How HD (The Home Depot) Makes Money in 2025: A Deep-Dive With Income Statement

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Understanding how a home improvement retail giant like HD Income Statement Overview makes money is essential for investors and anyone interested in the business of retail. In this post, we break down HD's quarterly income statement (Q3 2025) using a Sankey chart to visualize the financial flows — what comes in, where it goes, and what's left as profit.

Quick HD Overview

HD Income Statement Overview operates one of the world’s largest home improvement retail chains, offering a broad assortment of building materials, home improvement products, lawn and garden supplies, and related services. Revenue comes primarily from in-store and online sales to DIY consumers, professional contractors, and maintenance organizations. The business is structured around its core retail operations, with all revenue in Q3 2025 reported under “Other Revenue by Product,” reflecting its unified retail focus.

Revenue Breakdown

• Total Revenue (Q3 2025): $45.3B (+4.9% YoY)
  • Other Revenue by Product: $45.3B (100% of total)
  • Growth is powered by continued demand in home improvement, resilient consumer spending, and expansion of professional contractor services.

Gross Profit and Margins

• Gross Profit: $15.1B (33.4% gross margin)
  • Cost of Revenue: $30.2B (+4.8% YoY)
  • HD maintains robust margins due to its scale, efficient supply chain, and strong vendor relationships.
• Most costs come from merchandise procurement, logistics, and store operations.

Operating Income and Expenses

• Operating Income: $6.555B (+0.3% YoY, 14.5% margin)
• Operating Expenses: $8.57B (+8.7% YoY)
  • R&D: Not separately disclosed for Q3 2025
  • SG&A: $7.764B (+8.7% YoY, 17.1% of revenue) — Includes store labor, advertising, IT, and corporate overhead
  • HD continues to invest in omnichannel capabilities and customer experience while maintaining operational efficiency.

Net Income

• Pre-Tax Income: $6.005B (-0.7% YoY, 13.3% margin)
• Income Tax: $1.454B (24.2% effective tax rate)
• Net Income: $4.551B (-0.2% YoY, 10.1% net margin)
• HD converts a significant portion of sales into profit due to its scale, efficient operations, and pricing power.

What Drives HD's Money Machine?

• Retail sales to consumers and professionals: 100% of revenue is generated from product sales in stores and online.
• Same-store sales growth: Driven by increased transaction size and higher customer traffic.
• Omnichannel investment: Strategic investments in e-commerce, supply chain, and professional services expand market share and customer loyalty.
• Future growth areas: Expansion of pro customer services and digital platforms, though these segments are not yet separately profitable.

Visualizing HD's Financial Flows

The Sankey chart below visualizes how each dollar flows from gross revenue, through costs and expenses, down to net income. This helps investors spot where value is created, what areas weigh on profits, and how efficiently the company operates.

• Most revenue flows into gross profit, with operating expenses (especially SG&A) taking the largest chunk.
• Even after significant costs, 10.1% of revenue drops to the bottom line.

Key Takeaways

• HD's money comes overwhelmingly from retail product sales to consumers and professionals.
• High gross and net margins illustrate the power of HD's scale-driven retail business model.
• Heavy investment in omnichannel and customer experience, balanced by efficiency in operating costs.
• Ongoing growth is driven by resilient consumer demand and expansion of professional services.

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FAQ About HD's Income Statement

1. What is the main source of HD's revenue in 2025?

HD generates over 100% of its revenue from retail product sales, both in-store and online, to consumers and professional customers.

2. How profitable is HD in Q3 2025?

HD reported net income of $4.551B in Q3 2025, with a net margin of approximately 10.1%, reflecting strong profitability driven by scale and operational efficiency.

3. What are the largest expense categories for HD?

The biggest expenses on HD's income statement are cost of revenue (merchandise procurement and logistics) and operating expenses, particularly Sales, General & Administrative (SG&A) costs. SG&A reached $7.764B in Q3 2025, as HD prioritizes store operations, advertising, and IT investments.

4. Why does [segment/division] operate at a loss?

HD does not report a segment operating at a loss in Q3 2025; all revenue is consolidated under its core retail operations.

5. How does HD's effective tax rate compare to previous years?

HD's effective tax rate in Q3 2025 was 24.2%, consistent with previous years. This moderate rate is primarily due to standard U.S. corporate tax rates and limited international tax benefits.