Toro Company (Toro (TTC)) shares were up nearly 2% on Thursday after the outdoor equipment maker reported fiscal second-quarter results that made analysts look like they were mowing with dull blades. The company beat on both the top and bottom lines and raised its full-year outlook, thanks in part to a surprising source of growth: the AI buildout boom.
Yes, the same company known for lawn mowers and snow blowers is also a key player in the underground infrastructure that powers data centers and broadband networks. And that business is booming.
The Numbers
For the quarter ended in April, Toro reported sales of $1.43 billion, up 8.1% from a year ago and well above the $1.39 billion analysts were expecting. Organic growth came in at 5.7%. Adjusted earnings rose 13% to $1.60 per share, beating the consensus estimate of $1.50.
This marks Toro's second consecutive quarter of double-digit earnings growth, a streak the company attributes to higher sales and improving profitability. Adjusted operating margin expanded 70 basis points to 14.4%, helped by cost-saving initiatives, pricing actions, and productivity improvements.
Free cash flow was a standout: it climbed to $266 million, up $181 million from the prior year, driven by lower inventory levels and improved working capital management. Free cash flow conversion hit 125%, meaning Toro generated more cash than its reported net income. During the first half of fiscal 2026, the company returned $361 million to shareholders through dividends and share repurchases.
The AI Connection
Chairman and CEO Rick Olson highlighted that Toro's Ditch Witch underground business delivered low double-digit revenue growth during the quarter, driven by very strong demand and increased production capacity. Ditch Witch makes equipment for trenching and underground construction, and it turns out that's exactly what you need when you're burying fiber optic cables and power lines for data centers.
Olson noted sustained demand for fiber, broadband, power utility, and data center infrastructure projects, saying demand remains strong across the product lineup. In other words, the AI buildout isn't just about Nvidia chips and server racks—it's also about the underground pipes and cables that connect them. And Toro is cashing in.
Segment Performance
The Professional segment, which includes golf and grounds, landscape contracting, and underground construction, saw sales rise 9.1% year over year (6% organic). Operating margin for the segment was 20.3%.
The Residential segment, which includes lawn mowers and snow throwers, posted 4.1% organic sales growth, benefiting from improved demand and easier comparisons with the prior year. Its operating margin improved 440 basis points to 9.8%.
Guidance Raise
Toro raised its fiscal 2026 adjusted earnings forecast to a range of $4.50 to $4.62 per share, up from $4.40 to $4.60. Analysts were expecting $4.55. The company also increased its sales outlook to $4.69 billion to $4.80 billion, compared with its prior forecast of $4.65 billion to $4.80 billion. Wall Street's consensus was $4.74 billion.
Management now expects Professional segment sales to grow 5% to 7% this year, while Residential segment sales are projected to remain broadly flat. For the third quarter, Toro expects mid-single-digit total sales growth, with Professional up mid-single-digit and Residential up low-single-digit.
The company continues to target high-single-digit earnings growth and free cash flow conversion of at least 120% for fiscal 2026.
At the time of publication, Toro shares were up 1.79% at $92.57.
