CoStar’s third quarter was marked by strong top-line momentum but a negative market reaction, as investors focused on the company’s expanding investments and contracting operating margin. Management highlighted robust revenue contributions from the recent Domain acquisition and continued acceleration in its residential portals, particularly Homes.com. CEO Andy Florance noted, “Homes.com is now the fastest-growing revenue product we’ve ever launched,” underscoring the portal’s rapid subscriber and bookings growth. However, the company’s decision to increase spending on product development and sales force expansion weighed on profitability.
Is now the time to buy CSGP? Find out in our full research report (it’s free for active Edge members).
CoStar (CSGP) Q3 CY2025 Highlights:
- Revenue: $833.6 million vs analyst estimates of $814.4 million (20.4% year-on-year growth, 2.4% beat)
- Adjusted EPS: $0.23 vs analyst estimates of $0.19 (21.8% beat)
- Adjusted EBITDA: $114.6 million vs analyst estimates of $93.33 million (13.7% margin, 22.8% beat)
- Revenue Guidance for Q4 CY2025 is $890 million at the midpoint, above analyst estimates of $861.3 million
- Adjusted EPS guidance for Q4 CY2025 is $0.27 at the midpoint, below analyst estimates of $0.30
- EBITDA guidance for the full year is $420 million at the midpoint, above analyst estimates of $409.7 million
- Operating Margin: -6.1%, down from 3.4% in the same quarter last year
- Market Capitalization: $29.4 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From CoStar’s Q3 Earnings Call
- Peter Christiansen (Citi) asked about seasonality impacts on bookings and whether residential agent churn would affect future trends. CEO Andy Florance stated Homes.com bookings growth remains linear with minimal seasonality outside typical holiday slowdowns.
- Stephen Sheldon (William Blair) inquired about sequential booking trends and sales force productivity. CFO Chris Lown reported ramping sales force capacity is just beginning to impact results and expects further productivity gains as hiring stabilizes.
- Ryan Tomasello (KBW) questioned sustained growth at Apartments.com despite the larger sales team. Lown responded that increased property coverage and rooftop expansion are driving growth, though acknowledged seasonality in multifamily bookings.
- Curtis Nagle (Bank of America) asked how reallocating software spending toward AI would affect total investment levels. Florance clarified that shifting 50% of Homes.com development to AI is a reallocation, not an increase in total spend.
- Brett Huff (Stephens) requested details on Homes.com bookings and rep productivity. Florance explained rapid headcount growth temporarily impacts productivity, but incremental hires continue to generate positive ROI, with modest price increases also aiding penetration.
Catalysts in Upcoming Quarters
In the coming quarters, the StockStory team will be monitoring (1) the pace of AI feature adoption and its impact on Homes.com engagement and lead generation; (2) the integration progress and revenue contribution of Domain and other international businesses; and (3) how quickly sales force expansion translates into higher bookings and improved margins. Additionally, ongoing litigation outcomes and their impact on market share will be closely watched.
CoStar currently trades at $69.38, down from $78.24 just before the earnings. At this price, is it a buy or sell? The answer lies in our full research report (it’s free for active Edge members).
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