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Toll Brothers (TOL) posted mixed 4Q25 results with EPS significantly missing while revenue of $3.42 bln slightly beat expectations, driving shares sharply lower amid soft FY26 guidance and margin pressure. FY26 deliveries outlook of 10,300-10,700 homes fell short of expectations, signaling caution for another tough year despite a strong balance sheet.

• In 4Q25, TOL delivered 3,443 homes, flat yr/yr but beating guidance of 3,350, with revenue up 5% to $3.4 bln. EPS of $4.58 missed expectations largely due to the delayed Apartment Living sale.
• FY26 guidance assumes no demand improvement and starts from a 4,647-home backlog, bridging to about 10,500 deliveries via specs (3,000 under construction plus 1,500 starts) and 1,500 build-to-order homes.
• Margins continue to face pressure with 4Q25 adjusted home sales gross margin at 27.1% due to higher incentives (about $80k per home versus $68k yr/yr). 
• TOL guided for home sales gross margin of 26.25% for 1Q26 and 26.0% for FY26 despite flat land costs and modest construction deflation.
• Trends remain choppy but stable as Q4 orders dipped slightly yr/yr yet improved sequentially. 
• Early FY26 deposits held flat to a strong prior period, and affluent buyers (26% cash) with low cancellations support the $1 mln price point.
• TOL's strategy emphasizes specs at about 54% of deliveries (similar for FY26), multifamily exit for core focus, 8-10% community growth, and $650 mln buybacks.

Briefing.com Analyst Insight:

TOL's Q4 execution was solid but overshadowed by conservative FY26 guide and margin reset, reflecting affordability headwinds and no assumed spring rebound. Incentives now fully explain the 130-bps gross margin drop to 26% for FY26, risking further pressure if specs linger unsold. Yet TOL's luxury niche, coastal strength, and capital recycling position it well for upside if rates ease or demand firms. The EPS miss was largely timing-related from the Apartment Living delay, not a core operations red flag. With net debt-to-capital in the mid-teens and robust liquidity, TOL maintains flexibility to outperform if market conditions improve modestly.