HD

Home Depot is still an elite operator. Gross margin held at 33.3%, the business threw off $16.3B of operating cash flow, ROIC of 25.7% and ROE of 110.5% remain best-in-class, and the franchise comfortably funded a $9.15B dividend (raised 1.3% to $2.33/quarter). This is a durable, cash-generative compounder, not a broken business.

But the earnings trajectory is unmistakably negative. Net income has now fallen three years running — from $17.1B in FY2023 to $14.2B in FY2026 — and diluted EPS slipped -4.6% to $14.23 even as revenue grew +3.2% to $165B. The MD&A shows the squeeze in detail: operating margin compressed from 14.2% (fiscal 2023) to 13.5% to 12.7%, SG&A deleveraged from 17.4% to 18.6% of sales, operating cash flow fell -17.6%, and inventory turns slowed from 4.7x to 4.4x on higher stock. Top-line growth is increasingly bought rather than organic — only ten new U.S. stores opened, while the ~$5.5B GMS deal and SRS build out pro/contractor distribution. Management also concedes tariffs raised fiscal 2025 costs and flags ongoing trade-policy uncertainty after the Supreme Court struck down the IEEPA tariffs; mitigation has worked so far but is not guaranteed to hold.