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

As Home Depot prepares to release its fiscal second-quarter 2026 earnings report, investors are left wondering: can the world’s largest home improvement retailer continue to grow while the housing market remains stuck between high borrowing costs, weak turnover, and cautious consumers?

The answer to this question will be crucial in determining the future performance of Home Depot’s stock. The company’s ability to offset weakness in discretionary home projects with a strong professional customer base will be a key indicator of its resilience in a challenging market.

Home Depot’s fiscal first quarter saw revenue increase 4.8% year over year to $41.8 billion, thanks in part to acquisitions and currency movements. However, comparable sales rose only 0.6%, while comparable sales in the U.S. increased 0.4%. Net earnings declined to $3.3 billion from $3.4 billion a year earlier, with adjusted diluted EPS falling to $3.43 from $3.56.

The company’s management has maintained its fiscal 2026 guidance, calling for total sales growth of approximately 2.5% to 4.5% and comparable sales growth between flat and 2%. It also expects adjusted operating margins of 12.8% to 13.0% and adjusted EPS growth of approximately flat to 4%.

For traders, the key question is less whether Home Depot can meet its existing targets and more whether the second-quarter performance gives management a reason to raise, lower, or simply reaffirm those expectations.

Home Depot’s exposure to the housing cycle makes the current environment particularly difficult. Mortgage rates remain elevated, while expensive homes and limited inventory have discouraged both buyers and sellers. Existing-home sales fell 1.7% in July to an annualized 4.06 million units, while the median existing-home price rose 2% year over year to $434,100.

The lack of turnover is particularly important because homeowners who do not move have less incentive to undertake the type of major renovation projects that often accompany a home purchase. Mortgage rates also remain above 6.5%, limiting affordability and keeping the so-called mortgage-rate lock-in effect alive.

Many existing homeowners remain reluctant to sell because they are holding mortgages secured at much lower rates. That reduces the supply of homes available for sale and, in turn, limits housing transactions. This matters to Home Depot because a move generates spending. New homeowners typically need to furnish, repair, upgrade, and personalize properties, while sellers can undertake projects to improve the attractiveness of their homes.

When fewer homes change hands, some of this activity disappears. The result is a bifurcated market: essential maintenance can remain relatively resilient, while discretionary projects such as major kitchen, bathroom, or outdoor renovations are more vulnerable to postponement.

One of the clearest ways Home Depot is attempting to reduce this cyclicality is by expanding its professional customer business. The Pro segment already represents roughly half of Home Depot’s revenue, and the company has invested heavily in building an end-to-end ecosystem for contractors and other professionals.

The $18.25 billion acquisition of SRS Distribution in 2024 was central to that strategy, while the subsequent acquisition of GMS expanded the company’s reach in specialty building products. This is important because professional customers tend to purchase products for ongoing construction, repair, and maintenance work rather than discretionary projects by individual homeowners.

That can make demand more recurring and potentially less sensitive to housing transactions. The upcoming earnings report should therefore be read carefully for evidence that the acquisitions are generating genuine revenue synergies rather than simply adding scale.

Traders should watch sales growth within the Pro business, the integration of SRS and GMS, and whether management sees additional investment requirements. A successful integration could strengthen Home Depot’s competitive position while expanding its addressable market.

The company estimates that the professional market is roughly $300 billion, leaving substantial room for share gains. Large-ticket spending is the critical consumer signal. Home Depot’s results could also hinge on the behavior of consumers making bigger purchases.

The previous quarter showed that customers remained engaged, but not necessarily willing to commit to expensive projects. Management commentary around large-ticket transactions could therefore prove more important than headline revenue.

Traders should ask whether consumers are still prioritizing need-based purchases over discretionary renovations. If big-ticket demand remains weak, it would suggest that housing affordability and economic uncertainty are still suppressing the highest-value portion of the business.

Conversely, a stabilization in major projects could be an early indication that consumers are becoming more comfortable with the macroeconomic environment. This is particularly relevant because a recovery in mortgage rates could eventually unlock pent-up demand.

However, for now, the housing market remains constrained. The July decline in existing-home sales reinforces the view that a broad housing-led recovery has yet to materialize.

Revenue is not the only area traders should monitor. Higher transportation, input, and sourcing costs could create additional pressure on gross margins, particularly if tariffs raise the cost of imported merchandise.

Home Depot also carries a higher debt burden following its acquisitions. The company raised $10 billion of debt to help finance the SRS transaction and had nearly $56 billion in total debt at the end of 2025.

Share repurchases have consequently been halted, making cash flow and balance-sheet discipline more relevant to the stock’s valuation. The company’s ability to protect margins while continuing to invest in supply chain infrastructure, merchandising, and its Pro network will therefore be an important part of the earnings story.

CEO Ted Decker is taking a temporary medical leave of absence, with executives Ann-Marie Campbell and CFO Richard McPhail overseeing operations and financial matters during his absence. He is expected to return in the coming months.

For traders, the issue is less about the short-term operational impact and more about whether management provides clarity on strategic priorities and the timing of Decker’s return.