D.R. Horton, Inc.

What they do

D.R. Horton constructs and sells homes for entry-level, move-up, active adult and luxury buyers, typically 1,000 to 4,000 square feet and priced from about $250,000 to over $1,000,000. It closed 84,863 homes in fiscal 2025 at an average price of $370,400. It also runs rental operations (single-family and multi-family), owns 62% of lot developer Forestar Group, and provides mortgage and title services through DHI Mortgage and subsidiary title companies.

Revenue drivers

• Homebuilding — Core business generating 92% of fiscal 2025 consolidated revenues of $34.3 billion, mostly from completed home sales, with about 84% of home sales revenue from single-family detached homes.
• Rental operations — Builds and leases single-family homes for bulk sale and develops, leases and sells multi-family rental properties; closed 3,460 single-family rental homes and 2,947 multi-family units in fiscal 2025.
• Forestar Group (62% owned) — Publicly traded residential lot developer that sold 14,240 lots in fiscal 2025, 83% of them to D.R. Horton, supporting the land and lot pipeline.
• Financial services — DHI Mortgage originated or brokered 68,982 loans in fiscal 2025 and sells substantially all mortgages and related servicing rights to third parties; title companies provide closing and title services to homebuyers.

Recent performance

Fiscal 2025 revenue fell 7% to $34.3 billion and net income fell to $3.6 billion, or $11.57 per diluted share, from $4.8 billion and $14.34. Home sales gross margin slipped to 21.5% as the company increased sales incentives including mortgage-rate buydowns, and ROE fell to 14.6% from 19.9%. In the quarter ended June 30, 2026, revenue was $9.2 billion and net income $904.9 million, or $3.20 per diluted share, with homes closed up 4% to 23,983 but home sales gross margin at 20.7% and a cancellation rate of 20% versus 17% a year earlier. For the nine months ended June 30, 2026, revenue was $23.7 billion, net income $2.1 billion, and diluted EPS $7.45.

Strategy

Management focuses on maximizing returns on inventory investments, generating strong operating cash flow and maintaining financial flexibility. It prioritizes finished-lot purchases from Forestar and other developers, with 65% of fiscal 2025 closings on lots developed by Forestar or a third party, and keeps 75% of lots controlled through purchase contracts. Capital allocation includes share repurchases, $615.7 million in the June 2026 quarter, and dividends; the company declared a quarterly dividend of $0.45 per share. It manages pricing, incentives, sales pace and inventory by local market and expects to keep sales incentives elevated.

Risks

• Cyclical housing demand — Homebuilding, rental and land development results are significantly affected by employment, consumer confidence, housing demand, interest rates and inflation, any of which can reduce sales or require price and incentive concessions.
• Affordability and mortgage rates — Higher mortgage interest rates have reduced affordability of the company's homes, and it has had to increase incentives such as mortgage-rate buydowns to support demand.
• Margin compression — Home sales gross margin declined to 21.5% in fiscal 2025 and 20.7% in the June 2026 quarter as incentives rose, with pre-tax operating margin down to 13.8% in fiscal 2025 from 17.1%.
• Concentration in key markets — Adverse economic conditions affecting the company's larger markets could have a proportionately greater impact on it than on some other builders.

Outlook

Management expects sales incentives to remain elevated in the fiscal fourth quarter, with the level depending on demand, mortgage rates and other market conditions. It states that affordability constraints and cautious consumer sentiment continue to affect new home demand. The company points to its local operators, national footprint, flexible lot supply and strong balance sheet as positioning it to compete and capture demand.