Home Depot Q2 2025: Acquisitions Drive Sales, But Profits Squeezed

Home Depot, the titan of home improvement, recently filed its financial results for the second quarter of fiscal 2025. The headline numbers show a healthy increase in sales, but a closer look at the company's 10-Q report reveals a story of strategic acquisitions driving growth while core profitability faces pressure. Let's unpack the key details.

Acquisitions Bolster Top-Line Revenue

For the quarter ending August 3, 2025, Home Depot reported total net sales of $45.3 billion, a 4.9% increase from the same period last year. While positive, this growth isn't coming from a surge in traffic at its traditional retail stores.

The performance of its core "Primary Segment" was nearly flat, with sales up just 0.6% to $42.2 billion. The real driver of growth was the "Other" business category, which primarily consists of recently acquired companies like SRS Distribution, a major distributor for professional contractors. This segment's revenue more than doubled, jumping from $1.3 billion to $3.1 billion. This indicates a clear strategy by Home Depot to expand its footprint in the professional market through acquisitions.

The flow from revenue to profit for the quarter is visualized in the chart below, illustrating how different costs and expenses shape the final net earnings.

Profits Hold Steady as Costs Rise

Despite the higher sales, Home Depot's bottom line remained largely unchanged. Net earnings came in at $4.55 billion, nearly identical to the $4.56 billion earned in the prior-year quarter. This resulted in a slight dip in diluted earnings per share (EPS) to $4.58, down from $4.60.

So, where did the extra revenue go? The main culprit was a significant rise in operating expenses. Selling, General, and Administrative (SG&A) costs climbed 8.7% to $7.8 billion. The company attributes this jump to the costs of integrating its new acquisitions and making other strategic investments. This spending squeezed the operating margin, which contracted from 15.1% to 14.5% of sales, effectively consuming the profit from the increased revenue.

A Modest Rebound in Core Stores

One of the most watched metrics for any retailer is comparable sales, which measures performance at stores that have been open for at least a year, filtering out the impact of new store openings or acquisitions.

Here, there's a note of optimism. Home Depot’s comparable sales increased by 1.0% for the quarter. While modest, this is a welcome reversal from the 3.3% decline seen in the same quarter last year. The growth was entirely driven by a 1.4% increase in the average ticket, meaning customers spent more on each visit. This offset a slight 0.4% dip in the number of comparable transactions.

Looking Ahead

Home Depot's second-quarter results paint a picture of a company executing a dual strategy: acquiring new avenues for growth in the professional market while working to stabilize its massive retail base. The acquisitions are clearly fueling top-line growth, but the associated integration costs are, for now, preventing that growth from translating into higher profits. The return to positive comparable sales is an encouraging sign for the core business, but the challenge ahead will be to manage rising expenses and prove that its expansion strategy can deliver for the bottom line.