Home Depot Misses for First Time in a Decade — But Traders Are Already Buying the Dip

WATCH: Bitcoin $200K? The math behind the next crypto supercycle.

Home Depot’s fiscal second-quarter earnings delivered a mixed picture for investors, falling just shy of Wall Street’s expectations on both revenue and profit for the first time in more than a decade. The stock initially traded lower in premarket action, reflecting disappointment at the top-line miss. Yet, shares had clawed back losses toward the $400 mark, suggesting that investors may be looking past the near-term softness in sales and focusing instead on steady guidance and signs of underlying momentum in the business. The “buy-the-dip” response appears to have been supported by management’s confidence in reaffirming its full-year outlook, as well as modestly positive trends in July’s comparable sales.

The headline numbers show revenue of $45.28 billion, up 4.9% from last year but shy of the consensus estimate of $45.36 billion. Adjusted earnings per share came in at $4.68, narrowly missing the $4.72 expected, while operating income of $6.55 billion also undershot the $6.74 billion forecast. Comparable sales increased 1%, compared to expectations for 1.2% growth, with foreign exchange dragging the metric by about 40 basis points. Net income was effectively flat year-over-year at $4.55 billion. The simultaneous revenue and earnings miss is notable—it marks the first such double disappointment since May 2014. Still, the miss was small, and the company was able to highlight signs of progress across merchandising and customer spending.

One of the key narratives of the quarter was the relative strength in professional customers compared to DIY. Home Depot has been leaning into its Pro business for growth, most recently with its $18.25 billion acquisition of SRS Distribution and its pending $4.3 billion deal for GMS. Management indicated that sales growth between Pro and DIY customers was “relatively in line,” but the broader takeaway is that Pro continues to underpin stability. Roughly 55% of sales now come from professionals versus 45% from DIY customers when SRS is included. That mix is important for investors considering the read-through for Lowe’s, which is more dependent on DIY spending. While DIY projects remain constrained by a “deferral mindset” among homeowners, big-ticket transactions—purchases over $1,000—rose 2.6% year-over-year, offering some reassurance that larger projects are being delayed rather than abandoned outright.

The quarter’s sales cadence also provided some cause for optimism. Comparable sales grew just 0.3% in May and 0.5% in June but accelerated to 3.3% in July, according to CFO Richard McPhail. That momentum, alongside 12 of 16 merchandising departments showing year-over-year growth, suggests demand may be stabilizing after a soft stretch in home improvement activity. Customer transactions fell slightly to 446.8 million from 451 million a year ago, but the average ticket size increased to $90.01 from $88.90, indicating that while fewer trips are being made, shoppers are spending more per visit.

Guidance was the stabilizing element of the report. Home Depot reaffirmed its fiscal 2025 outlook, calling for total sales growth of about 2.8% and comparable sales growth of 1%. Adjusted EPS is expected to decline roughly 2%, and operating margin is projected at about 13.4%. The company plans to open approximately 13 new stores and maintain capital expenditures around 2.5% of sales. Notably, management said its outlook does not incorporate any potential tailwind from future Federal Reserve rate cuts, which could improve housing turnover and spur larger projects. By reaffirming guidance despite the miss, Home Depot signaled confidence that its strategy remains intact and that the underlying environment, while cautious, is not deteriorating.

On the macro front, Home Depot’s management noted that homeowners remain hesitant to embark on major renovations. The “deferral mindset,” which emerged in mid-2023, is still weighing on activity, but McPhail emphasized that projects are being postponed, not canceled. He highlighted that Home Depot’s customer base tends to be more financially resilient than the broader consumer, with about 90% of DIY shoppers owning their homes and professionals generally hired for essential improvements. This customer profile, combined with ongoing demand for smaller projects, provides some insulation against economic volatility. Tariffs, while a potential headwind for retailers, did not meaningfully affect Home Depot’s pricing in the quarter, with most imported goods arriving ahead of the recent tariff hikes. The company continues to avoid broad-based price increases in response to trade policy shifts.

The quarter’s results underscore Home Depot’s position at the intersection of housing, consumer spending, and broader economic sentiment. While the top- and bottom-line misses will draw headlines, the company’s ability to sustain guidance, show sequential momentum in comps, and highlight resilience in Pro demand all provide investors with reasons to remain constructive. The market’s early “buy-the-dip” response reflects that nuance—sentiment may have been bruised by the miss, but expectations for the sector were already low. With Toll Brothers set to report after the close and other retailers like Lowe’s, Target, and Walmart due this week, Home Depot’s quarter offers an important baseline: the home improvement cycle may not be roaring back, but it is stabilizing, and that stability could be enough to support the stock at current levels.