D.R. Horton opened fiscal 2026 with results that underline both the durability and the limits of the U.S. homebuilding recovery. The nation’s largest homebuilder reported first-quarter revenue of $6.9 billion and consolidated pre-tax income of $798 million, translating into earnings of $2.03 per share. While the company described the quarter as a “solid start,” profitability declined from a year earlier, reflecting a housing market still constrained by affordability and interest-rate sensitivity.

Earnings Performance in a Cautious Market

Revenue and earnings both fell year over year as higher incentives weighed on margins. Pre-tax profit margin came in at 11.6%, down from last year, as the company leaned more aggressively on buyer incentives to maintain sales pace. Management emphasized that these incentives, running in the high-single-digit to low-double-digit range as a percentage of sales, are likely to remain elevated through fiscal 2026. Rising lot costs are compounding the pressure, making margin expansion difficult in the near term.

Even so, leadership reiterated full-year guidance, projecting fiscal 2026 revenue of approximately $33.5 billion to $35.0 billion and home closings of 86,000 to 88,000 units. The outlook signals confidence that demand, while muted, remains sufficient to support scale.

Demand, Pricing, and Affordability Dynamics

Closings totaled 17,818 homes in the quarter, generating $6.5 billion in home sales revenue. The average closing price of roughly $365,500 was flat sequentially and modestly lower year over year. Executives repeatedly framed affordability as the defining challenge for buyers, noting that mortgage rates and elevated home prices continue to cap demand.

D.R. Horton’s strategy leans heavily on positioning its product below broader market averages. Management highlighted that its average sales price is materially lower than the national average for new homes and well below the median price of existing homes. This relative affordability has helped stabilize order activity. Net sales orders rose 3% year over year to about 18,300 homes, while the cancellation rate held steady at 18%, an encouraging sign in a cautious consumer environment.

Inventory, Land, and Capital Discipline

The company’s land and inventory strategy continues to prioritize capital efficiency. D.R. Horton ended the quarter with roughly 30,400 homes in inventory, including about 20,000 unsold units, and controlled a lot position of nearly 590,500 lots. Importantly, only a quarter of those lots are owned outright, with the remainder controlled through options or third-party development agreements. This structure limits balance-sheet risk while preserving flexibility should demand weaken.

Shareholder returns remain a key pillar of the investment case. During the quarter, the company repurchased 4.4 million shares for $670 million, contributing to $4.4 billion returned to shareholders over the past 12 months. Management reiterated its long-term leverage target of around 20%, signaling confidence in cash flow durability.

Looking Ahead

The path forward for D.R. Horton hinges on how long affordability pressures persist. Elevated incentives may protect volumes but are likely to restrain margins into the next quarter. Investors will be watching whether easing inflation or lower mortgage rates can eventually relieve pressure and restore pricing power, or whether incentives become a more permanent feature of the post-pandemic housing market.