Home Depot Earnings Preview: Can Pro Demand Offset a Weak Housing Market?

Home Depot prepares to release its fiscal second-quarter 2026 earnings on August 18, as investors ponder whether the retail giant can maintain growth amid a housing market grappling with high borrowing costs, weak turnover and cautious consumer sentiment. The focus will be on whether demand increased during spring and early summer and if Home Depot's professional customer base can offset weakness in discretionary home projects.

Home Depot's fiscal first quarter saw revenue increase 4.8% year over year to $41.8 billion, although comparable sales only rose 0.6%, with U.S. comparable sales up 0.4%. Net earnings fell to $3.3 billion from $3.4 billion a year earlier, with adjusted diluted EPS dropping to $3.43 from $3.56. Despite this, management noted demand remained similar to fiscal 2025 despite heightened consumer uncertainty and housing affordability pressures.

The company maintains fiscal 2026 guidance for total sales growth of 2.5% to 4.5% and comparable sales growth between flat and 2%, along with adjusted operating margins of 12.8% to 13.0% and adjusted EPS growth of approximately flat to 4%. The key question for traders is whether the second-quarter results justify keeping or revising these expectations.

Home Depot's exposure to the housing cycle complicates the current situation, with elevated mortgage rates, expensive homes and limited inventory discouraging both buyers and sellers. Existing-home sales dropped 1.7% in July to 4.06 million units annually, while the median home price rose 2% year over year to $434,100. Fewer home turnovers mean less incentive for major renovations, which are often linked to home purchases.

High mortgage rates also keep the "mortgage-rate lock-in effect" alive, discouraging homeowners from selling due to favorable existing mortgage rates.

To counteract this cyclicality, Home Depot has expanded its professional customer business, which now accounts for roughly half of its revenue. Acquisitions like SRS Distribution and GMS have been pivotal, but traders should closely monitor sales growth within this segment, the integration of SRS and GMS, and management's perspective on further investments. A successful integration could bolster Home Depot's competitive edge and broaden its addressable market.

The upcoming earnings report will reveal whether Home Depot's acquisitions are generating genuine revenue synergies and if professional customers can provide recurring, less housing-dependent demand. Management's comments on large-ticket transactions may prove more telling than overall revenue figures. If major projects remain weak, it would suggest ongoing housing affordability and economic uncertainty are suppressing high-value business areas.

However, a stabilization in significant projects could indicate consumers are more comfortable with the macroeconomic environment, signaling potential recovery in the housing market.