US ▾
TOL
Earnings call · Jul 2026 (Q3 FY26)

Toll Brothers Q3 FY26 earnings call TOL

Aug 19, 2026 Source

Executive summary

Toll Brothers Q3 FY26 — Solid Performance with Increased Orders and Raised Share Repurchase Guidance

Toll Brothers delivered solid third-quarter results, surpassing revenue and margin guidance, driven by resilient luxury demand and strategic community expansion. The company reaffirmed its full-year outlook and increased its share repurchase program, demonstrating confidence despite a challenging broader housing market. Management emphasized its differentiated luxury build-to-order model and strong balance sheet as key advantages for navigating current conditions and positioning for future growth.

Highlights

5

  • Delivered 2,662 homes and generated $2.6 billion of home sales revenue, exceeding the midpoint of guidance.

  • Adjusted gross margin was 25.6%, 35 basis points better than guidance.

  • Net signed contracts increased 5% compared to Q3 FY25.

  • Increased projected stock repurchases for FY26 to $700 million, up from $650 million.

  • Ended Q3 with $3.3 billion of liquidity, including $1.1 billion cash and $2.2 billion revolver availability.

Concerns

3

  • Overall sales environment remained subdued with low consumer confidence and elevated mortgage rates weighing on demand.

  • Challenging markets included Atlanta, Seattle, Portland, San Francisco, and Texas.

  • Average price of contracts signed in the quarter was approximately $1.003 million, down from $1.03 million in Q3 FY25.

Guidance & targets

CategoryTargetConfidence
Full-year FY26 Delivered Homes
10,500 to 10,600 homes
high materiality
High
Full-year FY26 Average Delivered Price
$995,000 and $1 million
high materiality
High
Full-year FY26 Home Sales Revenue
approximately $10.5 billion
high materiality
High
Full-year FY26 Adjusted Gross Margin
26.1%
high materiality
High
Full-year FY26 Stock Repurchases
$700 million
high materiality
High
Full-year FY26 Community Count Growth
8% to 10%
medium materiality
High
Full-year FY26-FY27+ Community Count Growth
similar 8% to 10% growth
medium materiality
High
Q4 FY26 Delivered Homes
3,450 to 3,550 homes
high materiality
High
Q4 FY26 Average Delivered Price
$995,000 and $1.005 million
high materiality
High
Q4 FY26 Adjusted Gross Margin
26.0%
high materiality
High
Q4 FY26 Interest and Cost of Sales
approximately 1.1%
medium materiality
High
Full-year FY26 Interest and Cost of Sales
approximately 1.1%
medium materiality
High
Q4 FY26 SG&A as % of Home Sales Revenues
approximately 8.1%
medium materiality
High
Full-year FY26 SG&A as % of Home Sales Revenues
10.1%
medium materiality
High
Q4 FY26 Other Income, Unconsolidated Entities, Land Sales Gross Profit
approximately $30 million
medium materiality
High
Full-year FY26 Other Income, Unconsolidated Entities, Land Sales Gross Profit
approximately $120 million
medium materiality
High
Q4 FY26 Tax Rate
approximately 26.0%
medium materiality
High
Full-year FY26 Tax Rate
approximately 25.2%
medium materiality
High
FY26 Year-end Community Count
between 480 and 490
medium materiality
High
Q4 FY26 Weighted Average Share Count
approximately 94 million
medium materiality
High
Full-year FY26 Weighted Average Share Count
approximately 95 million
medium materiality
High

Segment performance

SegmentRevenueYoYQoQMargin
Luxury Move-Up Business
Largest contributor to revenues and generates the highest margin among buyer segments. Higher price homes in this segment have lower incentives as a percentage of sales price. This business is growing for the company.
Average sales price: $1.35 million
61%——highest margin
Luxury First-Time Business
Revenue contribution from this buyer segment.
23%———
Move-Down Business
Revenue contribution from this buyer segment.
16%———
North Region
Still the best absorbing region by far, despite modest deceleration in order growth.
Order growth: modestly down
————

TOL operating KPIs by quarter

TOL operating KPIs stated on its earnings calls, by fiscal quarter
KPI Apr 2026 Q2 FY26This call 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 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 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 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 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 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 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 transcript
471 At quarter end, we were selling from 471 communities versus 420 at the end of the third quarter of fiscal 2025. Source 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 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 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 transcript
2.6% Our cancellation rate was 2.6% of beginning quarter backlog as compared to 3.2% in the prior year period. Source 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 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 transcript
+0.6 pt

Operating figures the company states on every call, 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 homebuilder focused on the luxury segment in Northwest Arkansas.

Joined the Toll Brothers team in May. It was a good fit due to higher average sales price and luxury segment focus. All employees were brought on as colleagues. This is consistent with Toll Brothers' playbook of careful bolt-on opportunities.

Risks & headwinds

Challenging Housing Market Q3 FY26, continuing into Q4 FY26

Subdued demand, low consumer confidence, elevated mortgage rates

Mitigation:Prioritizing price discipline and margin performance over sales pace; focusing on luxury move-up customer; efficient operations; strong balance sheet.

Geopolitical Uncertainty Q3 FY26, continuing into Q4 FY26

Renewed geopolitical uncertainty

Mitigation:Not explicitly stated, but implied by overall strategy of resilience and financial strength.

Lumber Cost Increases Q3 FY26

Lumber rose during the period

Mitigation:Offset by other modest reductions in building costs, resulting in overall flat build costs.

What to watch in Q4 FY26

Community Count Growth

FY27 and beyond
Current 8% to 10% for FY26
Target similar 8% to 10% growth for FY27 and beyond

Why it matters

Sustained community count growth is key for future revenue expansion and market presence.

Our existing land position supports similar community count growth in fiscal '27 and beyond.

Q&A highlights

Given the implied sequential increase in Q4 deliveries and gross margin, and the company's history of exceeding margin guidance, how much conservatism is built into the Q4 outlook?

Management confirmed confidence in Q4 delivery targets, with 2,700 of 3,500 homes from backlog and sufficient finished/near-finished spec homes. Q4 gross margin benefits from positive mix (North/Pacific regions, luxury move-up) and earlier sales of spec homes.

“2,700 of our projected 3,500 homes for the midpoint of the quarter will come from backlog. So those are scheduled and already in our backlog, which leaves 800 homes that need to sell and settle within the quarter. We have about 900 finished specs.”

asked by John Lovallo · answered by Karl Mistry

2 min read 6 chapters

Detailed narrative

Market Conditions and Demand Environment

The housing market remained challenging in Q3 FY26, characterized by subdued demand, low consumer confidence, and elevated mortgage rates. While net signed contracts increased 5% year-over-year, the sales environment continued to be difficult, extending into the first 2.5 weeks of Q4. Stronger markets included Florida, Boston through the Carolinas, Boise, Las Vegas, Reno, and Denver, while Atlanta, Seattle, Portland, San Francisco, and Texas were more challenging.

Luxury Move-Up Strategy and Resilience

Toll Brothers continues to prioritize its luxury move-up customer, which accounted for approximately 61% of home sales revenues in Q3 and generates the highest margins. This segment demonstrates greater financial resilience, with 25% of buyers paying all cash and an average loan-to-value of 69% for financed purchases. Management noted no material change in the outperformance of this segment, with price increases in about 30% of communities.

Operational Efficiencies and Cycle Times

The company realized benefits from production improvements, maintaining stable build-to-order home cycle times at approximately 9 months. Spec home cycle times are generally about one month shorter. Finished spec inventory was reduced to 1.9 homes per community, down from 2.8 at the start of FY26, reflecting a strategy to sell spec homes earlier in the construction cycle for better margins and personalization opportunities.

Land Strategy and Capital Allocation

Toll Brothers owned or controlled approximately 75,500 lots at quarter-end, with 58% optioned. The company spent $452 million on land acquisition in Q3, focusing on high-quality land at attractive returns, often utilizing seller financing. Capital allocation prioritizes smart, profitable growth, followed by maintaining a strong balance sheet, share repurchases (increased to $700 million for FY26), and dividends.

Buffington Acquisition and M&A Strategy

The acquisition of Buffington Homes in May was highlighted as a successful bolt-on M&A, contributing to community openings and sales in Q3. Buffington's focus on the luxury segment in Northwest Arkansas aligned well with Toll Brothers' brand. The company's M&A strategy continues to favor careful, bolt-on opportunities with companies that complement its brand and operational strengths, rather than large-scale transactions.

Gross Margin Drivers and Outlook

Q3 adjusted gross margin outperformed guidance due to favorable mix, including a greater proportion of luxury move-up and Pacific deliveries, and improved operating efficiencies. Q4 gross margin is expected to benefit from similar mix dynamics and earlier sales of spec homes. Management believes the company is structurally built for 26% to 28% gross margins in a normal environment, driven by underwriting changes over the past decade.

AI-generated summary of the company's earnings call. Not investment advice.