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Home Depot’s (HD) Q2 earnings report marked a second consecutive quarter of missing EPS expectations, ending a streak of over five years of consistent upside surprises, alongside a slight sales miss. CFO Richard McPhail attributed the shortfall to persistent macroeconomic uncertainty and elevated interest rates, which continue to suppress demand for larger, discretionary home improvement projects, keeping them on hold as consumers remain cautious.

• Despite the modest downside in Q2, HD reaffirmed its FY26 guidance, projecting an EPS decline of approximately 2%, revenue growth of about 2.8%, and comparable sales growth of roughly 1%. This reaffirmation has helped mitigate investor disappointment over the sluggish Q2 performance, particularly as market sentiment is buoyed by the prospect of a Federal Reserve interest rate cut in September 2025, which could alleviate pressure on big-ticket spending and stimulate demand in the home improvement sector.
• Comparable sales showed a positive shift, returning to growth at +1.0% in Q2, a notable improvement from the prior quarter’s -0.3% decline. This uptick was driven by resilient demand for smaller home improvement projects, with the average ticket rising 1.4%, reflecting consumer willingness to spend on modest upgrades despite economic headwinds. However, this was partially offset by a 0.4% decline in comparable customer transactions, indicating that while spending per visit increased, overall foot traffic remained slightly subdued.
• The Pro business, catering to professional contractors, has been a key pillar of strength for HD, offsetting softer performance in the DIY segment. However, the company’s Q2 earnings release notably emphasized strength in smaller projects over Pro business momentum, suggesting a potential slowdown in this segment’s growth compared to prior quarters. This shift in focus may indicate that while the Pro ecosystem remains robust, it could be facing similar macroeconomic pressures impacting larger project demand.

HD's Q2 results reflect ongoing trends: muted demand for big-ticket projects persists due to high interest rates and economic uncertainty, but smaller projects continue to drive resilient performance. The company’s confidence in maintaining its FY26 outlook, bolstered by steady demand for smaller-scale improvements and the potential for lower interest rates, supports a cautiously optimistic view for investors moving forward.