Toll Brothers (TOL) Financials

Toll Brothers’ latest results show a profitable homebuilder with improving sequential performance, but weaker year-over-year margins and continued reliance on inventory and financing management. The data covers quarterly periods from fiscal 2022 through the third quarter of fiscal 2026, with some prior-period figures restated.

Revenue and earnings remain positive, but profitability has softened. Third-quarter fiscal 2026 revenue was $2.66 billion, down 9.7% from the restated third quarter of fiscal 2025. Net income declined 24.2% to $280.1 million, while diluted EPS fell to $2.97 from $3.73. Gross margin narrowed to approximately 23.5%, compared with 25.2% a year earlier and nearly 27.7% in the third quarter of fiscal 2023. Operating margin also declined to approximately 13.5%.

Sequentially, however, the business improved. Revenue increased from $2.15 billion in the first quarter and $2.53 billion in the second quarter to $2.66 billion in the third quarter. Net income rose from $210.9 million in the first quarter and $260.6 million in the second quarter to $280.1 million.

Cash flow has also improved from the beginning of fiscal 2025, although operating working capital remains a major use of cash. Toll Brothers generated $250.3 million in operating cash flow during the third quarter, up from $7.3 million in the first quarter but below $370.3 million in the year-earlier quarter. Inventory reached $11.65 billion, up from $11.07 billion a year earlier, indicating that capital remains heavily tied up in land, homes under construction and other housing inventory.

• Sequential earnings recovery: Third-quarter revenue increased approximately 5.0% from the second quarter, while net income rose 7.5%.
• Strong ongoing profitability: Toll Brothers remained solidly profitable, producing $280.1 million of net income and $2.97 of diluted EPS in the latest quarter.
• Improved operating cash flow versus early fiscal 2026: Operating cash flow increased from $7.3 million in the first quarter to $250.3 million in the third quarter.
• Share count reduction: Third-quarter basic weighted-average shares fell to 93.9 million from 98.4 million a year earlier, supported by $204.9 million of share repurchases during the quarter.
• Stronger equity base: Total common equity increased to $8.53 billion from $8.10 billion in the third quarter of fiscal 2025, helped by retained earnings.
• Lower total debt than a year earlier: Short- and long-term debt totaled approximately $2.77 billion at July 31, 2026, compared with $2.94 billion a year earlier.
• Cash remains substantial but is declining sequentially: Cash and equivalents were $1.06 billion, down from $1.20 billion at the end of the first quarter and $1.11 billion at the end of the second quarter.
• Financing activity remains active: The company issued $701.3 million of debt and repaid $752.5 million in the latest quarter, suggesting ongoing refinancing and capital-structure management rather than a major change in leverage.
• Year-over-year revenue contraction: Third-quarter revenue declined from $2.95 billion in the restated prior-year quarter, reversing the stronger growth seen earlier in fiscal 2026.
• Margin and EPS pressure: Gross margin, operating margin, net income and diluted EPS all deteriorated compared with the third quarter of fiscal 2025, while inventory increased and working-capital changes consumed $133.8 million of cash.

For investors, the key issue is whether Toll Brothers can convert its elevated inventory balance into sales without further margin erosion. The company’s balance sheet remains supported by more than $1 billion of cash and a growing equity base, but weaker year-over-year demand and profitability, combined with sizable share repurchases and recurring debt activity, warrant continued monitoring.