Toro digs into the data-center boom

Underground construction and AMP productivity drive a record-margin quarter as tariffs recede into the background.

TTC · Earnings Call · 2026-06-04

A strong quarter with a new growth engine

The Toro Company’s fiscal second quarter was a beat-and-raise affair. Sales rose 8% to $1.42 billion, adjusted EPS jumped 13% to $1.60, and management lifted full-year guidance to 4%–6.5% sales growth with adjusted EPS of $4.50–$4.62. The more interesting shift is where the growth is coming from. Ditch Witch — the underground construction business — delivered low double-digit organic growth, with JT 21 horizontal directional drills leading the way. “We now expect full year sales growth in the range of 4% to 6.5% and adjusted EPS in the range of $4.50 to $4.62.” — Richard Olson · 2026-06-04

The pivot: data centers become the demand engine

Perhaps the most telling signal in this report is the sudden emergence of Data centers as a top-tier keyword — it ranked second in the company’s own keyword trajectory this quarter, absent in all prior quarters. That reflects a fundamental shift in how Toro’s demand story is being told: not just turf and landscape, but the infrastructure that feeds AI and hyperscale computing.

Data centers as much as the work on the data center, it is all the work to get power to the data center, to get all the fiber, incredible amount of fiber to the data center from the trunk and also water would be the third. So it is kind of everything. To feed the data center.
Edric C. Funk · 2026-06-04

Management has been planting this seed for over a year. On the June 2025 call, Rick Olson was already tying the underground business to the same theme: “If you think of the drivers of fiber, utilities work, that's happening, and specifically the data infrastructure, the building of data centers, and all of the infrastructure that needs to go with that, the power that we're all talking about that's needed for those centers, all of that gets installed underground and uses our equipment.” — Rick Olson, Chairman and Chief Executive Officer · 2025-06-05 But it has now become a headline growth driver, not a side note. The horizontal directional drill — particularly the compact JT 21 for fiber-to-the-home and the large JT 120 for utility-scale work — is the direct beneficiary. “The JT 21 is the more recent 1. that is actually a small compact horizontal directional drill that you might see in your neighborhood installing fiber to the home.” — Edric C. Funk · 2026-06-04 This is a genuine company-unique pivot. While global keywords are full of data-center stories, Toro is one of the few picks-and-shovels suppliers that benefits from the physical build-out of power, water, and fiber to these facilities — a differentiated twist on the AI capex narrative.

AMP delivers margin and cash

The other major change is a step-change in profitability. Adjusted operating margin hit 14.4%, the highest in 12 quarters, driven by the AMP productivity program, facility closures, and portfolio pruning. “This represents our highest operating margin in the past 12 quarters and reflects the impact of our AMP productivity program.” — Angela C. Drake · 2026-06-04 That margin expansion flowed straight to cash flow: free cash flow conversion came in at 125%, and the company returned $361 million to shareholders in the first half. GAAP operating margin of 13.7%, up 40 bps, trails the adjusted figure but shows the same improving trend. The AMP initiative — launched in fiscal 2024 — is on track to deliver $125 million of run-rate savings by year-end. It has been the crucial offset to inflation and tariff pressure, as management acknowledged: “We have been able to offset tariffs in most cases, and we have been able to improve productivity more broadly.” — Richard Olson · 2026-06-04

Tariffs fade into the background

Tariffs, a dominant theme in prior calls, have become a non-event. The company now expects ~$120 million of gross tariff expense but also ~$20 million of refunds, resulting in a negligible net impact. “The punch line's going to be when it is all said and done, there is minimal impact to our current fiscal year.” — Richard Olson · 2026-06-04 This is a sharp contrast to the task-force-driven mode of 2025, when management was debating every scenario: “We've had a task force in place since last fall with a scenario for every possibility” — Rick Olson, Chairman and Chief Executive Officer · 2025-03-06 — a reminder of how far the company has moved from reactive tariff management to proactive productivity. The residential segment remains the weak spot — revenue was flat for the year after a soft spring — but professional continued to shine, with golf and grounds, landscape contractor, and especially underground all growing. The combination of a productivity machine and a new data-center-driven growth curve gives Toro a compelling narrative: it’s no longer just a lawnmower company; it’s an infrastructure enabler. Net result: the quarter marks a genuine inflection point. Toro’s operating leverage is improving, its cash generation is strong, and it is now riding a theme — the physical build-out of data centers — that has legs well beyond turf season. The stock itself has been range-bound over the past 90 days, but if this narrative holds, the market may start to reassess the multiple.