KB Home (KBH 3.29%) reported Q2 2025 results on June 23, 2025, delivering revenues of $1.5 billion and diluted EPS of $1.50, with adjusted gross margins of 19.7%, exceeding guidance.
The company revised full-year guidance downward to $6.3-$6.5 billion in revenues and a 19%-19.4% adjusted (non-GAAP, excluding inventory-related charges) housing gross profit margin, reflecting challenging demand trends and a strategic shift toward cost control and capital returns.
Accelerated Share Repurchases and Capital Returns
Management returned nearly $290 million in cash to shareholders in the first half of FY2025, including $250 million in share repurchases at an average price of $55.70 per share—below book value—further enhancing EPS and return on equity. Shareholder returns are a higher priority in the near term amid tightening land investment.
"We have now repurchased over 30% of our outstanding common stock since implementing our share buyback program in late 2021. Over the past four years, we have returned over $1.59 billion to shareholders in the form of dividends and share repurchases. We have $450 million remaining in our current repurchase authorization and expect to repurchase between $100 million and $200 million of our common stock in the third quarter,"
— Rob Dillard, Executive Vice President and Chief Financial Officer
This intensified buyback at a price below book value signals management’s confidence in intrinsic value, reallocating capital to drive per-share metrics, and bolstering long-term investor returns even as growth moderates.
Strategic Retrenchment in Land Investment with Flexibility for Future Growth
The company canceled contracts on approximately 9,700 lots that did not meet updated underwriting criteria, while maintaining ownership or control of nearly 75,000 lots, of which 47% are "controlled" through options. This pivot reduces immediate land expenditures and preserves capital, allowing for rapid scaling if market conditions improve.
"Through our regular review of land deals in our pipeline, we also canceled contracts to purchase approximately 9,700 lots that no longer meet our underwriting criteria. When markets stabilize, we have the flexibility to again increase our land investments. With an expected lower level of spend on land for the remainder of the year, given our healthy lot pipeline to support future growth, we intend to continue a meaningful return of capital to our shareholders."
— Jeff Mezger, Chairman and Chief Executive Officer
This approach limits risk exposure in uncertain markets, sustains balance-sheet flexibility, and supports capital deployment toward the highest-return opportunities.
Operational Efficiency Via Build Times and Cost Reductions
Build times were shortened sequentially by seven days to 140 calendar days, reaching pre-pandemic levels; built-to-order homes are being constructed in 132 days. Direct costs per home fell by 3.2% year-over-year for homes started in the second quarter, with commodity inputs like lumber contributing but not solely driving these gains.
"Our value engineering and studio simplification efforts, in addition to an enhanced focus on costs, contributed to direct costs that were 3.2% lower year over year for our homes started during the second quarter, helping to offset the impact of our price reductions and increases in land cost. Homes that we started in May came in at the lowest cost per square foot year to date, as our divisions are continuing to drive better performance on cost. Our costs, including lumber, are protected for almost all of our third-quarter starts under the terms of our supply contracts."
— Rob McGibney, President and Chief Operating Officer
These operational gains enhance inventory turn, support margin preservation amid softening pricing, and position KB Home competitively through business cycles.
Looking Ahead
Management guided third-quarter housing revenues of $1.5-$1.7 billion and full-year revenues of $6.3-$6.5 billion, with housing gross profit margin expected between 18.1%-18.7% for Q3 and housing gross profit margin, excluding inventory-related charges, is expected to be between 19% and 19.4% for the year; full-year deliveries are now projected at approximately 13,200 homes. SG&A is forecast at 10.2%-10.6% of revenues, while capital returns via buybacks will continue in the range of $100-$200 million in the third quarter.
No explicit guidance was provided for fiscal 2026, and management stated that future growth flexibility depends on ongoing market conditions and inventory deployment.