The July quarter
Toll Brothers reported net income of $280.1 million, or $2.97 per diluted share, for its fiscal third quarter ended July 31, down from $369.6 million and $3.73 a year earlier, in results published August 18.
Home sales revenues were $2.65 billion against $2.88 billion, on 2,662 deliveries compared with 2,959 — a 10% decline in units. Home sales gross margin fell to 23.9% from 25.6%, and the adjusted measure to 25.6% from 27.5%.
Net signed contracts rose on both measures: 2,508 homes worth $2.52 billion, against 2,388 homes worth $2.41 billion in the same quarter of 2025.
Backlog is shrinking
Backlog closed the quarter at $6.24 billion across 5,312 homes, down from $6.38 billion and 5,492 homes a year earlier. Deliveries exceeded new contracts during the quarter — 2,662 against 2,508 — which is what drives a backlog down.
Analysis: a backlog of 5,312 homes against a quarterly delivery rate near 2,700 represents close to two quarters of committed work. That is a comfortable position by industry standards and reflects the longer build times typical of larger, more customized homes.
The company reaffirmed full-year guidance of approximately $10.5 billion in home sales revenue at a 26.1% adjusted gross margin, implying a fourth quarter stronger than the third on margin.
The luxury segment's different exposure
Toll Brothers builds at price points well above the national median, and that changes how mortgage rates transmit to its business. A larger share of its buyers pay cash or make large down payments, which softens the direct effect of a 30-year fixed rate near 7%.
What that segment is exposed to instead is wealth. Buyers at these prices frequently fund purchases from equity in an existing home or from financial assets, so the relevant variables are home-equity levels and asset prices rather than the monthly payment on a conforming loan.
The quarter's numbers fit that reading: contract volume and value both rose year over year — demand was present — while margin fell nearly two points. The pressure showed up in what the company could charge relative to its costs, not in whether buyers appeared.
Capital returns during compression
The company repurchased roughly 1.4 million shares at an average price of $148.63 and returned $231 million to shareholders in total during the quarter.
Continuing buybacks through a period of margin compression is a capital-allocation decision rather than a statement about trading conditions, and it is one several large builders made in 2026. It supports per-share results while absolute earnings decline.
The comparison across the builder results of this year is instructive on segment rather than strategy. Toll Brothers at 23.9%, PulteGroup at 25.0% for its June quarter and KB Home at an adjusted 16.8% for its August quarter span nearly nine points of gross margin — a spread that tracks price point and product mix more closely than it tracks any single national market condition.