Toll Brothers’ fiscal Q3 2026 net signed contract value increased approximately 5% to $2.52 billion from $2.41 billion, even as home sales revenue declined about 8% to $2.65 billion from $2.88 billion, creating a divergence between current-period deliveries and forward sales activity.
The number of homes under newly signed contracts increased to 2,508 from 2,388, also approximately 5%, while delivered homes declined to 2,662 from 2,959. The combination suggests that demand entering the backlog improved year over year even as previously contracted homes flowing through revenue declined.
Toll Brothers generated an average delivered home price of approximately $996,400 during the quarter. The company exceeded the midpoint of its home-sales-revenue guidance despite what management described as a challenging housing market.
Quarter-end backlog remained substantial at $6.24 billion across 5,312 homes, compared with $6.38 billion and 5,492 homes a year earlier. While both backlog value and units declined, the average price per home in backlog increased to $1.174 million from $1.161 million.
Cancellation trends also improved. Quarterly cancellations represented 5.4% of signed contracts, down from 7.5% a year earlier, while cancellations as a percentage of beginning-quarter backlog declined to 2.6% from 3.2%.
Profitability nevertheless declined with lower deliveries and narrower margins. Home-sales gross margin fell to 23.9% from 25.6%, while adjusted home-sales gross margin decreased to 25.6% from 27.5%. Income from operations declined to $359.2 million from $487.7 million.
Net income fell to $280.1 million, or $2.97 per diluted share, from $369.6 million, or $3.73 per share. The quarter included $17.7 million of pretax inventory impairments in home-sales cost of revenue, compared with $23.3 million a year earlier.
Toll Brothers continues to invest in future community growth despite the softer delivery comparison. Selling communities increased to 471 from 420 a year earlier, and the company spent approximately $451.9 million on land during Q3 to purchase 2,784 lots. Toll Brothers ended the quarter with approximately 75,500 owned and optioned lots.
The company is also returning significant capital to shareholders. Toll Brothers repurchased approximately 1.4 million shares for $206.8 million during Q3 and returned a total of $231 million through buybacks and dividends. Year-to-date shareholder returns reached $506 million, and management increased its projected fiscal 2026 share-repurchase total to $700 million from $650 million.
Liquidity remains substantial. Toll Brothers finished Q3 with approximately $1.06 billion of cash and another $2.24 billion available under its $2.38 billion revolving credit facility. Its debt-to-capital ratio was 24.5%, while net debt-to-capital was 15.6%.
For fiscal 2026, Toll Brothers continues to expect approximately $10.5 billion of home-sales revenue, 10,500 to 10,600 home deliveries and an adjusted home-sales gross margin of 26.1%. It expects to end the year with 480 to 490 selling communities, supporting continued expansion into fiscal 2027.
The increase in signed contract value is therefore an important counterpoint to the lower reported revenue and earnings. Current-quarter closings reflect previously contracted business, while new contracts provide a more forward-looking indication of demand entering future periods.
KEY QUOTES:
“Toll Brothers delivered solid third quarter results in a challenging market. We exceeded the midpoint of our guidance with $2.65 billion of home sales revenues, delivering 2,662 homes at an average price of $996,400. Our adjusted gross margin was 25.6%, or 35 basis points above guidance, and we earned $2.97 per diluted share. We also grew net signed contracts by 5% year over year.”
“Our balance sheet remains very strong, with ample liquidity, low leverage and substantial operating cash flows. This financial strength enables us to continue to invest in growth opportunities while returning capital to stockholders and driving long-term value creation. Consistent with this strategy, we are increasing our projected share repurchases for fiscal 2026 from $650 million to $700 million”
Karl K. Mistry, Chief Executive Officer of Toll Brothers
