KB Home’s second-quarter results show the No. 7 builder leaning further into its built-to-order strategy while navigating a sharp drop in revenue, deliveries, and margins amid ongoing affordability pressures.
“We produced solid second-quarter results that met or exceeded the mid-point of our key guidance ranges,” said Jeffrey Mezger, executive chairman. “Our return to a predominantly built-to-order business model continued to gain momentum, with these homes representing 73% of our net orders in the quarter, progress that we believe supports stronger, more sustainable performance over time and across market cycles.”
The Los Angeles–based builder reported net income of $27.3 million, or $0.43 per share, down from $107.9 million a year ago, as revenues fell 27% to $1.11 billion and deliveries dropped 23% to 2,395 homes. The average selling price declined to $461,900, reflecting continued pricing pressure and affordability constraints.
Demand held relatively stable but softened at the edges, KB reports. Net orders declined 4% to 3,317 homes, backlog slipped 5% to 4,526 homes, and absorption slowed modestly. However, cancellation rates improved to 12%, and the company expanded its community count, supporting future growth.
“Operationally, our teams continued to execute well and generated meaningful results, achieving 35 new community openings, at the high end of our projection, and reducing our build times by more than a full week sequentially from home start to home completion,” said Robert McGibney, president and CEO. “At the same time, we remained disciplined as we continued to successfully navigate a difficult and fluid market environment, balancing pace and price while tightly managing costs.”
Margins saw compression, with housing gross margin falling to 15.2% from 19.3% last year and operating margin dropping to 2.5%, driven by price reductions, higher land costs, and reduced operating leverage.
Management pointed out strong operational execution and strategic positioning as offsets, including faster build times, the 35 new community openings, and a continued shift toward built-to-order homes. The company also maintained liquidity and shareholder returns through buybacks, while moderating land investment and reducing its lot position.
“The progress in our second quarter sets the foundation for the remainder of fiscal 2026, with sequentially higher delivery volumes and gross margins projected for each of the final two quarters. We remain committed to increasing shareholder value through improved performance, as well as our continued focus on operational excellence, strong financial flexibility, and ongoing balanced approach to capital allocation,” Mezger added.
