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    DHI
    Earnings call· Dec 2025(Q1 FY26)

    HORTON D R INC /DE/ DHI

    Jan 20, 2026 Source

    Executive summary

    D.R. Horton Q1 FY26 — Strong Start with Increased Sales Orders and Reaffirmed FY26 Guidance

    D.R. Horton delivered a solid start to fiscal 2026, surpassing revenue and closings guidance while navigating affordability challenges with strategic incentives. The company reaffirmed its full-year guidance for revenues, homes closed, operating cash flow, and capital returns, signaling confidence in its market position and operational flexibility. Management emphasized its disciplined approach to capital allocation and focus on affordable housing, particularly for first-time buyers, despite ongoing market volatility.

    Highlights

    5

    • Net sales orders increased 3% year-over-year to 18,300 homes, demonstrating effective use of incentives.

    • Exceeded the high end of revenue and closings guidance, with consolidated revenues of $6.9 billion.

    • Generated $3.6 billion of cash from operations over the past 12 months, and returned $4.4 billion to shareholders.

    • Home sales gross margin of 20.4% (20.0% ex-warranty recovery) was within the expected range.

    • 64% of mortgage company's closings were to first-time homebuyers, highlighting focus on affordability.

    Concerns

    5

    • Diluted EPS decreased to $2.03 from $2.61 in the prior year quarter.

    • Homebuilding SG&A as a percentage of revenues increased to 9.7% from 8.9% in the prior year quarter due to lower closings volume.

    • Home sales gross margin is expected to be lower in Q2 FY26, guided to 19%-19.5%, reflecting increased incentives.

    • Affordability constraints and cautious consumer sentiment continue to impact new home demand.

    • Pockets of elevated inventory still exist in certain submarkets, though overall supply is rightsizing.

    Guidance & targets

    12
    CategoryTargetConfidence
    Consolidated revenues
    $7.3 billion to $7.8 billion
    high materiality
    High
    Homes closed (homebuilding operations)
    19,700 to 20,200 homes
    high materiality
    High
    Home sales gross margin
    19% to 19.5%
    high materiality
    High
    Consolidated pretax profit margin
    10.6% to 11.1%
    medium materiality
    High
    Consolidated revenues
    approximately $33.5 billion to $35 billion
    high materiality
    High
    Homes closed (homebuilding operations)
    86,000 to 88,000 homes
    high materiality
    High
    Income tax rate
    approximately 24.5%
    medium materiality
    High
    Operating cash flow
    at least $3 billion
    high materiality
    High
    Common stock repurchases
    approximately $2.5 billion
    high materiality
    High
    Dividend payments
    around $500 million
    medium materiality
    High
    Homebuilding senior notes maturing
    $600 million
    low materiality
    High
    Consolidated leverage
    around 20%
    medium materiality
    High

    Segment performance

    4
    SegmentRevenueYoYQoQMargin
    Homebuilding
    Home sales revenues decreased year-over-year due to lower closings volume, but gross margin remained strong. SG&A ratio increased due to lower volume. The company increased starts sequentially and is managing inventory efficiently with improved cycle times.
    Homes closed: 17,818Average closing price: $365,500Home sales gross margin: 20.4%Home sales gross margin (ex-warranty recovery): 20.0%SG&A as % of revenues: 9.7%Starts: 18,500 homesHomes in inventory: 30,400Unsold homes in inventory: 20,000Completed unsold homes: 7,300Median cycle time (start to close): decreased 2 weeks YoYLot position: 590,500 lotsOwned lots: 25%Controlled lots: 75%Homes closed on 3rd party/Forestar lots: 67%
    		$6.5B-8.5%——
    Rental Operations
    Generated revenue from the sale of single-family rental homes. The company is focused on improving capital efficiency and returns, shifting towards purpose-built communities and forward sales.
    Single-family rental homes sold: 397Rental property inventory: $2.9BMultifamily rental properties inventory: $2.5BSingle-family rental properties inventory: $356M
    		$110M———
    Financial Services
    Contributed solid pretax income with a strong profit margin. The segment plays a key role in facilitating homeownership for first-time buyers.
    Pretax profit margin: 31.4%Closings to first-time homebuyers: 64%ARM products as % of homes financed: low single digitTemporary buydowns as % of homes financed: low double-digit
    		$185M——$58M
    Forestar
    Reported revenues and pretax income from lot sales. Forestar continues to provide essential finished lots to the homebuilding industry, leveraging its strong balance sheet and national platform.
    Lots sold: 1,944Owned and controlled lot position: 101,000 lotsOwned lots under contract with D.R. Horton: 62%Finished lots purchased from Forestar by D.R. Horton: $180M
    		$273M——$21M

    Operational metrics

    33
    Consolidated pretax income
    $798M
    Q1 FY26

    Reported consolidated pretax income.

    Consolidated pretax profit margin
    11.6%
    Q1 FY26

    Reported consolidated pretax profit margin.

    Diluted EPS
    $2.03down from $2.61 YoY
    Q1 FY26

    Reported diluted earnings per share.

    Net income
    $595M
    Q1 FY26

    Reported net income.

    Home sales gross margin
    20.4%up 40 bps sequentially
    Q1 FY26

    Reported home sales gross margin, including a warranty recovery benefit.

    Home sales gross margin (ex-warranty recovery)
    20.0%
    Q1 FY26

    Home sales gross margin excluding the 40 basis point benefit from warranty recovery.

    Homebuilding SG&A expenses
    -1%YoY
    Q1 FY26

    Year-over-year change in homebuilding SG&A expenses.

    Homebuilding SG&A as percentage of revenues
    9.7%up from 8.9% YoY
    Q1 FY26

    Reported homebuilding SG&A as a percentage of revenues.

    Homebuilding pretax return on inventory
    18.6%
    TTM ended Dec 31

    Trailing twelve months homebuilding pretax return on inventory.

    Consolidated return on equity
    13.7%
    TTM ended Dec 31

    Trailing twelve months consolidated return on equity.

    Consolidated return on assets
    9.4%
    TTM ended Dec 31

    Trailing twelve months consolidated return on assets.

    Capital returned to shareholders
    $4.4B
    TTM

    Total capital returned to shareholders over the past 12 months.

    Share repurchases
    4.4M shares
    Q1 FY26

    Shares repurchased during the quarter.

    Outstanding share count
    -9%YoY
    Q1 FY26

    Year-over-year decrease in outstanding share count.

    Dividends paid
    $132M
    Q1 FY26

    Cash dividends paid during the quarter.

    Stockholders' equity
    $24Bdown 4% YoY
    Dec 31

    Stockholders' equity at quarter end.

    Book value per share
    $82.60up 5% YoY
    Dec 31

    Book value per share at quarter end.

    Consolidated liquidity
    $6.6B
    Dec 31

    Consolidated liquidity at quarter end.

    Debt
    $5.5B
    Dec 31

    Total debt at quarter end.

    Consolidated leverage
    18.8%
    Dec 31

    Consolidated leverage ratio at quarter end.

    Net sales orders
    18,300 homesup 3% YoY
    Q1 FY26

    Total net sales orders for the quarter.

    Order value
    $6.7Bunchanged YoY
    Q1 FY26

    Total value of net sales orders for the quarter.

    Average closing price
    $365,500flat sequentially, down 3% YoY
    Q1 FY26

    Average closing price of homes sold.

    Average sales price of net sales orders
    $364,000flat sequentially, down 2% YoY
    Q1 FY26

    Average sales price of net sales orders.

    Cancellation rate
    18%consistent YoY, down from 20% sequentially
    Q1 FY26

    Cancellation rate for the quarter.

    Active selling communities
    up 12%YoY
    Q1 FY26

    Year-over-year and sequential change in average active selling communities.

    Home starts
    18,500 homesup 27% sequentially
    Q1 FY26

    Number of homes started in the quarter.

    Completed unsold homes
    7,300 homesdown 2,000 from September
    Q1 FY26

    Number of completed unsold homes at quarter end.

    Homebuilding investments in lots, land and development
    $2B
    Q1 FY26

    Total investments in land and development.

    Stick and brick costs
    down roughly 1%sequentially
    Q1 FY26

    Sequential change in stick and brick costs on a per square foot basis.

    Lot costs
    increased 2%sequentially
    Q1 FY26

    Sequential change in lot costs on a per square foot basis.

    Sales incentives
    high single-digit percentage
    Q1 FY26

    Sales incentives as a percentage of sales, with an increase towards the end of the quarter.

    Gift funds utilization
    just shy of 20%
    Q1 FY26

    Percentage of buyers utilizing gift funds for purchase.

    Industry KPIs

    1
    MetricValueDetails
    Segment revenue operating income mix11.6%%

    Risks & headwinds

    5
    Affordability constraints and cautious consumer sentimentOngoing

    Impacted new home demand, requiring increased incentives.

    Mitigation: Tailoring product offerings, sales incentives, and inventory levels; focusing on affordable price points and first-time homebuyers.

    Increased SG&A as a percentage of revenuesQ1 FY26

    9.7% in Q1 FY26, up from 8.9% YoY.

    Mitigation: Primarily due to lower closings volume; expect improvement as closings volume grows for the full year.

    Lower gross margin in Q2 FY26Q2 FY26

    Expected 19%-19.5% in Q2 FY26, down from 20.0% (ex-warranty) in Q1 FY26.

    Mitigation: Reflects increased incentives used at the end of Q1; dependent on demand, mortgage rates, and market conditions.

    Pockets of elevated inventoryCurrent

    Exists in certain submarkets and subdivisions.

    Mitigation: Monitoring market by market and submarket by submarket; inventory is rightsizing across the footprint.

    Volatility and uncertainty in the economyOngoing

    General macro environment.

    Mitigation: Adjusting to market conditions in a disciplined manner to enhance long-term value.

    What to watch in Q2 FY26

    5

    Home sales gross margin

    Q2 FY26
    Current20.0% (ex-warranty recovery)
    Target19.0%-19.5%

    Why it matters

    This will indicate the impact of increased incentives and market conditions on profitability.

    We expect our home sales gross margin for the second quarter to be in the range of 19% to 19.5%

    Q&A highlights

    5

    Why was SG&A higher than expected, given closings beat guidance? Was there anything unusual or related to incentives?

    SG&A was in line with plan and overall spend was down slightly year-over-year. The higher ratio (9.7% vs 8.9% YoY) was due to lower closings volume in Q1 compared to the prior year, leading to less leverage. No unusual items or incentive-related costs were in SG&A. The company expects to grow closings for the full year, which should improve the ratio.

    “nothing unusual in SG&A this quarter. Overall, relatively in line with our plan, and we hit our operating margin guidance for the quarter. If you look at the overall spend on SG&A, it was down slightly year-over-year in terms of absolute dollars.”

    asked by Stephen Kim · answered by Bill Wheat

    2 min read5 chapters

    Detailed Narrative

    01

    Market Conditions and Affordability Focus

    New home demand continues to be influenced by affordability constraints and cautious consumer sentiment. D.R. Horton is actively responding by tailoring product offerings, sales incentives, and inventory levels to maximize returns. The company's focus on affordable price points is evident, with 64% of mortgage company closings in Q1 FY26 attributed to first-time homebuyers. Management noted that lower mortgage rates, particularly around 6%, tend to spur activity in sales offices.

    02

    Operational Efficiency and Inventory Management

    The company started 18,500 homes in Q1 FY26, a 27% sequential increase, and expects higher starts in Q2. Homes in inventory stood at 30,400, with 20,000 unsold and 7,300 completed unsold homes (down 2,000 sequentially). Improved cycle times, decreasing by 2 weeks year-over-year, enable more efficient inventory turns and responsiveness to buyer demand, reducing the need for large completed spec inventories.

    03

    Land Strategy and Capital Efficiency

    D.R. Horton's lot position comprises 590,500 lots, with 75% controlled through purchase contracts, emphasizing capital efficiency. Investments in lots, land, and development totaled $2 billion in Q1, with $1.3 billion for finished lots. The strategy focuses on relationships with land developers, with 67% of homes closed on third-party developed lots, enhancing flexibility and returns.

    04

    Rental and Financial Services Performance

    Rental operations generated $110 million in revenue from the sale of 397 single-family rental homes. The rental property inventory was $2.9 billion, primarily multifamily. Financial services contributed $58 million in pretax income with a 31.4% pretax profit margin. The company's SFR focus remains on purpose-built communities and forward sales, rather than selling to institutional buyers in for-sale communities.

    05

    Capital Allocation and Shareholder Returns

    The company maintains a disciplined and balanced capital allocation strategy, generating substantial operating cash flows. Q1 FY26 saw $670 million in share repurchases (4.4 million shares) and $132 million in dividends ($0.45 per share). Consolidated liquidity was $6.6 billion, with leverage at 18.8%, below the long-term target of around 20%. Management reiterated its full-year targets for share repurchases and dividends.

    AI-generated summary of the company’s earnings call. Not investment advice.