Home Depot (NYSE: HD) Q2 2026: Revenue Rises 5.7% but SG&A Surge Compresses Margins

Q2 Fiscal 2026 Results

Home Depot (NYSE: HD) reported Q2 fiscal 2026 net sales of $47.9 billion, up 5.7% year over year, as adjusted diluted EPS of $4.92 beat the $4.88 consensus estimate. The headline numbers, however, obscured a notable cost-side development: selling, general and administrative (SG&A) expense rose 8.5% year over year to $8.4 billion, materially outpacing both revenue growth and gross profit expansion, and compressing GAAP operating margin by 20 basis points to 14.3%.

Key Metrics

• Net sales: $47.9 billion for the quarter ended August 2, 2026, up 5.7% from $45.3 billion in Q2 fiscal 2025
• Comparable sales: increased 1.7% overall; U.S. comparable sales up 1.3%
• GAAP diluted EPS: $4.79, up 4.6% from $4.58 in the prior-year quarter
• Adjusted diluted EPS: $4.92, up 5.1% from $4.68, beating the $4.88 consensus
• GAAP operating income: $6.8 billion, up 4.3% year over year; GAAP operating margin of 14.3%, down 20 basis points from 14.5%
• Net income: $4.8 billion, up 4.7% year over year
• Free cash flow: $9.7 billion for the first half of fiscal 2026, on operating cash flow of $11.4 billion and capital expenditures of $1.7 billion

What Drove the Results

Adjusted diluted EPS of $4.92 beat the $4.88 consensus by approximately 0.9%. Gross profit grew 6.5% year over year to $16.1 billion, reflecting disciplined cost-of-sales management. The divergence between revenue growth of 5.7% and GAAP operating income growth of 4.3% traces directly to SG&A, which climbed $660 million, or 8.5%, year over year to $8.4 billion, absorbing the gross profit gain and narrowing the GAAP operating margin from 14.5% to 14.3%.

Comparable average ticket rose 2.8% to $92.50, while comparable customer transactions declined 1.0%, indicating that per-visit spending increased even as foot traffic softened. CFO Richard McPhail noted in the company's announcement that second-quarter results "exceeded our expectations" and cited broad-based demand across the business, with customers continuing to engage in smaller projects. Senior Executive Vice President Ann-Marie Campbell attributed the results to investments across the business and associates' focus on customer service.

The GAAP-to-adjusted EPS gap of $0.13 per share reflects acquired intangible asset amortization of $178 million in the quarter, primarily from the SRS Distribution acquisition. Excluding that non-cash charge, adjusted operating income reached $7.0 billion, with an adjusted operating margin of 14.7%, down only 10 basis points from the prior-year period.

Guidance Maintained

Home Depot reaffirmed its full fiscal 2026 guidance, targeting total sales growth of approximately 2.5% to 4.5% and comparable sales growth of approximately flat to 2.0%. The company expects GAAP diluted EPS to grow approximately flat to 4.0% from $14.23 in fiscal 2025, and adjusted diluted EPS to grow approximately flat to 4.0% from $14.69. GAAP operating margin guidance of approximately 12.4% to 12.6% and adjusted operating margin of approximately 12.8% to 13.0% were both maintained. The company also guided for approximately 15 new stores, a gross margin of approximately 33.1%, and capital expenditures of approximately 2.5% of total sales. Management noted that guidance incorporates IEEPA tariff refunds, expected to partially offset unplanned fuel, energy, and other product input costs during the fiscal year.

Wall Street View

Analyst sentiment heading into the print was broadly constructive, with the majority of covering firms holding Buy or equivalent ratings. The reaffirmed full-year guidance, alongside the adjusted EPS beat, provides a stable foundation for current-consensus models, though the SG&A trajectory will likely draw scrutiny from analysts monitoring operating leverage heading into the second half.

Investor Takeaway

The Q2 result confirms that Home Depot's top line is expanding at a mid-single-digit pace, supported by higher average ticket values even as transaction counts dip. The more consequential question for the remainder of fiscal 2026 is whether SG&A growth, running nearly 3 percentage points above revenue growth this quarter, moderates enough to restore operating leverage. With full-year guidance maintained and tariff offsets embedded in the outlook, the near-term financial framework is intact, but margin recovery will depend on whether the company can slow cost growth as the SRS integration matures.