How Home Depot Makes Money: Why a $164.7 Billion Retailer Now Grows Fastest Outside Its Stores
Home Depot sold $164.7 billion of hammers, lumber, paint and appliances last year. Yet the fastest-growing part of the company is something most shoppers never see: trucks delivering roofing, drywall and HVAC parts straight to contractors. That shift is the story to watch when third-quarter results land on Tuesday.
The short answer
Home Depot makes money selling home improvement products to DIY homeowners and professional contractors, mostly through 2,364 stores. Fiscal 2025 sales were $164.7 billion. In Q2 fiscal 2026 sales rose 5.7% to $47.9 billion, but store categories grew only 1-2%; acquisitions such as GMS did most of the lifting.
Home Depot by the numbers
Metric | Q2 FY2026 | Q2 FY2025 | Change |
Net sales | $47,861M | $45,277M | +5.7% |
Comparable sales | +1.7% | +1.0% | n/a |
Gross margin | 33.7% | 33.4% | +0.3 pts |
Operating margin (GAAP) | 14.3% | 14.5% | -0.2 pts |
Net earnings | $4,766M | $4,551M | +4.7% |
Diluted EPS (GAAP) | $4.79 | $4.58 | +4.6% |
Adjusted diluted EPS | $4.92 | $4.68 | +5.1% |
Average ticket | $92.50 | $90.01 | +2.8% |
Quarter ended 2 August 2026. Source: Home Depot’s Q2 fiscal 2026 earnings release, filed with the SEC on 18 August 2026. Fiscal 2025 ended 1 February 2026.
What does Home Depot actually sell, and to whom?
Its annual report describes three kinds of customer. DIY customers are homeowners doing their own projects. Pros are remodelers, contractors, homebuilders, property managers and tradespeople such as electricians, plumbers and roofers. DIFM ("do it for me") customers are homeowners who buy products and pay Home Depot to arrange installation of things like flooring, water heaters and cabinets.
The company does not report sales by customer type. It reports by product line. In Q2 fiscal 2026, according to its Form 10-Q, the store business (the "Primary" segment) sold $42.8 billion, split almost evenly between three buckets: Building Materials (lumber, electrical, plumbing, millwork) at $14.4 billion, Décor (appliances, bath, flooring, kitchen, lighting, paint) at $13.9 billion and Hardlines (hardware, garden, power tools, storage) at $14.4 billion.
Why is Home Depot buying distributors like SRS and GMS?
Because the biggest untapped pool of spending is the complex Pro project, and those customers often buy from specialist distributors rather than stores. Home Depot bought SRS Distribution in June 2024, then, through SRS, bought GMS, a drywall, ceilings and steel-framing distributor, for $5.1 billion in cash on 4 September 2025. In May 2026 SRS added Mingledorff’s, a southeastern HVAC distributor, for about $1.1 billion.
These businesses sit in a reporting bucket called "Other". In Q2 fiscal 2026 that bucket’s sales jumped to $5.1 billion from $3.1 billion. GMS alone contributed $1.4 billion of incremental sales, which explains most of the company’s 5.7% growth. Roofing, once around 62% of Other sales, fell to about 39% as drywall and HVAC were added. Across the year, SRS now runs more than 1,340 locations.
Page 21 analysis: which part of Home Depot earns more per dollar?
Q2 FY2026 | Net sales | Operating income | Operating margin |
Primary (stores and online) | $42,806M | $6,592M | 15.4% |
Other (SRS, incl. GMS) | $5,055M | $247M | 4.9% |
Total | $47,861M | $6,839M | 14.3% |
Margins are our calculation from the segment table in the 10-Q; the Other segment carries heavy depreciation and amortization from the acquisitions. The takeaway: the distribution arm is adding sales quickly but earns about a third as much per dollar as the stores, so faster growth there can lift revenue while dragging down the company-wide margin. That is part of why operating margin slipped to 14.3% even as sales grew.
How are tariffs and tariff refunds affecting Home Depot?
After the US Supreme Court struck down tariffs imposed under the International Emergency Economic Powers Act (IEEPA), importers began getting money back. Home Depot said in its 10-Q that it had received about $730 million in IEEPA refunds by 2 August 2026, "the vast majority" of what it expects. About $685 million was booked as lower cost of goods sold. That helped gross margin rise to 33.7% from 33.4%, though the company said the benefit was largely offset by higher fuel, energy and input costs.
Its Q2 release reaffirmed full-year guidance and said that guidance includes the refunds, which are expected to partly offset unplanned fuel, energy and other cost increases.
What has Home Depot guided for fiscal 2026?
Total sales growth of about 2.5% to 4.5%, with comparable sales flat to up 2.0%
About 15 new stores
Gross margin of about 33.1% and operating margin of about 12.4% to 12.6% (adjusted 12.8% to 13.0%)
Diluted EPS flat to up about 4% from $14.23 in fiscal 2025; adjusted EPS flat to up about 4% from $14.69
Page 21 calculation: first-half fiscal 2026 adjusted EPS was $8.35. To land inside the adjusted guide of $14.69 to about $15.28, the second half needs roughly $6.34 to $6.93. A year earlier the same two quarters produced $6.46 ($3.74 plus $2.72, per ChartRow’s earnings history), so the guide allows for anything from a slight decline to about 7% growth.
What to watch when Home Depot reports Q3 on 17 November
EPS against the $3.87 consensus. ChartRow lists 11 estimates and a year-ago figure of $3.74. Home Depot beat in each of the last three quarters by its count.
Comparable sales and transactions. Q2 comps rose 1.7% only because the average ticket rose 2.8%; customer transactions fell 1.0%. Watch whether traffic stabilises.
The Other segment. How fast SRS, GMS and Mingledorff’s grow, and whether their margins improve.
Whether guidance holds. The company reaffirmed in August. Any change to the 2.5%-4.5% sales range or the EPS range will matter more than the quarter itself.
Housing and rates. Management has pointed to smaller repair projects and housing affordability pressure; a December Fed hike would raise borrowing costs for big remodels.
The company holds its call at 9 a.m. Eastern time on Tuesday, according to its notice.
Frequently asked questions
How does Home Depot make money?
Mostly by selling home improvement products in about 2,364 stores and online to two groups: do-it-yourself homeowners and professional contractors (Pros). Building materials, décor and hardlines each bring in roughly $14 billion a quarter. A growing slice, about $5.1 billion in Q2 fiscal 2026, comes from SRS, its distribution arm for roofers, pool builders, drywall and HVAC contractors.
When does Home Depot report Q3 2026 earnings?
Before the market opens on Tuesday, 17 November 2026, with a conference call at 9 a.m. Eastern time, according to the company’s notice.
What are analysts expecting from Home Depot in Q3?
Earnings-calendar data compiled by ChartRow shows a consensus of $3.87 per share from 11 analysts, against $3.74 in the same quarter a year earlier. Consensus figures are third-party estimates and can move before the report.
What are IEEPA tariff refunds and why do they matter for Home Depot?
After the US Supreme Court invalidated tariffs imposed under the International Emergency Economic Powers Act, importers began receiving refunds. Home Depot said it had received about $730 million by 2 August 2026, and booked about $685 million as lower cost of goods sold, which lifted gross margin. Its full-year guidance includes those refunds.
Does Home Depot say how much it sells to Pros versus DIY customers?
Not as a reported figure. Its filings describe DIY, Pro and do-it-for-me customers, but report sales by product line and by segment, not by customer type. Any split you see quoted is an estimate, not a company disclosure.
Sources
Related on Page 21
This article is for general information and education only and is not investment advice. Figures come from Home Depot’s SEC filings for fiscal 2025 and the second quarter of fiscal 2026; the Q3 consensus is a third-party estimate and can change before 17 November 2026.
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