D.R. Horton FY2026: net income fell 19% to $2.89B on thinner margins; buybacks held the EPS drop to 13%

D.R. Horton, the largest US homebuilder by homes closed, earned less in fiscal 2026 (the year ended September 30, 2026) while selling almost as many houses as the year before. It closed 84,202 homes, 0.8% fewer than in fiscal 2025, but the average closing price fell 1.8% to about $363,600, and incentives such as mortgage-rate buydowns cut how much it kept from each sale. Consolidated revenue fell 3.5% to $33.04 billion, pre-tax income fell 17.6% to $3.91 billion, and net income attributable to D.R. Horton fell 19.4% to $2.89 billion. Diluted earnings per share (EPS, profit divided by the number of shares) fell a smaller 12.6%, to $10.11, because the company bought back enough stock to cut its diluted share count by 7.8%.

The fourth quarter (July–September) was weaker than the year as a whole. Net sales orders fell 7%, the cancellation rate rose to 23% from 20%, and management said housing conditions "became more challenging" as "rising mortgage rates, affordability constraints and cautious consumer sentiment continued to pressure new home demand." Its first guidance for fiscal 2027 calls for revenue of $30.0–32.0 billion, 3% to 9% below fiscal 2026.

This analysis uses the earnings release (8-K Exhibit 99.1) filed on October 29, 2026. The full 10-K for fiscal 2026 has not been filed yet, so the company's own gross-margin breakdown, the incentive commentary and regional profit detail are not available here.

Fiscal 2026 in figures

*D.R. Horton's income statement has no "operating income" line. The company reports pre-tax profit margin (pre-tax income as a share of revenue), so the site's operating-margin figure for this report is the 11.8% pre-tax margin. †Our calculation: home sales revenue minus the homebuilding segment's cost of home sales, before inventory impairments and land option charges. On this basis the first nine months come to 20.4%, matching the figure in the company's Q3 10-Q, but the 10-K will give the official number.

The fourth quarter alone

Q4 included a $91.4 million inventory impairment in the rental segment (more on this below). Without it, Q4 pre-tax income would have been about $1,106 million, still 8% below a year earlier.

Where the profit went

Revenue fell only 3.5%, but pre-tax income fell 17.6%. The cost of building and selling homes did not fall as fast as revenue did:

• Homebuilding earned $3,423.6 million before tax, down 17.2% from $4,134.9 million, on revenue down 2.7% to $30.66 billion. Its pre-tax margin fell to 11.2%. Two things drove this. Home sales gross margin (the share of home sale revenue left after land, construction and incentive costs) fell about 1.3 points. Homebuilding SG&A (selling, general and administrative costs) also rose to 8.9% of homebuilding revenue from 8.3%, as it grew 4% to $2,731.3 million while revenue shrank.
• Rental earned only $18.2 million before tax, down from $170.0 million. Rental property sales fell 24.7% to $1.23 billion, and the year includes $94.4 million of inventory and land option charges in the segment. $91.4 million of that is the Q4 impairment on nine multi-family rental projects. (An impairment is a write-down that reduces a property's carrying value to what it is now expected to sell for.)
• Forestar (the majority-owned lot developer) earned $192.1 million before tax, down 12% from $219.3 million, on 13,545 lots sold.
• Financial services (mainly mortgages) earned $258.1 million before tax, down 7% from $278.7 million, at a 31.6% margin.

Below the pre-tax line, the effective tax rate rose to 24.8% from 23.6%, and income attributable to noncontrolling interests (the part of Forestar's profit owned by outside shareholders) rose to $48.0 million from $35.7 million. That is why net income fell more (-19.4%) than pre-tax income (-17.6%).

Demand: the fourth quarter turned down

For the full year, net sales orders (new contracts minus cancellations) rose 1.9% to 84,995 homes, and order value was flat at $30.9 billion. The fourth quarter broke that pattern. Orders fell 7.3% to 18,619 homes, and the average order price fell to about $356,600 from $364,900. The drop was concentrated in a few regions:

• South Central (which includes Texas): orders down 15% (4,548 vs. 5,352)
• Southwest: down 14% (2,052 vs. 2,384)
• Northwest: down 18% (1,013 vs. 1,235)
• Southeast and East: down 1–2%
• North: roughly flat (2,439 vs. 2,422)

The Q4 cancellation rate (cancelled orders divided by gross orders) was 23%, up from 20% a year earlier and from 20% in fiscal Q3. Management said it is "adjusting incentives, pricing and starts on a community-by-community basis" and expects incentives "to remain elevated in fiscal 2027."

Inventory moved in the right direction overall. Homes in inventory were 28,200 at year end, down from 29,600 a year earlier and 38,000 at June 30. But completed homes still waiting for a buyer rose to 8,800, from 7,600 at June 30, including 600 that had been finished for more than six months. Those are the homes most likely to need bigger incentives to sell. Backlog (homes under contract but not yet closed) was 11,714 homes worth $4.46 billion, up 8.6% in units from a year ago.

The company kept shifting land risk to others. Owned lots fell 11% to 130,500, and 77% of its 570,600 total lots are controlled through purchase contracts rather than owned (75% a year earlier). Controlling lots through options instead of owning them means less cash is tied up in land and less exposure if land values fall. 68% of homes closed were on lots developed by Forestar or third parties, up from 65%.

Takeaway: D.R. Horton's fiscal 2026 profit fell about five times as fast as its revenue, because incentives and higher overhead per home took about 1.3 points off home margins while volumes held flat. EPS hid much of this: without the 7.8% smaller share count, EPS would have fallen about 19%, not 13%. The fourth quarter (orders -7%, cancellations 23%) and the FY2027 revenue guide of $30–32 billion show the squeeze has not ended.

What the headline numbers hide

• Buybacks did a large share of the per-share work. The company repurchased 24.0 million shares for $3.6 billion during the year ($3,523.8 million in cash, with $34.6 million not yet settled at year end) and paid $513.3 million in dividends. Shares outstanding fell 8% to 271.4 million. Net income fell 19.4%, but EPS fell 12.6%, so about 7 percentage points of the EPS figure came from the smaller share count, not from the business.
• Cash conversion was good, but returns exceeded cash generated. Cash from operations was $3.51 billion, 1.19 times net income, helped by holding inventory about flat ($25.07 billion vs. $25.29 billion). However, the $4.04 billion returned to shareholders was more than the cash generated. Cash fell to $2.06 billion from $2.99 billion, notes payable rose slightly to $6.05 billion, and debt to total capital rose to 20.8% from about 19.8%. The company repaid $600 million of senior notes in October 2026 and reports $7.2 billion of total liquidity, so this is not a strain, but the year's returns were partly funded from the cash pile.
• One-offs cut both ways, and are small next to the margin decline. The $91.4 million rental impairment is a real hit to this year (about $0.24 per share after tax at the year's 24.8% rate). Total inventory and land option charges were $199.6 million versus $158.1 million in fiscal 2025, so the increase was about $41.5 million. In Q4, the "eliminations and other" line (mostly intercompany profit on lots Forestar sells to the homebuilder) was a $7.9 million loss compared with a $65.3 million loss a year earlier. That roughly $57 million swing helped Q4 pre-tax income, and the release does not explain it. Even after adding back the impairment, full-year pre-tax income fell about 16%.
• The tax rate worked against them. A 1.2-point higher effective tax rate (24.8% vs. 23.6%) cost roughly $47 million of net income.
• Guidance: the year landed at the top of the cut range. The July guidance (already cut twice) called for revenue of $32.5–33.0 billion and 83,800–84,300 closings. The company delivered $33.04 billion and 84,202 closings. Operating cash flow of $3.5 billion beat the "at least $3.0 billion" target. Buybacks of $3.6 billion were well above the ~$2.5 billion plan.

On balance fiscal 2026 is flattered at the per-share level: EPS fell 12.6%, but the business earned 17.6% less before tax and 19.4% less after tax, and a 7.8% lower share count closed most of that gap. The rental impairment pulls the other way, but it is worth about 2% of EPS, compared with about 8% from buybacks.

Did last time's read hold up?

Our fiscal Q3 2026 report concluded that the company was "keeping volume up by giving away margin." It listed three things to watch for Q4, and two of them went the wrong way:

• Cancellation rate back below 20%? No. It rose to 23% in Q4 (20% a year earlier).
• Gross margin holding near 20.5%? No. On the same basis, Q4 home sales gross margin was about 19.5%, down from 20.7% in Q3 and 20.0% a year earlier.
• Rental sales recovering? Partly. Rental revenue jumped to $647.1 million in Q4 from $266.1 million in Q3, mainly from selling 2,182 multi-family units. But it was still below the year-ago $805.4 million, and with the $91.4 million impairment the segment posted a $25.3 million pre-tax loss.

The Q4 figures the July guidance implied mostly held. Closings of 22,915 were inside the implied 22,500–23,000. Revenue of $9.37 billion was slightly above the implied $8.8–9.3 billion. Buybacks were the big surprise: $1.4 billion in Q4, against roughly $0.3 billion left under the old $2.5 billion target. Remaining repurchase authorization is now $4.7 billion, up from $1.1 billion at June 30.

Outlook: fiscal 2027

Management's initial fiscal 2027 guidance, "based on current market conditions":

The board also raised the quarterly dividend 11% to $0.50 per share. Q1 fiscal 2027 guidance was to be given on the conference call and is not in the release.

Our read: the guidance implies another down year. The revenue range is 3% to 9% below fiscal 2026, and closings fall by 0% to 6%. At the midpoints, revenue per home closed falls about 3%, which fits with management's comment that incentives will stay elevated. A higher tax rate (~25.5%) is a further small drag on net income. Planned buybacks plus dividends of ~$3.5 billion equal the expected operating cash flow, so the share count should keep shrinking and EPS should again fall less than net income. The supports are a backlog 8.6% larger than a year ago and a lot position that is mostly optioned. The risks are the Q4 order decline, 8,800 finished but unsold homes, and $2.6 billion of rental property inventory after this year's write-down.

Things to watch in the Q1 fiscal 2027 results, scheduled for January 19, 2027:

• whether the cancellation rate comes back toward 19–20% or stays at 23%
• whether home sales gross margin holds near 19.5% or keeps falling
• whether more rental impairments follow the nine multi-family projects written down in Q4

Source: D.R. Horton earnings release for the fourth quarter and fiscal 2026 (Form 8-K Exhibit 99.1, filed October 29, 2026). Prior-quarter figures and the Q3 watch list are from our fiscal Q3 2026 report, based on the company's Form 10-Q for the quarter ended June 30, 2026.