Pulte is sharpening its segment focus by pushing to further protect margins
Coming out of the latter half of 2025 unscathed was no small task, The PulteGroupThe Q4 2025 earnings call has been revealed, as one of America’s most resilient and unskilled builders staged a strong defense against weak demand.
Price pressures, regional declines and a tough stimulus environment painted a tough picture for the country’s third-largest builder in Q4. However, Pulte executives expressed optimism that the final quarter will be lower.
To position itself for more consistency in the coming year, Pulte plans to lean on a strong customer profile, focus its energies solely on its core homebuilding business, and move more of its finished inventory as the Spring sales season approaches.
Pulte, whose management sent to Wall Street analysts last week, is reorganizing its machine from the period of the pandemic, a strong strategy to a high return model, build to order – while admitting that 2026 will still need higher incentives and margin protection because many costs are rising and demand remains rich in the market.
Builder income presents a mixed picture. New orders increased 4% year-over-year, and the average population increased 6%. However, its absorption rate slowed slightly last year, its cancellation rate increased by 200 points, closings decreased by 3% and revenue decreased by 5% year-over-year.
The margin squeeze continues
Pulte’s gross profit margin in Q4 was 24.7%, compared to 27.5%. James Ossowski, Executive VP & CFO at PulteGroup, placed much of the blame on the higher incentive rate of 9.9%, up from 8.9% in Q3 and up from 7.2% last year. He predicts that margins will remain low through 2026.
“Higher incentives for the quarter were primarily the result of our effort to sell finished inventory as we close out 2025. We currently expect gross margin of 24.5% to 25.0% for both the first quarter and full year of 2026, but note that the spring sales season will be a key driver for our year,” he said.
Impairments, which totaled $35 million, also hurt financial performance, as they impacted last quarter’s margins by 80 basis points.
“Out of 1,000 communities that we work in, we have eight of them that we charge for land impairment, which was just…we had to be very aggressive in pricing,” Ossowski explained.
Shift to higher margin product mix
Pulte executives view the Del Webb company’s active senior communities as one of its core strengths, as they are 400 basis points higher than the company’s entry-level homes and 200 basis points higher than the move-in products. Competitively, Pulte management’s message is that Del Webb’s product market equity is better in a rate-choppy world because demand in that segment is more demand-based, equity-driven, and discretionary. That is why management plans to increase the capacity of the Del Webb community to 25% of the total units, from 20% a year ago.
The company is on track to achieve that goal by 2026, with 24% of Q4 closings coming from the adult segment, along with 37% from the first segment and 38% from rising consumers.
Like many of its homebuilder peers, Pulte is working to bring its figure down to about 40%, down from about 60%. Built-to-order homes have base margins hundreds of thousands higher than custom homes.
“As we enter the spring sales season, our goal will be to sell dirt at a higher percentage than spec, while we still have some information available, especially on price points,” said President and CEO Ryan Marshall.
The first segment continues to be a sore spot, as prices for those homes are down 6% year-over-year. However, management did not indicate that entry-level homes will make up a smaller percentage of units going forward.
“Overall, it was a strong quarter amid a challenging environment,” wrote Stephen Kim, Executive Director at . Evercore ISI. Kim reported that order growth and average sales both exceeded expectations.
Local strengths and weaknesses
Marshall has tied a diverse portfolio of businesses in many regions and cities as a sign of PulteGroup’s resilience in 2025, noting that some markets will remain underperforming. The builder now operates in 47 markets, having expanded to Cincinnati in November.
According to Marshall, demand has held up well in the Midwest, Northeast, and Florida, which has helped ease pressure from soft markets in the West and Texas. He specifically pointed to Boston, the DC area, Chicago, Indianapolis, Louisville, and the Carolinas.
Many builders noted Florida as a challenging state last year, but Pulte had strong success in the Sunshine State in 2025, with orders up 13% year-over-year in the fourth quarter. M/I houses similarly noted positive results from Florida last year as well.
The West was a weak spot for Pulte, especially the more expensive coastal markets and Colorado, another expensive state. Marshall also pointed to the challenging tech job market as an additional layer of challenge in California and the Northwest. However, Las Vegas and Arizona did better.
“The fact that we have such a diverse geographic platform, even with some challenges in the West, we’ve been able to do very well because of what our businesses in Florida, the Southeast, the Midwest and the Northeast have done,” Marshall said.
Shifting the focus back to essential home building skills
During the call, Marshall announced plans to sell Innovative Construction Group (ICG)Pulte’s off-site manufacturing operations. Pulte acquired ICG, which specializes in off-site frame solutions and retrofits for single-family and multi-family buildings, in 2020.
After buying ICG, post-COVID supply chain issues reduced Pulte’s initial gains. Since then, large off-site producers have invested heavily and are now operating on a much larger scale, which is influencing Pulte’s decision to sell.
“We’re big proponents of innovation and innovation in the home building industry. We’ve learned a lot over the last 6 years, we’ve had a ton of benefits with the kind of innovation-based home building that’s happened there. We’ve just come to the conclusion that we think we’re best at focusing on the basics, home improvement, architecture, home improvement, Marshall.
The upcoming sale of ICG reflects a strategy to return to Pulte’s core home building capabilities. In the cutthroat home building world, many builders realize they can’t do everything at once.
Toll Brothersfor example, it announced plans last year to exit the multifamily business through a sale Kennedy Wilson. Lennar also recently sold a large portion of Quarterra, which is multi-family directly.
Both of those deals, in addition to Pulte’s latest announcement, represent a realignment. As homebuilders face a narrow path to profitability, they are increasingly sharpening their focus on their core homebuilding business – and branching out from other verticals.
For Pulte, the imminent ICG deal will free up capital for the company to invest in real estate. It is unclear what Pulte can expect in return for ICG, but the 2020 deal reportedly reached $104 million.
Outlook: from defense to attack
According to Marshall, the first few weeks of January got off to a good start with an expected increase in demand for the year. However, high incentives and price cuts remain a problem.
“At this point, I will tell you that the improvement in the pace of sales is probably the result of price action as we work hard to find a price to clean up and turn around the goods. This is especially true with regard to the finished inventory that we had to get rid of,” said Marshall.
Marshall is optimistic that the Spring sales season will do well, with mortgage rates lower than last year and positive wage growth. However, average selling prices and gross margins are expected to remain relatively low over the next year, and gross margins will likely remain high.
