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December 22, 2025 • 4 min read
In the complex world of real estate, few metrics tell a story quite like the annual report of a major luxury homebuilder. Toll Brothers, Inc. (TOL), the nation’s leading builder of luxury homes, recently released its financial results for the fiscal year ended October 31, 2025. By digging into their latest 10-K filing, we can gauge not just the health of the company, but also the temperature of the high-end housing market in an era of fluctuating interest rates.
Toll Brothers operates primarily by acquiring land, developing communities, and building luxury residences across the U.S. While they compete with mass-market giants like D.R. Horton or Lennar, Toll Brothers differentiates itself by targeting affluent buyers with higher price points and customizable options. Let's break down the income statement to see how they navigated the 2025 fiscal landscape.
To understand how Toll Brothers converts home sales into profit, we can look at the flow of capital through their business. The diagram below illustrates their income statement for the fiscal year:
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Toll Brothers generated $10.97 billion in total revenue for fiscal 2025, a slight increase of roughly 1% compared to the previous year. This revenue was driven primarily by the delivery of 11,292 homes, a 4% increase in volume. This indicates that despite economic headwinds, the company was successful in getting keys into the hands of customers.
However, moving down the income statement, the picture becomes more mixed. Net income fell by 14% to $1.35 billion, down from $1.57 billion in 2024. Consequently, diluted earnings per share (EPS) dropped to $13.49.
Why the drop in profit despite higher deliveries? The answer lies largely in the Cost of Revenues. The cost to build and sell homes rose faster than the revenue generated from them. Home sales cost of revenues increased to 74.4% of home sales revenues, up from 73.4% the prior year. In the construction industry, a 100-basis point compression in gross margin is significant, reflecting higher land, labor, or material costs that couldn't be fully passed on to the buyer.
Toll Brothers breaks its revenue down by geography, providing a fascinating map of U.S. luxury demand:
The data suggests a shift in momentum away from the West Coast and toward the Mountain states and the Northeast, potentially reflecting broader migration trends or regional affordability constraints even within the luxury sector.
While the 2025 delivery numbers were solid, the most critical forward-looking metric in the filing—Backlog—flashed a warning sign. Backlog represents homes that are under contract but not yet delivered; it constitutes the company's future revenue pipeline.
At the end of fiscal 2025, the value of homes in backlog stood at $5.49 billion, a sharp 15% decrease from the previous year. Even more striking, the number of units in backlog dropped by 22% to 4,647 homes.
This contraction suggests that while Toll Brothers successfully cleared its existing pipeline, replenishing it has been harder. The value of net signed contracts also dipped by 2% to $9.85 billion.
Toll Brothers' 2025 fiscal year was a story of execution amidst resistance. They successfully delivered more homes and slightly grew top-line revenue, proving the resilience of the luxury consumer. However, rising construction costs eroded margins, and a double-digit decline in backlog units suggests that 2026 may present challenges if demand does not reaccelerate.
For investors and industry watchers, the focus going forward should be on whether the Mountain region can continue its heavy lifting and if the contraction in backlog stabilizes. In a high-stakes game of luxury real estate, Toll Brothers has cleared the 2025 hurdle, but the track ahead looks steeper.
Last updated: December 22, 2025