CoStar Group delivered an excellent Q3 2025, achieving $834 million in revenue (20% YoY growth) and $115 million in Adjusted EBITDA (51% YoY growth). This marked the 58th consecutive quarter of double-digit revenue growth, driven by a 92% surge in net new bookings to $84 million. The Residential Portfolios segment, led by Homes.com and Apartments.com, saw revenue grow 31.3% year-over-year to $411 million on a pro forma basis, with Homes.com bookings increasing 53% quarter-over-quarter. Management raised full-year 2025 revenue guidance to $3.23-$3.24 billion and Adjusted EBITDA to $415-$425 million, citing better-than-expected performance and expense discipline. Strategic highlights include the aggressive integration of AI into Homes.com (50% of software dev resources), the successful $1.9 billion acquisition of Domain, and the launch of multiple lawsuits against competitor Zillow alleging IP theft and antitrust violations.
| Metric | Value | Change |
|---|---|---|
| Q3 Revenue | $834 million | +20% YoY |
| Q3 Adjusted EBITDA | $115 million | +51% YoY |
| Net New Bookings | $84 million | +92% YoY |
| Commercial Info Margin | 47% | +400 bps YoY |
| Homes.com Bookings | $16 million (annualized) | +53% QoQ |
| Apartments.com Revenue | $303 million | +11% YoY |
| CoStar Core Revenue | $277 million | +8% YoY |
| Cash Balance | $2.0 billion | N/A |
Homes.com is emerging as the primary growth engine, described as 'the fastest-growing revenue product we've ever launched.' Management reported a 53% quarter-over-quarter increase in annualized net new bookings to $16 million and a 1,225% year-over-year increase. The platform now boasts over 26,000 subscribing agents and 115 million unique monthly visitors. This rapid scaling is supported by a 'Your Listing, Your Lead' value proposition which management claims creates goodwill among agents, contrasting with competitors' 'lead diversion' models.
CoStar is making a massive strategic pivot towards Artificial Intelligence, allocating 50% of all Homes.com software development efforts towards AI features. The launch of 'AI Smart Search' allows for natural language queries and has already demonstrated significant improvements in user engagement (users viewed 37% more listing pages). CEO Andy Florance believes this investment will unlock 'tremendous value' and defend against general-purpose AI entrants, positioning specialized real estate data as the key moat.
The company is aggressively leveraging its recent acquisitions to drive cross-selling and global expansion. The $1.9 billion Domain acquisition closed in August, immediately adding $25 million in revenue, with plans to introduce LoopNet and CoStar products to Australia within 18 months. Simultaneously, the integration of Matterport is deepening; 'Matterport Max' subscriptions are generating $5,000+ in annual revenue, and Matterport usage is driving 40x higher listing views for subscribers, creating a sticky premium product.
Management is actively working to dismantle the competitive advantage of Zillow through litigation and regulatory pressure. CoStar filed a lawsuit against Zillow for IP theft, while CEO Florance detailed five other federal lawsuits and an FTC suit targeting Zillow's business model. Florance explicitly stated these actions target the 'heart of Zillow's operations,' suggesting CoStar views legal and regulatory enforcement as a strategic lever to gain market share in the residential portal space.
Operational efficiency is improving despite heavy investment. The Commercial Information and Marketplace businesses achieved a 47% profit margin in Q3, up from 43% a year prior. Management emphasized that the massive investment in AI for Homes.com is a reallocation of existing resources rather than new spend, and they expect 'same or lower spend on Homes.com investment in '26,' indicating a disciplined approach to scaling the high-growth residential segment.
The company is embroiled in significant legal warfare with Zillow. While management frames this as attacking a competitor, litigation is inherently unpredictable, costly, and could distract management. The aggressive rhetoric regarding Zillow's 'alleged' misconduct and the 'unprecedented wave of lawsuits' suggests a high-stakes battle that could result in reputational damage or unexpected legal liabilities if countersuits arise.
Rapid headcount expansion at Homes.com (500 reps in production, 150 in preproduction) creates execution risk. CEO Florance admitted that bringing in 'classes of 100-and-some' leads to a drop-off in per-person productivity and that the company has 'capped the growth of salespeople to allow for training and onboarding to catch up.' Investors must monitor if this rapid scaling dilutes sales efficiency or increases churn.
The core CoStar business, while stable, is growing significantly slower (8% YoY) than the residential segments. Management cited 'continued volatility in the commercial real estate sector.' While reacceleration is expected, the heavy reliance on the cyclical commercial real estate market for the legacy cash flow remains a vulnerability if macro conditions worsen.
Integration complexity is high with two major recent moves (Domain and Matterport). While early Domain metrics are positive, management noted the business was previously 'constrained' and requires 'rationalizing' its product portfolio. Successfully integrating Australian operations and Matterport's technology stack simultaneously requires flawless execution to avoid synergy leakage.
Overall: Management exhibited a highly confident and aggressive demeanor throughout the call. CEO Andy Florance was particularly ebullient regarding the growth of Homes.com and the company's AI initiatives, frequently using superlatives like 'amazing' and 'hyper accelerated.' He displayed a combative tone towards competitor Zillow, dedicating a significant portion of his prepared remarks to detailing legal challenges facing Zillow. CFO Chris Lown provided a grounded counterbalance, emphasizing 'laser focused' expense discipline and prudent capital allocation, though he echoed the CEO's enthusiasm for the company's momentum.
Confidence: HIGH - Management demonstrated high confidence through specific guidance raises, detailed metrics on product performance (e.g., 53% QoQ booking growth at Homes.com), and aggressive strategic commitments like allocating 50% of software development to AI. The tone was assertive regarding competitive positioning.
$3.23 billion - $3.24 billion
$415 million - $425 million
$885 million - $895 million
$150 million - $160 million
7% (raised from 6-7%)
11% - 12%
10% - 11%
Hedging & Uncertainty: Management generally used strong, definitive language ('We achieved,' 'I believe,' 'We expect'), particularly regarding growth and competitive positioning. However, CEO Andy Florance employed hedging when discussing specific timelines for margin targets, stating, 'I don't have a specific date for that' regarding 40% residential margins. He also used probabilistic language regarding AI traffic sources, noting 'GEO will become much bigger top of funnel traffic feed' rather than stating it definitively has. The use of 'alleged' when describing Zillow's misconduct in the lawsuits is a necessary legal hedge, contrasting with his otherwise unbridled confidence in CoStar's superiority.
We achieved another excellent quarter for CoStar Group... - Andrew Florance, CEO
I believe we are about to see our products hyper accelerated by some of the most exciting facilitating AI technologies I could have ever imagined. - Andrew Florance, CEO
Zillow is under siege facing an unprecedented wave of lawsuits. - Andrew Florance, CEO
We are laser focused on expenses. - Christian Lown, CFO
This is our single biggest commitment by far to any software development effort. - Andrew Florance, CEO
I believe that few products are better positioned to cohesively capitalize on this opportunity than is Homes.com... - Andrew Florance, CEO
Analyst Sentiment: Analysts were generally positive, probing for details on the sustainability of the booking surge and the mechanics of the sales force ramp. There was skepticism regarding the seasonality of the residential business, which management countered by citing linear growth trends.
Management Responses: Management was direct and data-driven in responses. Andy Florance was enthusiastic, often pivoting answers to highlight competitive advantages or AI capabilities. Chris Lown provided the financial guardrails, confirming that AI investments were reallocations rather than new spend and that sales productivity was tracking to expectations despite the rapid hiring.
Analysts inquired about the 10% sequential decline in bookings, seeking to understand if it was seasonal or indicative of demand softness. Florance clarified that while Apartments.com has seasonality, Homes.com growth is currently linear and unaffected by holidays.
Questions focused on the specific drivers of the 53% QoQ booking increase at Homes.com. Management attributed it to sales force productivity and pricing adjustments, noting they are 'capping' headcount growth to ensure training keeps up.
Discussion regarding the cost of the 50% AI allocation. Florance clarified this is a reallocation of existing budget, not an increase, and expects total spend on Homes.com in 2026 to be 'same or lower.'
Inquiry into the timeline for 40% residential margins. Florance hedged, citing precedent models (Rightmove, REA) but offering no specific date, focusing instead on the 'progression of EBITDA margin.'
CoStar Group is executing on a massive multi-pronged growth strategy that is just beginning to bear fruit. The reacceleration of the legacy CoStar business to 8% growth provides a stable baseline, but the thesis rests on the 'hyper accelerated' growth of Homes.com and the strategic integration of AI. The shift to a 'Your Listing, Your Lead' model is resonating with agents (evidenced by surging NPS and subscribers) and poses a structural threat to Zillow's lead diversion model. Furthermore, the aggressive legal and regulatory pressure on Zillow creates a potential opportunity for CoStar to capture market share. The acquisition of Domain and Matterport expands the TAM and deepens the moat through proprietary data and digital twins. While execution risks regarding sales force ramp and integration exist, the 58th consecutive quarter of double-digit growth and the raised guidance demonstrate management's ability to deliver. The company is positioning itself as the dominant specialized AI player in real estate, justifying a premium valuation.
Management acknowledged 'continued volatility in the commercial real estate sector,' which has constrained the legacy CoStar business to 8% growth. However, they noted a reacceleration in net new bookings to the highest levels since 2022, suggesting a potential bottoming or adaptation by clients.
The FTC lawsuit against Zillow and Redfin for suppressing competition signals a heightened regulatory environment for real estate portals. CoStar is positioning itself as a beneficiary of this enforcement, arguing that its model aligns with antitrust laws while competitors' 'walled gardens' do not.
Management views Generative AI as a transformative 'facilitating technology' rather than a threat. They believe specialized real estate data (CoStar's asset) is required to make AI useful in this vertical, predicting that general AI models will fail to displace specialized portals.