Home Depot Sales Up, Earnings Dip Amid Major Acquisitions

TL;DR

**HD is betting big on pro contractors with SRS and GMS, but watch the debt and integration risks as earnings slightly dip.**

AI Summary

The Home Depot, Inc. reported net sales of $41.352 billion for the three months ended November 2, 2025, an increase from $40.217 billion in the prior year period. Net earnings for the quarter were $3.601 billion, a slight decrease from $3.648 billion in the comparable period of 2024. For the nine months ended November 2, 2025, net sales rose to $126.485 billion from $119.810 billion, while net earnings decreased to $11.585 billion from $11.809 billion. Key business changes include a significant increase in goodwill to $22.267 billion from $19.475 billion and intangible assets to $10.416 billion from $8.983 billion, largely due to the acquisition of SRS in June 2024 and SRS's subsequent acquisition of GMS on September 4, 2025. Total assets increased to $106.274 billion from $96.119 billion. The company's short-term debt surged to $3.200 billion from $316 million, and current installments of long-term debt increased to $6.471 billion from $4.582 billion, indicating increased leverage. Cash provided by operating activities decreased to $12.978 billion from $15.139 billion, while cash used in investing activities was $7.765 billion, primarily due to $5.248 billion in payments for acquired businesses. The recently enacted One Big Beautiful Bill Act (OBBBA) is not expected to materially impact the fiscal 2025 effective tax rate but will reduce cash tax payments.

Why It Matters

Home Depot's strategic acquisitions of SRS and GMS, totaling over $5.2 billion in payments for acquired businesses in the nine months ended November 2, 2025, signal a significant push into the professional contractor market, intensifying competition with existing distributors. This expansion could drive long-term growth by diversifying revenue streams beyond the traditional DIY segment, but also introduces integration risks and increased debt. For investors, the slight dip in net earnings despite higher sales, coupled with increased short-term debt and reduced operating cash flow, warrants close attention to the profitability and cash generation of these new ventures. Employees and customers of SRS and GMS will experience changes under Home Depot's ownership, potentially impacting service offerings and operational structures.

Risk Assessment

Risk Level: medium — The risk level is medium due to the significant increase in short-term debt to $3.200 billion from $316 million and current installments of long-term debt to $6.471 billion from $4.582 billion, indicating higher leverage. Additionally, cash provided by operating activities decreased to $12.978 billion from $15.139 billion, while payments for acquired businesses totaled $5.248 billion, suggesting substantial capital deployment for acquisitions which carry integration risks.

Analyst Insight

Investors should monitor Home Depot's integration of SRS and GMS closely, focusing on how these acquisitions impact profitability and cash flow in future quarters. Evaluate the company's ability to manage its increased debt load and generate sufficient cash from operations to support its growth strategy and dividend payments.

Financial Highlights

debt To Equity

7.77

revenue

$126.485B

operating Margin

13.47%

total Assets

$106.274B

total Debt

$52.814B

net Income

$11.585B

eps

$11.68

gross Margin

33.52%

cash Position

$1.684B

revenue Growth

+5.56%

Revenue Breakdown

Key Numbers

• $41.352B — Net sales for Q3 2025 (Increased from $40.217 billion in Q3 2024)
• $3.601B — Net earnings for Q3 2025 (Slight decrease from $3.648 billion in Q3 2024)
• $126.485B — Net sales for nine months ended Nov 2, 2025 (Increased from $119.810 billion in the prior nine-month period)
• $11.585B — Net earnings for nine months ended Nov 2, 2025 (Decreased from $11.809 billion in the prior nine-month period)
• $22.267B — Goodwill as of Nov 2, 2025 (Increased from $19.475 billion as of Feb 2, 2025, due to acquisitions)
• $10.416B — Intangible assets as of Nov 2, 2025 (Increased from $8.983 billion as of Feb 2, 2025, due to acquisitions)
• $3.200B — Short-term debt as of Nov 2, 2025 (Significant increase from $316 million as of Feb 2, 2025)
• $6.471B — Current installments of long-term debt as of Nov 2, 2025 (Increased from $4.582 billion as of Feb 2, 2025)
• $12.978B — Net cash provided by operating activities for nine months ended Nov 2, 2025 (Decreased from $15.139 billion in the prior nine-month period)
• $5.248B — Payments for businesses acquired for nine months ended Nov 2, 2025 (Primary driver of cash used in investing activities)

Key Players & Entities

• HOME DEPOT, INC. (company) — registrant
• SRS Distribution Inc. (company) — acquired company
• GMS Inc. (company) — acquired by SRS
• New York Stock Exchange (regulator) — exchange where common stock is registered
• SEC (regulator) — Securities and Exchange Commission
• One Big Beautiful Bill Act (regulator) — new tax legislation
• President and Chief Executive Officer (person) — chief operating decision maker

FAQ

Risk Factors

• Increased Leverage [high — financial]: Short-term debt surged to $3.200 billion from $316 million, and current installments of long-term debt increased to $6.471 billion from $4.582 billion. This indicates a significant increase in the company's reliance on borrowed funds.
• Acquisition Integration [medium — operational]: The acquisition of SRS and its subsequent acquisition of GMS led to a substantial increase in goodwill ($22.267 billion from $19.475 billion) and intangible assets ($10.416 billion from $8.983 billion). Successful integration of these businesses is critical.
• Decreased Operating Cash Flow [medium — financial]: Cash provided by operating activities decreased to $12.978 billion from $15.139 billion for the nine months ended November 2, 2025. This reduction could impact the company's ability to fund operations and investments internally.
• Increased Capital Expenditures [medium — financial]: Cash used in investing activities was $7.765 billion, primarily due to $5.248 billion in payments for acquired businesses. While strategic, this significant outflow requires careful management.
• Tax Legislation Impact [low — regulatory]: The One Big Beautiful Bill Act (OBBBA) is not expected to materially impact the fiscal 2025 effective tax rate but will reduce cash tax payments. The long-term implications of such legislation require ongoing monitoring.

Industry Context

The home improvement retail sector remains competitive, with companies like Lowe's and various specialty retailers vying for market share. Trends include increased demand for professional contractor services, DIY project growth fueled by homeownership, and a continued shift towards online sales channels. Supply chain resilience and inventory management are critical for success.

Regulatory Implications

The enactment of the One Big Beautiful Bill Act (OBBBA) is noted, with an expected reduction in cash tax payments for fiscal 2025. While not materially impacting the effective tax rate, changes in tax legislation can influence future investment decisions and profitability.

What Investors Should Do

1. [object Object]
2. [object Object]
3. [object Object]
4. [object Object]

Key Dates

• 2025-11-02: End of Fiscal Q3 2025 — Reporting period for the latest financial results, showing increased sales but a slight decrease in net earnings compared to the prior year.
• 2025-09-04: GMS Acquisition by SRS — A significant event contributing to the increase in goodwill and intangible assets for Home Depot, following the SRS acquisition.
• 2025-06-01: SRS Acquisition by Home Depot — Major acquisition driving substantial increases in goodwill and intangible assets, impacting the balance sheet and future integration efforts.
• 2025-07-04: One Big Beautiful Bill Act (OBBBA) Enacted — Legislation that is expected to reduce cash tax payments, though not materially impact the effective tax rate for fiscal 2025.
• 2025-02-02: End of Fiscal Q4 2024 / Start of Fiscal Q1 2025 — Prior period balance sheet date for comparison, showing lower debt levels and goodwill prior to recent acquisitions.

Glossary

Goodwill

An intangible asset that arises when one company acquires another for a price greater than the fair market value of its assets and liabilities. (Increased significantly to $22.267 billion due to acquisitions, indicating substantial premium paid over fair value of acquired net assets.)

Intangible Assets, net

Non-physical assets that have value, such as patents, trademarks, and customer lists. Net of accumulated amortization. (Increased to $10.416 billion due to acquisitions, representing the value of acquired intellectual property and other non-physical assets.)

Operating lease right-of-use assets

Assets recognized under ASC 842 for the right to use a leased asset for the lease term. (Increased to $9.041 billion, reflecting the company's use of leased properties, likely including facilities for acquired businesses.)

Current installments of long-term debt

The portion of long-term debt that is due within the next twelve months. (Increased to $6.471 billion, indicating a higher near-term repayment obligation on the company's long-term borrowings.)

Cash provided by operating activities

The net amount of cash generated from the normal day-to-day business operations of a company. (Decreased to $12.978 billion for the nine-month period, suggesting a reduction in cash generation from core operations.)

Supplier Finance Program

A program where suppliers can elect to receive early payment from a financial institution at a discount, with Home Depot's payment terms remaining unchanged. (Outstanding payment obligations were $333 million at November 2, 2025, recorded within accounts payable.)

Year-Over-Year Comparison

Compared to the filing on February 2, 2025, Home Depot has seen a significant increase in total assets to $106.274 billion, largely driven by acquisitions that boosted goodwill and intangible assets. Total debt has also risen considerably, with short-term debt increasing from $316 million to $3.200 billion and current long-term debt installments growing. While net sales for the nine months increased by 5.56%, net earnings saw a slight decrease, and operating cash flow declined, indicating pressure on profitability and cash generation despite top-line growth.

Key Financial Figures

• $0.05 — ange on which registered Common Stock, $0.05 Par Value Per Share HD New York Stock E

Filing Documents

• hd-20251102.htm (10-Q) — 994KB
• hd_exhibit311-11022025.htm (EX-31.1) — 9KB
• hd_exhibit312-11022025.htm (EX-31.2) — 9KB
• hd_exhibit321-11022025.htm (EX-32.1) — 4KB
• hd_exhibit322-11022025.htm (EX-32.2) — 4KB
• hd-20251102_g1.jpg (GRAPHIC) — 1053KB
• 0001628280-25-053868.txt ( ) — 8302KB
• hd-20251102.xsd (EX-101.SCH) — 36KB
• hd-20251102_cal.xml (EX-101.CAL) — 82KB
• hd-20251102_def.xml (EX-101.DEF) — 167KB
• hd-20251102_lab.xml (EX-101.LAB) — 531KB
• hd-20251102_pre.xml (EX-101.PRE) — 370KB
• hd-20251102_htm.xml (XML) — 842KB

Forward-Looking Statements

Forward-Looking Statements iii

– FINANCIAL INFORMATION

PART I – FINANCIAL INFORMATION 1

Financial Statements

Item 1. Financial Statements. 1 Consolidated Balance Sheets 1 Consolidated Statements of Earnings 2 Consolidated Statements of Comprehensive Income 3 Consolidated Statements of Stockholders' Equity 4 Consolidated Statements of Cash Flows 5

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements 6 Note 1. Summary of Significant Accounting Policies 6 Note 2. Segment Reporting and Net Sales 7 Note 3. Property and Leases 10 Note 4. Goodwill and Intangible Assets 10 Note 5. Debt and Derivative Instruments 12 Note 6. Stockholders' Equity 13 Note 7. Fair Value Measurements 14 Note 8. Weighted Average Common Shares 15 Note 9. Contingencies 15 Note 10. Acquisitions 15

Management's Discussion and Analysis of Financial Condition and Results of Operations

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. 17

Quantitative and Qualitative Disclosures About Market Risk

Item 3. Quantitative and Qualitative Disclosures About Market Risk. 25

Controls and Procedures

Item 4. Controls and Procedures. 26

– OTHER INFORMATION

PART II – OTHER INFORMATION 26 Item 1. Legal Proceedings. 26

Risk Factors

Item 1A. Risk Factors. 26

Unregistered Sales of Equity Securities and Use of Proceeds

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds. 26 Item 5. Other Information. 27

Exhibits

Item 6. Exhibits. 27

SIGNATURES

SIGNATURES 28 Fiscal Q3 2025 Form 10-Q i Table of Contents COMMONLY USED OR DEFINED TERMS Term Definition Comparable sales As defined in the Results of Operations section of MD&A Exchange Act Securities Exchange Act of 1934, as amended fiscal 2023 Fiscal year ended January 28, 2024 (includes 52 weeks) fiscal 2024 Fiscal year ended February 2, 2025 (includes 53 weeks) fiscal 2025 Fiscal year ending February 1, 2026 (includes 52 weeks) GAAP U.S. generally accepted accounting principles GMS GMS Inc. MD&A Management's Discussion and Analysis of Financial Condition and Results of Operations NOPAT Net operating profit after tax Restoration Plans Home Depot FutureBuilder Restoration Plan and HD Supply Restoration Plan ROIC Return on invested capital SEC Securities and Exchange Commission Securities Act Securities Act of 1933, as amended SG&A Selling, general, and administrative expenses SRS SRS Distribution Inc. 2024 Form 10-K Annual Report on Form 10-K for fiscal 2024 as filed with the SEC on March 21, 2025 Fiscal Q3 2025 Form 10-Q ii Table of Contents

FORWARD-LOOKING STATEMENTS

FORWARD-LOOKING STATEMENTS Certain statements contained herein, as well as in other filings we make with the SEC and other written and oral information we release, including statements regarding our performance, estimates, expectations, beliefs, intentions, projections, strategies for the future, or other events or developments in the future constitute "forward-looking statements" under the federal securities laws, including as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on currently available information and our current assumptions, expectations and projections about future events, and use words such as "may," "will," "could," "should," "would," "anticipate," "intend," "estimate," "project," "plan," "believe," "expect," "target," "prospects," "potential," "commit" and "forecast," or words of similar import or meaning or refer to future time periods. Forward-looking statements may relate to, among other things, the demand for our products and services, including as a result of macroeconomic conditions and changing customer preferences and expectations; net sales growth; comparable sales; the effects of competition; our brand and reputation; implementation of interconnected retail, store, supply chain, technology, innovation and other strategic initiatives, including with respect to real estate; inventory and in-stock positions; the state of the economy; the state of the housing and home improvement markets; the state of the credit markets, including mortgages, home equity loans, and consumer and trade credit; the impact of tariffs, trade policy changes or restrictions, or international trade disputes and efforts and ability to continue to diversify our supply chain; issues related to the payment methods we accept; demand for credit offerings, including trade credit; management of relationships with our associates, jobseekers, suppliers and service providers; cost and availability of labor; costs of fuel and

– FINANCIAL INFORMATION

PART I – FINANCIAL INFORMATION

Financial Statements

Item 1. Financial Statements. THE HOME DEPOT, INC. CONSOLIDATED BALANCE SHEETS (Unaudited) in millions, except per share data November 2, 2025 February 2, 2025 Assets Current assets: Cash and cash equivalents $ 1,684 $ 1,659 Receivables, net 6,765 4,903 Merchandise inventories 26,203 23,451 Other current assets 1,463 1,670 Total current assets 36,115 31,683 Net property and equipment 27,683 26,702 Operating lease right-of-use assets 9,041 8,592 Goodwill 22,267 19,475 Intangible assets, net 10,416 8,983 Other assets 752 684 Total assets $ 106,274 $ 96,119 Liabilities and Stockholders' Equity Current liabilities: Short-term debt $ 3,200 $ 316 Accounts payable 13,237 11,938 Accrued salaries and related expenses 2,245 2,315 Sales taxes payable 668 628 Deferred revenue 2,543 2,610 Income taxes payable 46 832 Current installments of long-term debt 6,471 4,582 Current operating lease liabilities 1,417 1,274 Other accrued expenses 4,540 4,166 Total current liabilities 34,367 28,661 Long-term debt, excluding current installments 46,343 48,485 Long-term operating lease liabilities 7,986 7,633 Deferred income taxes 2,883 1,962 Other long-term liabilities 2,579 2,738 Total liabilities 94,158 89,479 Contingencies ( Note 9 ) Common stock, par value $ 0.05 ; authorized: 10,000 shares; issued: 1,801 shares at November 2, 2025 and 1,800 shares at February 2, 2025; outstanding: 995 shares at November 2, 2025 and 994 shares at February 2, 2025 90 90 Paid-in capital 14,562 14,117 Retained earnings 94,255 89,533 Accumulated other comprehensive loss ( 820 ) ( 1,129 ) Treasury stock, at cost, 806 shares at November 2, 2025 and February 2, 2025 ( 95,971 ) ( 95,971 ) Total stockholders' equity 12,116 6,640 Total liabilities and stockholders' equity $ 106,274 $ 96,119 ————— See accompanying notes to consolidated financial statements. Fiscal Q3 2025 Form 10-Q 1 Table of Contents THE HOME DEPOT, INC. CONSOLIDATED STATEMENTS OF EARNI

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The accompanying consolidated financial statements of The Home Depot, Inc., together with its subsidiaries (the "Company," "The Home Depot," "Home Depot," "we," "our" or "us"), have been prepared in accordance with the instructions to Form 10-Q and do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Results of operations for interim periods are not necessarily indicative of results for the entire year. As a result, these consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our 2024 Form 10-K. During the nine months ended November 2, 2025, there were no significant changes to our significant accounting policies as disclosed in the 2024 Form 10-K. Receivables, net The following table presents components of receivables, net: in millions November 2, 2025 February 2, 2025 Card receivables $ 1,258 $ 1,019 Rebate receivables 1,756 1,404 Customer receivables 3,182 1,896 Other receivables 569 584 Receivables, net $ 6,765 $ 4,903 Card receivables consist of payments due from financial institutions for the settlement of credit card and debit card transactions. Rebate receivables represent amounts due from vendors for volume and co-op advertising rebates. Customer receivables relate to credit extended directly to certain customers in the ordinary course of business. The valuation allowance related to our receivables was not material to our consolidated financial statements at November 2, 2025 or February 2, 2025. Supplier Finance Program We have a supplier finance program whereby participating suppliers may, at their sole discretion, elect to receive payme