A builder of single-family homes and rental communities, D.R. Horton is one of the largest homebuilders in the United States, selling houses across dozens of states and also developing residential lots through its Forestar unit and offering mortgages through DHI Mortgage. Founder Donald Ray Horton started the company in 1978 in Fort Worth, Texas, with a loan to build a single house, which he famously sold while it was still in the framing stage. The company's name simply comes from its founder's initials.
Q3 FY2026 gross margin fell to 21.7% as home costs and incentives outpaced prices, with revenue flat at $9.7B.
Homebuilding margin kept compressing even as orders recovered. was $9.7B, flat but up 9.7% from Q2, with at 21.7% and at $2.90, down 13.2% from a year earlier as higher costs and weighed on pricing. The business is stabilizing on volume but not on profitability.
Key takeaways
Home sales fell to 20.7% from 21.8% a year earlier, driven by higher average costs, lower selling prices, and elevated sales incentives including , pulling consolidated gross margin to 21.7%.
Consolidated was $9.7B, flat versus Q3 FY2025 but up 9.7% from Q2 FY2026, while dropped 12% to $904.9M and fell 13.2% to $2.90 .
Homebuilding rose to 8.3% of revenues from 7.8%, with employee compensation increasing to $560.6M from $532.3M, adding cost pressure on a flat .
Section summaries
Management's Discussion and Analysis
Q3 FY2026 homebuilding pre-tax income fell 10% to $1.1B on lower margins and higher SG&A, while consolidated net income dropped 12% to $904.9M.
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Consolidated revenues were flat at $9.2B in Q3, but pre-tax income declined 10% to $1.2B, with pre-tax margin compressing to 13.3% from 14.7%.
grew 12% to $48.7M on a 4% increase, with lots sold to D.R. Horton rising to 3,370 from 3,075, a rare bright spot.
Rental nearly halved to $31.0M as single-family rental closings fell 44% and gross margins compressed, and financial services pre-tax income decreased 14% to $70.3M on lower mortgage gains.
Liquidity totaled $3.9B with $1.3B homebuilding cash and $2.6B available; was 23.0%.
What changed
Home sales fell again to 20.7% in Q3 after 20.1% in Q2 and 20.4% in Q1, extending the compression flagged from the 21.5% FY2025 level.
orders had risen 11% to 24,992 in Q2 with up 19%; Q3 was not given in the table but the prior-year Q3 narrative showed flat orders at 23,071 and backlog down 16%, so the Q2 order recovery is the open question for this quarter's follow-through.
Rental dropped to $31.0M from $12.3M in Q2 but remained far below the $170.0M FY2025 and $228.7M FY2024 levels, confirming the multi-family slowdown persists rather than reversing.
of $48.7M rose 12% quarter over quarter and stayed above the $219.3M annualized FY2025 drop, with lot margins not disclosed but volume to D.R. Horton up.
was 23.0% versus 21.7% in Q2 and 23.2% in Q3 FY2025, little changed from the elevated post- level flagged after FY2025.
Legal reserve was not updated this quarter; the FY2025 10-K had increased the construction defect reserve to $1.1B from $949.6M, and this filing added a resolved Maryland stormwater case with $837,500 in penalties plus restoration costs.
What to watch
Home sales next quarter to see if the 20.7% Q3 level falls further as incentives and costs move into the next selling season.
orders and cancellation rate in Q4 FY2026 after the Q2 order rise to 24,992 homes and 19% growth, to confirm demand held.
Rental after the near-halving to $31.0M, to see if single-family closings recover from the 44% drop.
lot sale margins and after the 12% rise to $48.7M, to see if cost pressures from FY2025 persist.
Homebuilding home sales fell to 20.7% from 21.8%, driven by higher average costs, lower average selling prices, and elevated including mortgage rate buydowns.
Homebuilding rose to 8.3% of revenues from 7.8%, with employee compensation costs increasing to $560.6M from $532.3M.
Rental revenues dropped 30% to $266.1M, and pre-tax income nearly halved to $31.0M, as single-family rental closings fell 44% and gross margins compressed.
's pre-tax income grew 12% to $48.7M on a 4% increase, with lots sold to D.R. Horton rising to 3,370 from 3,075.
Financial services pre-tax income decreased 14% to $70.3M, as gains on sale of mortgage loans declined 7% and G&A expense as a percentage of increased to 78.0%.
Liquidity remained strong with $1.3B in homebuilding cash, $2.6B available under the homebuilding , and a debt-to-total-capital ratio of 23.0%.
The company believes no pending legal matters will materially harm its financial position, though it discloses specific environmental and derivative proceedings.
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The company states that liabilities from ordinary-course lawsuits and contingencies are not expected to have a material adverse effect on its consolidated financial position, results of operations, or cash flows.
A 2014 EPA stormwater matter was resolved via a in 2024, with a $400,000 civil penalty and a supplemental environmental project; ongoing reporting obligations and remain, but future losses are not expected to be material.
In September 2024, the Maryland Department of Environment sued D.R. Horton and over stormwater issues; the case was resolved in May 2026 with combined civil penalties of $837,500, restoration contributions of $1,050,000, and $325,000 in attorneys' fees.
On April 29, 2025, a stockholder filed a derivative suit against D.R. Horton and certain Forestar directors, alleging breach of fiduciary duty in lot sale transactions; the company disputes the claims and does not anticipate a material adverse effect.
The company will disclose environmental proceedings if it reasonably believes monetary sanctions will reach or exceed $1 million, excluding interest and costs.