The Home Depot, Inc. (HD) Cash Flow Statement

The OCF/NI ratio has consistently remained above 1.0, with the exception of 2025Q2 at 1.02, suggesting that non-cash charges like D&A and working capital timing are supporting cash generation. The 2026Q1 spike to 1.83 was driven by a $1.3B working capital inflow, which appears to be a seasonal benefit rather than a sustainable trend. Investors should monitor whether the gap between net income and operating cash flow narrows as working capital dynamics normalize.

FCF margins have ranged from 6.0% in 2025Q4 to 12.8% in 2024Q1, with the most recent quarter aligning with the historical average. The 2025Q4 trough appears tied to elevated capex and a working capital outflow, while the 2026Q1 recovery reflects improved collections. This stability suggests that HD's cash conversion is resilient, though the trajectory may face pressure if capex increases to support the SRS integration.

Capex as a percentage of revenue has stayed within a narrow band of 1.7% to 2.8%, with the higher readings in Q4 quarters likely reflecting seasonal store maintenance. The low capital intensity suggests that HD's growth is not heavily dependent on new store openings, but rather on same-store sales and supply chain efficiency. However, the SRS acquisition may require incremental capex to integrate distribution networks, which could modestly raise this ratio.

The negative working capital changes in 2025Q4 and 2026Q2 suggest inventory build-ups ahead of peak seasons or slower collections, while the positive swings in 2026Q1 and 2024Q4 indicate efficient cash conversion. The 2025Q3 outflow of -$902M coincided with the SRS acquisition, which may have included inventory purchases. These fluctuations appear manageable, but investors should monitor whether inventory levels grow faster than sales, which could signal demand softening.

The consistent dividend payout of approximately $2.3B quarterly represents a significant cash commitment, consuming roughly half of quarterly FCF. The near-absence of buybacks, with only a $649M repurchase in 2024Q1, suggests management is prioritizing debt reduction or acquisition funding over share repurchases. This allocation may reflect a cautious stance given the elevated leverage ratio, though it could also indicate a preference for M&A-driven growth.

The $10.3B cumulative excess of operating cash flow over net income suggests that earnings are backed by real cash generation, with D&A and working capital management contributing positively. This divergence is a positive signal for earnings quality, as it implies that reported profits are not being inflated by aggressive revenue recognition. However, the gap may narrow if working capital outflows persist, particularly if inventory shrink or slower collections become more pronounced.