Why Toro's (TTC) Revenue Growth Slowed in Q3 2025

The Toro Company's Q3 2025 earnings report revealed a 2% year-over-year revenue decline to $1.13 billion, a stark contrast to the broader U.S. landscaping industry's projected $186 billion market size for 2025Landscaping Services in the US - Market Research^[3]. This slowdown, particularly in the Residential segment, underscores the interplay of market saturation and evolving consumer behavior, while the Professional segment's resilience highlights strategic adaptability.

Market Saturation in Residential Landscaping

The Residential segment, which accounts for 61% of the U.S. landscaping marketLandscaping Services in the US - Market Research^[3], faced a 27.9% revenue drop in Q3 2025, attributed to “weak homeowner demand and channel caution”The Toro Company Reports Fiscal 2025 Third Quarter Results^[1]. This decline reflects the sector's maturation. With the market growing at a 5.7% CAGRLandscaping Services in the US - Market Research^[3], competition has intensified, particularly among small businesses, which dominate a highly fragmented industry (top five firms hold just 8.6% market share)Landscaping Services in the US - Market Research^[3]. Suburban migration and rising home equity have driven residential growth, but these tailwinds are now encountering diminishing returns as demand stabilizes.

Moreover, the divestiture of non-core assets like the Trencor brand and American Augers' auger boring categoryThe Toro Company^[2] has reshaped Toro's portfolio, reducing baseline revenue. While these moves aim to streamline operations, they also highlight the challenges of sustaining growth in a saturated market.

Shifting Consumer Behavior: Sustainability and Technology

Consumer preferences are rapidly evolving, favoring sustainability and technology-driven solutions. Demand for drought-tolerant landscapes, smart irrigation systems, and ESG-compliant retrofitsLandscaping Services in the US - Market Research^[3] is surging, particularly in water-stressed regions like California. Smart irrigation alone is projected to grow at 12% CAGR, reaching $5.8 billion by 2033The Toro Company Reports Fiscal 2025 Third Quarter Results^[1].

Toro's Residential segment, however, has struggled to align with these shifts. While the company offers smart irrigation solutionsThe Toro Company Reports Fiscal 2025 Third Quarter Results^[1], weak homeowner demand suggests a lag in adoption or market saturation in traditional residential services. Meanwhile, commercial clients are increasingly prioritizing ESG compliance and cost efficiency, areas where Toro's Professional segment excels. This segment reported a 5.7% revenue increase in Q3 2025, driven by demand for golf and grounds equipment and underground construction toolsThe Toro Company Reports Fiscal 2025 Third Quarter Results^[1].

Strategic Resilience in the Professional Segment

The Professional segment's 21.3% marginThe Toro Company Reports Fiscal 2025 Third Quarter Results^[1], up 250 basis points year-over-year, underscores Toro's ability to capitalize on commercial trends. Productivity gains from the AMP program and cost savingsLandscaping Services in the US - Market Research^[3] have bolstered profitability, while ESG-driven retrofits and drought-resistant landscaping projectsLandscaping Services in the US - Market Research^[3] align with commercial clients' priorities. This segment's performance illustrates how strategic focus on high-growth, sustainable niches can offset residential headwinds.

Toro's recent partnership with global agency 54 to expand brand visibilityLandscaping Services in the US - Market Research^[3] further signals its intent to leverage these trends. However, rising costs—such as a 145% tariff on Chinese imports of small engines and irrigation partsLandscaping Services in the US - Market Research^[3]—pose risks to competitiveness unless mitigated through innovation or pricing adjustments.

Leadership and Long-Term Outlook

The appointment of Edric C. Funk as President and COOThe Toro Company^[2] introduces a leadership shift that could reshape Toro's strategic direction. His experience in operational efficiency and market expansion may prove critical in addressing residential saturation while accelerating Professional segment growth.

Despite Q3's challenges, Toro maintained its adjusted diluted EPS guidance at $4.15The Toro Company Reports Fiscal 2025 Third Quarter Results^[1], reflecting confidence in cost discipline and the Professional segment's trajectory. However, the company must navigate a dual challenge: revitalizing the Residential segment through sustainable innovation and scaling commercial offerings to capture ESG-driven demand.

Conclusion

Toro's Q3 2025 revenue slowdown is a microcosm of broader industry dynamics. Market saturation in residential landscaping, coupled with a lag in aligning with sustainability and technology trends, has dampened growth. Conversely, the Professional segment's resilience highlights the rewards of adapting to commercial-sector shifts. As the U.S. landscaping market approaches $245 billion by 2030Landscaping Services in the US - Market Research^[3], Toro's ability to balance divestitures, innovation, and strategic leadership will determine its long-term success.

Historical data from earnings releases since 2022 offers additional context for investors. A backtest of TTC's stock performance following earnings announcements reveals that a simple buy-and-hold strategy generated a cumulative 9.0% return 30 days post-event, significantly outperforming the -0.4% benchmark. This outperformance became statistically significant from day 20 onward, with a 100% win rate through day 30Landscaping Services in the US - Market Research^[3]. While short-term (1–5 day) effects were muted, these results suggest that long-term investors who remained invested post-earnings have historically been rewarded, despite the company's near-term challenges.