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Toll Brothers (TOL) Q2 FY26 earnings call: guidance and Q&A

Earnings call· Apr 2026 (Q2 FY26)· Consumer Discretionary· May 20, 2026

Source: earnings call transcript

Executive summary

Toll Brothers Q2 FY26 — Strong Performance, Raised Full-Year Guidance, and Strategic M&A

Toll Brothers demonstrated resilience in a challenging market, leveraging its luxury positioning and operational discipline to exceed Q2 expectations and raise full-year guidance. Strategic community count growth and the Buffington Homes acquisition underscore a focus on expanding market presence, while a healthy balance sheet supports continued capital returns and investment in future growth.

Highlights

5

  • Exceeded guidance for home deliveries and average delivered price, generating $2.5 billion in homebuilding revenue, $110 million above midpoint.

  • Adjusted gross margin of 26.2% was 70 basis points better than guidance, reflecting improved operating efficiencies.

  • Diluted EPS of $2.72, beating guidance by $0.18 per share.

  • Net agreements increased 7% in units and 8% in dollars year-over-year, driven by community count growth.

  • Raised full-year guidance across all key homebuilding metrics, including deliveries (10,400-10,700 homes) and adjusted gross margin (26.1%).

Concerns

3

  • Demand environment remained challenging in Q2 and early Q3, with flat per-community sales pace.

  • Weaker markets included Atlanta, San Antonio, Seattle, Portland, and San Francisco.

  • Write-offs in home sales gross margin totaled $32.5 million, including $20 million related to dropped deals.

Guidance & targets

CategoryTargetConfidence
Q3 FY26 Deliveries
approximately 2,600 to 2,700 homes
high materiality
High
Q3 FY26 Average Delivered Price
between $965,000 and $985,000
medium materiality
High
Full-Year FY26 Deliveries
between 10,400 and 10,700 homes
high materiality
High
Full-Year FY26 Average Delivered Price
between $985,000 and $1 million
medium materiality
High
Full-Year FY26 Adjusted Gross Margin
26.1%
high materiality
High
Q3 FY26 Adjusted Gross Margin
25.25%
medium materiality
High
Q4 FY26 Adjusted Gross Margin
approximately 26.3%
medium materiality
High
Q3 FY26 Interest in Cost of Sales
approximately 1.1%
low materiality
High
Full-Year FY26 Interest in Cost of Sales
approximately 1.1%
low materiality
High
Q3 FY26 SG&A as % of Home Sales Revenue
approximately 10.0%
medium materiality
High
Full-Year FY26 SG&A as % of Home Sales Revenue
10.1%
medium materiality
High
Q3 FY26 Other Income (JV, land sales, etc.)
$5 million
low materiality
High
Full-Year FY26 Other Income (JV, land sales, etc.)
$120 million
medium materiality
High
Full-Year FY26 Community Count
between 480 and 490
high materiality
High
Q3 FY26 Community Count
475 communities
medium materiality
High
Full-Year FY26 Weighted Average Share Count
approximately 95 million
low materiality
High
Full-Year FY26 Share Repurchases
$650 million
high materiality
High
Q3 FY26 Tax Rate
approximately 26.0%
low materiality
High
Full-Year FY26 Tax Rate
approximately 25.5%
low materiality
High

TOL operating KPIs by quarter

TOL operating KPIs stated on its earnings calls, by fiscal quarter
KPIThis call Apr 2026 Q2 FY26 Jul 2026 Q3 FY26Change vs prior quarter
Homes delivered
2,491 In the quarter, we delivered 2,491 homes at an average price of $1,009,000, generating $2.5 billion of homebuilding revenue or approximately $110 million above the midpoint of our guidance. Source: earnings call transcript
2,662 We delivered 2,662 homes and generated $2.6 billion of home sales revenue, exceeding the midpoint of our guidance in both units and dollars. Source: earnings call transcript
+6.9%
Average delivered price
$1.009M In the quarter, we delivered 2,491 homes at an average price of $1,009,000, generating $2.5 billion of homebuilding revenue or approximately $110 million above the midpoint of our guidance. Source: earnings call transcript
~$996K The average delivered price of homes in the quarter was approximately $996,000, above the high end of our guidance range and driven primarily by mix, including a greater-than-expected proportion of luxury move-up and Pacific deliveries. Source: earnings call transcript
—
Net signed contracts
2,834 In addition, we signed 2,834 net agreements in the quarter, for [ $2.8 billion ], up 7% in units and 8% in dollars. Source: earnings call transcript
2,508 We signed 2,508 net agreements in the quarter for $2.5 billion, up 5% in units and 4% in dollars. Source: earnings call transcript
-11.5%
Selling communities
459 At quarter end, we were selling from 459 communities versus 421 1 year earlier and 386 just 2 years ago. Source: earnings call transcript
471 At quarter end, we were selling from 471 communities versus 420 at the end of the third quarter of fiscal 2025. Source: earnings call transcript
+2.6%
Average price of contracts signed
$990.6K The average price of contracts signed in the quarter was approximately [ $990,600 ], up 1% compared to the second quarter of fiscal 2025. Source: earnings call transcript
~$1.003M The average price of contracts signed in the quarter was approximately $1.003 million versus $1.03 million in the third quarter of fiscal 2025. Source: earnings call transcript
—
Cancellation rate as a percentage of beginning quarter backlog
2.9% Our cancellation rate was 2.9% of beginning quarter backlog as compared to 2.8% in the prior year period. Source: earnings call transcript
2.6% Our cancellation rate was 2.6% of beginning quarter backlog as compared to 3.2% in the prior year period. Source: earnings call transcript
-0.3 pt
Cancellation rate as a percentage of signed contracts
4.8% As a percentage of signed contracts in the second quarter cancellation rate was 4.8% versus 6.2% in last year's second quarter. Source: earnings call transcript
5.4% As a percentage of signed contracts in the third quarter, cancellation rate was 5.4% versus 7.5% in last year's third quarter. Source: earnings call transcript
+0.6 pt

Operating figures the company stated on at least two of the calls shown, checked against each call's transcript. Click a figure to read the sentence. A dash means it was not stated that quarter.

Deals & partnerships

Buffington Homes Acquisition of a leading luxury homebuilder in Northwest Arkansas.

Entry into Northwest Arkansas (Fayetteville/Bentonville market). Buffington Homes builds from $400k to over $1M. Leveraging local expertise and strong land position to scale their business.

Risks & headwinds

Challenging Demand Environment Q2 FY26 and first 3 weeks of Q3 FY26

Flat per community sales pace.

Mitigation:Balancing pace, price, and incentives; serving more affluent customer base.

Weaker Market Performance Q2 FY26

Atlanta, San Antonio, Seattle, Portland, and San Francisco cited as weaker markets.

Mitigation:Focus on strong performing markets like Florida, Boston, Boise, Las Vegas, Austin.

Write-offs in Home Sales Gross Margin Q2 FY26

$32.5 million in write-offs, including $20 million related to dropped deals.

Mitigation:Rigorous underwriting standards for land acquisition.

Mortgage Rate Volatility Recent period

Discussed, not quantified.

Mitigation:Luxury customers less sensitive to rates; ability to sell specs early in construction cycle.

Rising Lumber Costs Q2 FY26

Discussed, not quantified.

Mitigation:Overall building costs remained flat due to improved production efficiencies and offsetting other costs.

What to watch in Q3 FY26

Full-year delivery guidance

FY26 end
Current 10,400 to 10,700 homes
Target Achievement of the raised full-year delivery target

Why it matters

Indicates the company's ability to convert backlog and new sales into deliveries amidst market challenges, crucial for revenue and earnings.

For the full fiscal year, we are increasing the low end of our guidance range by 100 homes, and we are increasing the projected average delivered price by $12,500 at the midpoint. We now project deliveries of between 10,400 and 10,700 homes with an average price between $985,000 and $1 million.

Find out whether TOL delivers this. Inve re-checks your case every morning.

Q&A highlights

Seeking more color on current demand trends, buyer sentiment, and how spec sales are performing given recent market dynamics.

Demand was consistent throughout Q2 and early May, with April being the strongest month. Traffic and web activity are up year-over-year but flat per community. Customers are still taking longer to decide, but the company is pleased with flat per-community sales given the backdrop.

“Customers are still waiting to make a decision conversions are taking a little bit longer. I think we've shared in the past, it's tied a bit to consumer confidence at our price point. But overall, I think given the backdrop in the current environment, we're really happy to be flat, frankly, and again, consistent throughout the quarter and early in May.”

asked by Michael Dahl · answered by Karl Mistry

2 min read 6 chapters

Detailed narrative

Strategic Expansion and Leadership Transition

Doug Yearley highlighted the company's strategic initiatives, including expanding geographies, product lines, and price points. The call also announced Rob Parahus's retirement and Seth Ring's succession as President and COO, emphasizing a focus on mentoring the next generation of leadership and building on the company's foundation. Seth Ring, with over 20 years of experience, is seen as the perfect successor to lead the company forward.

Resilient Luxury Market Performance

The company's unique position as a luxury homebuilder continues to drive strong results, with orders up 7% gross and flat per community in Q2, a trend continuing into Q3. The affluent customer base is less sensitive to affordability pressures, benefiting from income growth, stock market gains, and home equity appreciation, allowing Toll Brothers to balance pace, price, and incentives effectively. This segment accounts for 62% of home sales revenues.

Operational Efficiencies and Cost Management

Toll Brothers achieved an adjusted gross margin of 26.2% and SG&A as a percentage of revenue of 10.3%, both better than guidance. Production efficiencies improved, with build-to-order cycle times at approximately 9 months, and overall building costs remained flat despite rising lumber prices, demonstrating effective cost management and the team's ability to offset cost increases.

Land Strategy and Competitive Advantage

At quarter-end, Toll Brothers owned or controlled 76,800 lots, with 58% optioned, supporting future community count growth. The company's luxury focus allows it to acquire land in prime locations with less competition from larger builders, often utilizing favorable financing structures like seller financing and joint ventures to improve capital efficiency. Approximately 20% of this year's revenue will come from land-banked communities.

Buffington Homes Acquisition and Market Entry

The acquisition of Buffington Homes, a leading luxury builder in Northwest Arkansas, marks Toll Brothers' entry into the vibrant Fayetteville/Bentonville market. This strategic bolt-on acquisition adds approximately 1,500 lots to the pipeline and is expected to scale well into the future, leveraging local expertise and strong land position. This is part of a long history of strategic, non-transformational acquisitions.

Capital Allocation and Financial Health

The company repurchased $175 million of common stock in Q2, bringing the year-to-date total to $226 million, and raised its quarterly dividend. With $3.3 billion in liquidity, a net debt-to-capital ratio of 15.4%, and an investment-grade credit rating, Toll Brothers maintains a healthy balance sheet to support growth and shareholder returns, reaffirming its $650 million share repurchase target for the full year.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.