY guide of ~13.0% implies the back half runs roughly 140bps below Q2's level. Demand is improving on smaller projects; large discretionary remodels remain stuck, and the EPS-decline guide stays in place.

Headline numbers

EPS

Q2 FY2025

$4.68

Revenue

Q2 FY2025

$45.28B

+4.9% YoY

Gross margin

Q2 FY2025

33.4%

Operating margin

Q2 FY2025

14.5%

Key financials

Q2 FY2025

Metric	Q2 FY2025	YoY	Q1 FY2025	QoQ
Revenue	$45.28B	+4.9%	$39.86B	+13.6%
EPS	$4.68	—	$3.56	+31.5%
Gross margin	33.4%	—	33.8%	-40bps
Operating margin	14.5%	—	12.9%	+160bps

Guidance

The Home Depot reaffirmed full-year FY2025 guidance across all metrics; Q2 actuals showed strong operating performance (14.5% GAAP operating margin vs. 13.0% FY guide, 14.8% adjusted vs. 13.4% guide), signaling H2 margin pressure ahead.

Guidance is issued for both next quarter and the full year. Both may appear below.

Reaffirmed unchanged this quarter: Adjusted diluted EPS (non-GAAP) (decline approximately 2% from $15.24 in fiscal 2024), GAAP diluted EPS (decline approximately 3% from $14.91 in fiscal 2024), Total sales growth (approximately 2.8%), Comparable sales growth (approximately 1.0%), Gross margin (approximately 33.4%), Operating margin (approximately 13.0%), Adjusted operating margin (non-GAAP) (approximately 13.4%), Tax rate (approximately 24.5%), Net interest expense (approximately $2.2 billion), New stores (approximately 13), Capital expenditures (approximately 2.5% of total sales)

Platform metrics

Q2 FY2025

Segment	Q2 FY2025
Comparable Customer Transactions	(0.4)%
Comparable Average Ticket	1.4%
Customer Transactions	446.8 million
Average Ticket	$90.01
Total Retail Stores	2,353
Foreign Exchange Impact on Comparable Sales	(40) bps

Profitability

Q2 FY2025

Segment	Q2 FY2025
Operating Margin (Non-GAAP)	14.8%

Management tone

Narrative arc: Q1 "best positioned to win" defensive reframing → Q2 "notable improvements in underlying demand" with comp inflection, but the FY guide that anchors EPS decline stays put.

The "large discretionary remodel" overhang is now in its third quarter as the structural ceiling on growth. Q4 2024 framed high rates as suppressing big projects; Q1 reclassified that headwind as persistent ("$50B cumulative deferred spend"); Q2 confirms it is unchanged: "we continue to see softer engagement in larger discretionary projects where customers typically use financing to fund the renovation project." The verbatim repetition of "softer engagement in larger discretionary projects" across quarters signals management has stopped forecasting a turn and is now operating as if this is the new baseline.

Confidence has shifted from market outlook to operational navigation. Q1 leaned on "best positioned to win." This quarter the anchor is "Despite the uncertainty and volatility in the market, we are confident that we can effectively navigate this environment." Note what disappeared: forward-looking growth confidence. What remained: confidence in execution under a difficult environment. The reaffirmed -2% adjusted EPS guide encodes that distinction — management is not signaling earnings power inflection, only operational stability.

Promotional posture quietly tightened. In Q&A, McPhail clarified that the Q2 promotional pullback was concentrated in outdoor garden (mulch, chemicals) to absorb tariff pressure while preserving EDLP across the broader portfolio. Q1 commentary emphasized absorbing tariff costs to protect price leadership; Q2 reveals the absorption is now category-selective. This is a more nuanced — and more defensive — pricing stance than the blanket "we will hold price" framing of one quarter ago.

The pro ecosystem narrative gained specificity, but the numbers remain small. Last quarter management disclosed thousands of HD core pro accounts on trade credit vs. 90,000+ at SRS. This quarter the disclosure was "single-digit thousands of pros" on the program against a pro customer base in the millions — directionally honest, but the gap between aspiration and current penetration widened rather than narrowed. The GMS acquisition announcement (adding 1,200 distribution branches to SRS's 800) is the more material near-term lever.

Inventory build is the new soft spot. Q1 dismissed inventory growth as SRS-base-effect. Q2 shows turns continuing to decelerate (4.6x vs. 4.9x) with no equivalent base-effect explanation. Management did not address this directly in prepared remarks.

Recurring themes management leaned on this quarter:

Smaller home improvement projects driving engagement vs. larger discretionary projectsPro ecosystem expansion via SRS and pending GMS acquisitionFaster delivery speeds and omnichannel fulfillment capabilitiesOperating leverage challenges and margin pressureMarket share gains despite macroeconomic uncertaintyTrade credit and order management systems maturing for pro customers

Risks management surfaced:

Macroeconomic uncertainty and volatility affecting customer financing for larger projectsSofter engagement in larger discretionary renovation projectsForeign exchange headwinds (40 bps negative impact in Q2)Inventory turnover deceleration (from 4.9x to 4.6x)Operating margin compression and EPS decline guidance

Q&A highlights

Zach Fadum · Wells Fargo

Asked whether July improvement was catch-up due to weather or underlying trend change, and requested breakdown of H2 comp drivers across traffic, ticket, pricing with implications for full-year 1% guidance.

Management attributed Q2 improvement to broader engagement across portfolio (12 of 16 categories positive, best in 2 years), favorable July weather in northern regions, and consumers engaging in smaller projects. Guided to slight uptick in H2 comps (just under 1% H1, slightly above 1% H2) to achieve 1% full-year target. Noted underlying momentum helped by weather but not dependent on it.

12 of 16 categories in positive comp territory1% company comp, 1.4% US comp in Q20.9% US comp H1, targeting slight improvement in H255 bps FX headwind H1, flips to 25 bps tailwind at current rates

Steven Zaccone · Citi

Asked how tax clarity and rate cut expectations inform view on timing of large project recovery and whether 12-month recovery is feasible; also requested detail on AUR, pricing, and promotional activity impact on ticket/transaction.

Management stated economic uncertainty is primary deterrent to large projects (exceeds price/labor concerns), and tax clarification removes some uncertainty. Lower mortgage/HELOC rates would help but company doesn't know the threshold rate needed. Clarified Q2 promotional pullback was concentrated in outdoor garden (mulch, chemicals) to mitigate tariff pressure; noted 50%+ products sourced domestically not subject to tariffs; committed to EDLP strategy with portfolio pricing approach.

Economic uncertainty cited as #1 reason for project deferral by wide marginOver 50% of products sourced domestically, exempt from tariffsPromotional activity reduction focused on lower-ticket garden categoriesPortfolio approach to pricing to protect total project cost

Christopher Horvers · JP Morgan

Asked about H2 comp cadence expectations and puts/takes (ticket inflation vs. December euphoria cycling); also requested comparison of GMS to roofing business and rationale for acquisition vs. organic build.

Management indicated no significant uptick needed in H2 comps to meet guidance, with US business running similar comp rates. Ticket improvement in Q2 driven by mix shift (2.6% comp on items over $1,000) not price; transaction decline entirely attributable to outdoor garden promo pullback. Positioned GMS acquisition as complementary specialty vertical to SRS with similar business model (small branches, truckload delivery, high inventory turn, asset-light, similar margins). Noted GMS adds 1,200 distribution branches to SRS's 800, creating unified ecosystem.

2.6% comp on tickets over $1,000 in Q2H2 comp guidance assumes no new hurricane impactsHurricane impacts smaller in Q2 than Q1, smaller again in Q3/Q4GMS and SRS have similar cultures, single ERP systems, branch-level go-to-market

Simeon Gutman · Morgan Stanley

Asked whether 'notable improvement in underlying demand' reflects actual market inflection, market share gains, or just weather; also requested update on complex pro initiatives.

Management attributed momentum to healthy customer fundamentals (strong income, $11T+ equity, 50% home price appreciation since 2019) rather than macro inflection or housing turn. Noted customers deferring (not canceling) large projects due to rate environment. H2 guidance assumes continuation of existing momentum without improvement in large project outlook. Highlighted SRS share gains (paint, roofing, landscape, drywall based on public Q2 disclosures) and organic pro improvements in delivery (on-time/complete performance step change), trade credit (still early with single-digit thousands of pros on program), and cross-sell benefits.

Customer sitting on $11T+ home equity, double 2019 levelsHome prices up 50% since 2019Pros report customers deferring not canceling projectsSRS taking share in paint, roofing, landscape, drywall

Michael Lasser · UBS

Asked what market changes are driving big strategic calls (pro ecosystem, SRS, GMS acquisitions) and whether growth/returns trade-off is a real constraint or moot point in robust recovery scenario.

Management framed strategic moves as responding to pro customer consolidation needs (reducing 20-50 supplier relationships) and achieving scale in fragmented markets. Emphasized returns-focused capital allocation: investments must exceed cost of capital with margin of safety. Highlighted SRS branches and DFCs as capital-light with faster returns than Home Depot stores; noted GMS increases TAM and positions company to win in wholesale distribution. On promotional pullback/tariffs: reaffirmed EDLP commitment, tariff impacts in current guidance, and confidence in price leadership position.

SRS branch capital intensity lower than Home Depot store on % of sales basisSRS returns accrue faster than Home Depot store returnsDFCs generating higher ROIC than equivalent Home Depot store at comparable maturity stageHome Depot store characterized as 'like buying treasuries' – most confident return profile

Answers to last quarter's watch list

Q2 U.S. comp sales above +1.5% — Came in at +1.4%, just below the +1.5% bar but well above the +0.5% downside threshold that would have forced a cut. Comp guidance reaffirmed at +1.0% FY.

Continue monitoring

Gross margin trajectory below 33.4% — Q2 gross margin landed at exactly 33.4%, matching the FY guide on the nose. Tariff absorption is visible in the garden-category promo pullback but did not push reported gross margin below the guide.

Resolved positively

SRS standalone disclosure — Management again did not break out SRS revenue contribution in segment reporting. Q&A provided qualitative share-gain commentary (paint, roofing, landscape, drywall) and the GMS acquisition framing, but no quantitative same-store SRS comp was disclosed.

Not resolved

Pro trade credit account growth specifics — Gutman drew out a concrete-but-small number: "single-digit thousands of pros" on the trade credit program against a millions-strong pro customer base. The specificity is welcome; the absolute number signals execution lag versus the SRS comparison (90,000+ accounts).

Resolved negatively

Adjusted EPS "52-week basis essentially flat" framing — Management dropped the calendar-framing crutch in prepared remarks this quarter; the -2% adjusted EPS guide was stated on a straight YoY basis without the alternative presentation. Underlying EPS is still guided negative, but management is no longer reaching for the optical workaround.

Resolved positively

Supply-chain <10% non-U.S. country concentration — No interim progress update was disclosed on the 12-month clock Decker put on the rebalancing target last quarter. Management referenced >50% domestic sourcing in Q&A on tariff context but did not address the country-concentration commitment specifically.

Continue monitoring

What to watch into next quarter

Q3 operating margin vs. 13.0% FY guide: Q2 printed 14.5%. For the FY ~13.0% guide to hold, Q3+Q4 combined needs to average roughly 11.5–12%. Watch whether Q3 alone drops below 13% — that would confirm the implied H2 step-down is real, not just conservatism.

Comp transaction trend: Q2 transactions were -0.4%; the comp is now entirely ticket-led. Watch whether transactions return to positive in Q3 — if not, the +1% FY comp depends on continued mix-up, which is fragile.

GMS deal closing timeline and synergy framing: Guidance explicitly excludes GMS impacts. Watch the next call for a closing date, accretion timeline, and whether management discloses a combined SRS+GMS revenue run-rate that lets investors triangulate organic comps.

Inventory turns: 4.6x vs. 4.9x prior-year. Watch whether turns stabilize or continue decelerating — further deterioration with comp momentum present would imply pull-forward or category mix mismanagement.

Trade credit pro count: Single-digit thousands disclosed this quarter. Watch for either a specific number above 10,000 next quarter or continued vague "thousands" framing — the latter signals the pro ecosystem flywheel is taking longer than management has implied.

Large discretionary project commentary: Watch whether the verbatim "softer engagement in larger discretionary projects" phrase appears for a fourth consecutive quarter, or whether any green shoots are flagged. Repetition confirms the structural ceiling; any change in language is a meaningful signal.

Sources

Home Depot Q2 FY2025 Press Release, filed 2025-08-19 — https://www.sec.gov/Archives/edgar/data/354950/000035495025000195/hd_exhibit991x08032025.htm
Home Depot Q2 FY2025 earnings call commentary (Decker, Bastek, McPhail) — as cited in tone and Q&A inputs.

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