Toro Turns the Page: Data Centers, a CEO Handoff, and the End of AMP
Q3 shows demand outside turf isn't cyclical — it's structural, and the next productivity era begins.
TTC · Earnings Call · 2026-09-03
A Quarter of Change
Toro's fiscal Q3 was another solid beat — net sales up 8.4%, adjusted EPS of $1.33, and full-year guidance raised — but the most telling details are about where the growth is coming from and who will lead it. The company has made a clear strategic shift toward underground construction and data center infrastructure, a theme that barely existed in the same form a year ago. "Data centers are a deal for us, but it's just one slice of the demand that we see in that area," said Chairman and CEO Richard Olson, pointing to a project where 25 drills and 14 miles of underground work were needed to power a single site in Frederick, Maryland. “It's not so much the work that's done on the site, it's the work that's done to get the data, the power, and the utilities to the site.” — Richard M. Olson, Chairman of the Board and Chief Executive Officer · 2026-09-03 That's a meaningful shift for a company historically seen as a lawn-and-garden player. data centers have emerged as a core demand driver for Toro's Ditch Witch business, and management is investing heavily to unlock capacity. The company also continues to lean into Tornado acquisition, which expands its toolkit on those same job sites. Total revenue climbed to $1.4B in Q3, up 8% year-over-year, with both Professional and Residential segments growing over 8%.The End of AMP and the Next Act
The Accelerating Maximum Productivity (AMP) program, launched in 2024, has been central to margin expansion, offsetting tariff and inflationary pressures. CFO Angie Drake confirmed the program will exceed its $125 million run-rate savings target by year-end. But AMP is ending, and investors are wondering what comes next — especially since management hints at a new initiative with a growth component. "We don't expect to deviate or lose ground on that, but we are in fact looking at what might be next and not ready to announce anything specific today," said President and COO Edric Funk, who will take over as CEO. “We do anticipate having another initiative and likely will have some element of growth that's a part of that.” — Edric C. Funk, President and Chief Operating Officer · 2026-09-03 The market is skeptical about how durable the margin gains are without a formal program. Toro's operating margin in Q3 was 13.7%, up 40 bps from a year ago, but the improvement was largely concentrated in Residential, which saw margins expand 400 bps to 5.9% — still far from the company's double-digit target. AMP initiative was the engine, but management is signaling a pivot toward growth-oriented productivity, possibly tied to new technologies and autonomous offerings.Tariff Refunds: A Cautionary Trim
Toro had earlier guided to $12 million in IEPA tariff refunds in Q4; that was cut to $7 million, with $5 million reclassified outside Phase 2. "The refund timing of this portion of IEPA refunds is uncertain given the current process," Drake said. “If they are available in the future, we will include them in our guidance at that time.” — Angela C. Drake, Vice President and Chief Financial Officer · 2026-09-03 This is a subtle but notable change from just two quarters ago, when management expressed greater conviction on refunds. In June, they said, "We also received more clarity on the refund process. I will emphasize more clarity, not complete clarity." “For us, being largely U.S.-based in our manufacturing, the IEPA tariffs were not as big of an impact to us.” — Richard Olson · 2026-06-04 The $5 million shift is small relative to the $1 billion revenue base, but it underscores the ongoing uncertainty in trade policy.Weather, Autonomous, and the Leadership Handoff
Aside from data centers, weather remains a wildcard — Toro is closely watching el niño patterns that could affect snow sales in Q4. The company is also pushing autonomous golf equipment like the TurfPro and GEO-Link, expecting a spring launch of the larger Reelmaster 5010H. These initiatives are designed to address chronic labor shortages at golf courses, a structural trend rather than a cyclical one. Amid all this, Rick Olson is retiring after a decade leading the company. "I am also confident in The Toro Company's future with Edric at the helm," he said.Toro's 90-day price trend is slightly negative, down 4%, even after a strong earnings report, suggesting the market is waiting for clarity on the post-AMP strategy and tariff landscape. But the shift toward infrastructure and automation gives the company a longer runway than its turf legacy might suggest. The real test will be whether the new CEO can sustain the margin discipline and find fresh growth levers — likely through a combination of underground, autonomous, and data-center-driven demand.He is an exceptional leader who understands our business, customers, and people, and I know that he and the team will continue to build on our momentum.