Key facts
- D.R. Horton lowered its annual revenue forecast due to high costs and buyer incentives.
- The company reported a fiscal Q3 home sales gross margin of 20.7%, exceeding expectations.
- Orders were flat year-over-year, and cancellations rose to 20%.
- The fiscal 2026 closing forecast was reduced to 83,800-84,300 homes, with revenue guidance lowered to $32.5 billion-$33 billion.
- D.R. Horton is prioritizing gross margin preservation through disciplined operational execution over sales volume.
D.R. Horton has lowered its annual revenue forecast, citing high costs and buyer incentives that are impacting profit margins. The company reported a fiscal third-quarter home sales gross margin of 20.7%, exceeding expectations, while closing nearly 24,000 homes. However, orders remained largely flat year-over-year with a 20% increase in cancellations, leading to a reduced fiscal 2026 closing forecast of 83,800 to 84,300 homes and revenue guidance of $32.5 billion to $33 billion.
President and CEO Paul Romanowski indicated a strategic shift, stating the company chose to prioritize holding gross margin over pushing for higher sales volume. This approach, while resulting in lower expected volume, helped drive earnings above consensus. The company observed that while buyer traffic remains, confidence is fragile due to elevated mortgage rates, affordability pressures, and economic uncertainty.
Operational execution played a key role in the quarter's performance, with declines noted in major cost categories, particularly framing. Construction cost reductions, slightly lower incentives, and faster inventory turnover offset affordability pressures. Executive Vice President and Chief Operating Officer Michael Murray noted ongoing efforts in cost containment, though further improvements are becoming more challenging.
Despite improved construction efficiency, D.R. Horton expects fourth-quarter housing starts to be below third-quarter levels, a deliberate choice to align production with proven market demand. The company also aims to increase its revenue-to-inventory turn ratio to three times from a historical norm of two times, emphasizing returns over sheer production volume.