D.R. Horton Revenue Tops Q3 Estimates

D.R. Horton (DHI 0.43%), the largest U.S. homebuilder by volume, reported its results for Q3 FY2025 on July 22, 2025. The company delivered higher-than-expected GAAP earnings and revenue, with GAAP EPS of $3.36, beating the analyst estimate of $2.89 and GAAP revenue was $9.2 billion, surpassing the consensus estimate of $8.75 billion. However, both earnings and revenue declined compared to the same quarter last year. The quarter was marked by shrinking margins and flat sales orders, underscoring a tough market shaped by affordability concerns and ongoing price competition. Overall, while D.R. Horton outperformed short-term analyst forecasts, its underlying business showed continued contraction from the prior year.

Source: D.R. Horton. Note: Analysts' consensus estimates for the quarter provided by FactSet.

Business Overview and Key Areas of Focus

D.R. Horton is a major American homebuilder known for supplying a range of homes across entry-level, move-up, and active adult buyers. It operates in 126 markets and 36 states, allowing a wide national reach. The core business is homebuilding, which accounts for most of its revenue, but it also includes rental operations, financial services, and residential lot development through its stake in Forestar Group.

In recent years, D.R. Horton has focused on using its scale to maintain operational flexibility and market leadership. Key strategies include tight control of land supply, integrated mortgage and title services for buyers, and a continued push to streamline operations for capital efficiency. Success in the highly competitive industry depends on the company's national presence, integration across the building supply chain, and disciplined approach to land and lot management.

Quarter Highlights and Segment Detail

In the quarter, D.R. Horton exceeded analyst expectations for both revenue and GAAP earnings, delivering a notable outperformance against consensus. However, the results highlighted a significant year-over-year decline: GAAP EPS dropped to $3.36 from $4.10 compared to Q3 FY2024, and revenue fell to $9.2 billion from $10.0 billion. This contraction was the result of weaker new home demand, rising sales incentives, and continued high interest rates putting pressure on affordability. The gross margin on home sales, a key profitability measure representing the percent of revenue remaining after construction and related costs, was 21.8%, but was under strain from higher use of incentives to attract buyers.

Net sales orders, which represent new contracts signed during the period and signal future revenue, totaled 23,071 homes — effectively flat year over year. While the volume of orders held steady, the value per home order dipped by about 3% compared to the same quarter of fiscal 2024, reflecting buyers shifting to lower-priced homes and increased use of incentives. Sales backlogs, which track homes under contract yet to close, declined 16% in units, and 19% in dollar value, suggesting softer prospects into the next quarter.

The homebuilding segment, which drives the bulk of company revenues, reported $8.6 billion in revenue, marking a 7% decline in homebuilding revenue, attributed to fewer home closings. Segment pre-tax margin dropped sharply from 17.0% in Q3 FY2024 to 13.8% in Q3 FY2025, meaning a smaller proportion of sales turned into profits, with management noting that the "pre-tax margin drops to 13.8%" this quarter. Aggressive incentive spending — especially in the form of mortgage rate buydowns for buyers — remains a central tactic. The cancellation rate for home orders was 17%, showing buyers are still generally following through on purchases.

Rental operations performed slightly below last year, with revenues of $380.7 million, down 8% compared to Q3 FY2024. Overall pre-tax income (GAAP) declined by double digits. The rental segment provides strategic inventory management and diversification, but did not offset softness in the core homebuilding results.

Forestar Group, the company’s majority-owned lot development arm, increased its lot sales and revenue, but the profitability of the segment fell. Pre-tax margin in Forestar slid to 11.2% from 16.2% the previous year, highlighting cost and price pressures even as volumes rose. This segment continues to provide an internal supply of build-ready lots, offering flexibility in controlling construction starts and helping manage capital, yet is not immune to the wider market’s headwinds.

In financial services, including mortgage and title offerings, revenue declined by 6% to $227.8 million compared to the same quarter of fiscal 2024. The capture rate, or the portion of homebuyers financing through DHI Mortgage, was 81% in Q2 FY2025.

Management Outlook and Investor Focus

Looking forward, D.R. Horton modestly raised the midpoint of its FY2025 revenue guidance, targeting a range of $33.7 billion to $34.2 billion. Expected home closings were tightened to 85,000 to 85,500 homes. Share repurchase plans were also increased, now forecast between $4.2 billion and $4.4 billion. These actions underline management’s ongoing capital return strategy. The company did not announce significant changes to its annual dividend plans, which remain at about $500 million.

Management cautioned that margin pressures will persist, as sales incentives are expected to rise further in Q4 FY2025 and no relief is seen for lot or construction costs. Community counts — the number of active selling communities — and sales pace will be closely watched, as both signal future growth potential or contraction. Key risks to the outlook include sustained high incentives, declining backlogs, and the ongoing challenge of defending margins as affordability constraints affect buyers. The next quarters will be shaped by the direction of interest rates, the strength of new home demand, and the company's ability to control costs and maintain sales velocity.

Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.