* Quarter hurt by delayed closings in California

* Higher costs also weigh on adjusted gross margins

* Shares fall more than 7 pct (Adds conference call details, revenue forecast, share movement)

By Sanjana Shivdas

May 22 (Reuters) - U.S. luxury homebuilder Toll Brothers Inc's second-quarter profit missed Wall Street estimates on Tuesday, as delayed closings in California and rising costs put pressure on its adjusted gross margins, sending its shares down 7.1 percent. The company said California was 27 percent of revenue in the quarter and is becoming a larger percentage of deliveries. At the same time, Toll Brothers is facing higher costs even as demand for expensive homes remains strong.

In the quarter orders, an indication of future revenue for homebuilders, rose 6.2 percent to 2,666 homes.

Adjusted gross margins, which was also affected by rising prices for building materials and labor cost pressure, slipped to 22.5 percent from 24.3 percent a year ago. Costs rose 20.5 percent to $1.29 billion.

The Pennsylvania-based company said the average price of homes in the reported quarter rose to $847,900 from $832,400 a year earlier, while the number of homes sold rose to 1,886 from 1,638.

The company raised its forecast for the number of homes it expects to sell in fiscal 2018 to between 8,000 and 8,500 units, from between 7,800 and 8,600 units.

Toll Brothers also raised the lower end of its full-year average price forecast to $830,000 from $820,000, but kept the higher end unchanged at $860,000.

The luxury homebuilder raised the lower end of its full-year revenue range outlook, now expecting between $6.64 billion and $7.31 billion, from a prior estimate of $6.40 billion and $7.40 billion.

Homebuilders PulteGroup Inc and Lennar Corp have also raised their annual home sales forecast, indicating homebuyers' optimism in an improving economy despite rising mortgage rates.

Net income fell to $111.8 million, or 72 cents per share, in the quarter ended April 30, from $124.6 million, or 73 cents per share, a year earlier. The company recorded an inventory charge of $13.8 million in the latest second quarter.

Revenue rose to $1.59 billion from $1.36 billion a year ago.

Analysts on average had expected a profit of 76 cents per share and revenue of $1.58 billion. (Reporting by Sanjana Shivdas in Bengaluru; Editing by Arun Koyyur, Bernard Orr)