Toll Brothers 2025 Q3 Earnings Slight Net Income Dip Despite Revenue Growth

Toll Brothers (TOL) reported its fiscal 2025 Q3 earnings on August 28, 2025, showing mixed results. The company delivered 8% revenue growth year-over-year, but net income fell slightly by 1.3%. Management provided optimistic guidance for the remainder of the year and highlighted strong operational metrics, including a resilient luxury home market.

Revenue
Toll Brothers generated $2.95 billion in total revenue for Q3 2025, representing an 8% year-over-year increase, driven primarily by its home sales segment. The company reported $2.88 billion in home sales revenue, reflecting the delivery of 2,959 homes at an average price of $974,000. Additionally, land sales and other revenue accounted for $64.14 million, rounding out the total revenue figure. This performance underscores the company’s continued strength in the high-end housing sector despite broader market affordability challenges.

Earnings/Net Income
Earnings per share (EPS) for Toll Brothers rose by 3.3% to $3.76 in Q3 2025, up from $3.64 in the same period the previous year. However, net income declined slightly to $369.62 million, a 1.3% decrease from $374.61 million in Q3 2024. While the EPS growth is a positive sign, the net income decline suggests margin pressures or operational inefficiencies may be emerging, warranting closer analysis.

Price Action
Toll Brothers’ stock price moved modestly in the days following the earnings report. While it dipped 0.27% in the latest trading day, the stock demonstrated strength over the past month, rising 13.03% month-to-date. The stock also gained 5.55% during the most recent full trading week, indicating strong investor confidence despite mixed earnings results.

Post-Earnings Price Action Review
A historical trading strategy of buying TOL when earnings beat expectations and selling after 30 days has proven highly effective, delivering an impressive 141.04% total gain and a compound annual growth rate (CAGR) of 19.70%. This approach has exhibited strong risk-adjusted returns, with a Sharpe ratio of 0.52, a maximum drawdown of 0.00%, and volatility of 38.00%. These metrics suggest that investors who acted on earnings surprises have historically benefited from favorable returns and relatively low downside risk.

CEO Commentary
Douglas C. Yearley, Jr., chairman and CEO of Toll Brothers, expressed confidence in the company’s third-quarter performance, highlighting the delivery of 2,959 homes and an average price of $974,000. The company reported an adjusted gross margin of 27.5%, exceeding guidance by 25 basis points, and an SG&A margin of 8.8%, which improved by 40 basis points. Yearley acknowledged ongoing affordability challenges and uncertain economic conditions but remained optimistic about the resilience of the luxury home market. He emphasized strategic pricing and disciplined land acquisition to maximize profitability and returns, as well as robust cash flow and a strong balance sheet to support long-term success.

Guidance
For the fourth quarter of 2025, Toll Brothers expects to deliver between 3,350 and 11,200 homes, with average delivered prices ranging from $970,000 to $980,000. The company anticipates adjusted gross margins of 27.00% and 27.25%, respectively. SG&A expenses are expected to remain between 8.3% and 9.5% of home sales revenue. Toll Brothers also projected period-end community counts of 440 to 450, other income and land gross margin of $65 million and $110 million, and an effective tax rate of 25.5% for the quarter and 25.1% for the full year.

Additional News
A Seeking Alpha article published on August 8, 2025, regarding Toll Brothers (TOL) was inaccessible, denying readers access to potential updates or commentary on the company's stock. No further non-earnings-related news within the three weeks prior to the earnings release, from August 28, 2025, was available for inclusion. As such, this section remains limited to the original earnings report and commentary. No recent corporate actions such as M&A activity, C-level changes, or dividend/buyback announcements were publicly accessible during this time.