Key Highlights

  • CoStar Group's (NASDAQ:CSGP) second-quarter results, released, were on the face of it the best in its recent history.
  • Within June-quarter revenue of US$925m, the core CoStar service contributed US$337m (up 9%), LoopNet US$87m (up 14%), other commercial products US$57m (down from US$60m) and Residential Real Estate US$444m (up from US$335m).
  • CoStar Suite and LoopNet together generated US$424m of quarterly revenue at high margins, growing 9% and 14% respectively, and face no competitor with comparable depth of researched property data.
  • The Homes.com return is still unproven. Residential adjusted EBITDA turned positive by cutting spending, not through a visible step-change in monetisation, after roughly US$635m of segment losses between 2023 and 2025.

A profitability inflection the market has not yet rewarded

CoStar Group's (NASDAQ:CSGP) second-quarter results, released, were on the face of it the best in its recent history. Revenue for the three months to 30 June rose 18% to US$925m, income from operations swung to US$76m from a US$27m loss a year earlier, and adjusted EBITDA, underlying profit before share-based pay, amortisation and acquisition costs, more than doubled to US$184m.

The share price has not co-operated. CoStar Group trades and, on aggregated market data data, roughly 70% below a 52-week high of US$97.43. CoStar itself repurchased stock in March 2026 at an average of US$44.27 a share.

What the company does

CoStar Group, listed on Nasdaq under CSGP, sells subscription research and analytics on property and runs a portfolio of online marketplaces. It reports in two segments: Commercial Real Estate, housing the CoStar information service, the LoopNet listing marketplace and other commercial products; and Residential Real Estate, containing Apartments.com, Homes.com and Domain.

Revenue is overwhelmingly subscription-based on annual contracts, producing high gross margins - 78.7% in the June quarter, and good visibility on renewals. Revenue earned outside the United States was US$150m in the quarter against US$61m a year earlier, reflecting the August 2025 acquisition of Australia's Domain Holdings.

Latest financial and operating performance

Within June-quarter revenue of US$925m, the core CoStar service contributed US$337m (up 9%), LoopNet US$87m (up 14%), other commercial products US$57m (down from US$60m) and Residential Real Estate US$444m (up from US$335m). Net income was US$55m, or US$0.14 a diluted share, against US$6m a year earlier.

Segment profitability is where the change shows. Commercial Real Estate delivered adjusted EBITDA of US$172m, while Residential Real Estate produced positive adjusted EBITDA of US$12m against a US$76m loss a year earlier. Residential adjusted EBITDA losses ran to US$44m in 2023, US$361m in 2024 and US$230m in 2025.

For the half year, revenue was US$1,822m and net income US$58m, reversing a US$9m loss, with operating cash flow of US$267m. Cash stood at US$1,266m against US$1bn of 2.800% senior notes due July 2030 and an undrawn US$1.1bn revolver. CoStar repurchased 13.8m shares for US$589m, leaving about US$913m of its authorisation; diluted shares fell to 404.4m.

Net new bookings, the key forward sales metric, were US$69m, up 3% on the first quarter. Guidance is for full-year revenue of US$3.715bn-US$3.755bn, adjusted EBITDA of US$780m-US$820m and adjusted EPS of US$1.32-US$1.39; third-quarter revenue of US$935m-US$945m implies roughly 13% growth.

The catalyst that matters: a flat marketing budget

The profit turn is not principally a revenue story. Selling and marketing expense, excluding customer base amortisation, climbed from US$990m in 2023 to US$1,364m in 2024 and US$1,560m in 2025 as CoStar poured money into launching Homes.com. In the June 2026 quarter that line was US$395m, level with the prior year, while revenue grew 18%.

That is the inflection. Holding the residential marketing programme flat while revenue builds converts a largely fixed cost base into operating leverage. Andy Florance, founder and chief executive, said the quarter marked a profitability inflection point and that the projected expense base had been cut by about US$100m against original guidance. Group adjusted EBITDA was US$442m in 2025.

The bear reading is that margin has been bought with growth. Third-quarter guidance implies deceleration from 18% to about 13%, and bookings advanced only 3% sequentially.

The bull case

The commercial franchise is entrenched. CoStar Suite and LoopNet together generated US$424m of quarterly revenue at high margins, growing 9% and 14% respectively, and face no competitor with comparable depth of researched property data.

The residential division has stopped consuming cash at the previous rate, removing the largest drag on group profitability; if it merely holds near break-even, commercial earnings flow through. Capital discipline has improved too: net cash, an undrawn revolver, US$589m of first-half buybacks and a falling share count. At roughly US$11.9bn of market capitalisation, the shares sit near 15 times the midpoint of guided adjusted EBITDA.

The bear case and the risks

The Homes.com return is still unproven. Residential adjusted EBITDA turned positive by cutting spending, not through a visible step-change in monetisation, after roughly US$635m of segment losses between 2023 and 2025. Rival portals remain established with US agents, and the release discloses no figure isolating Homes.com revenue.

Growth is increasingly acquired rather than organic. Domain and Matterport materially inflate the year-on-year comparisons; international revenue alone rose US$89m in the quarter. The guided slowdown to about 13% growth in the September quarter is the market's central concern.

Acquisition and goodwill risk is large. Matterport cost US$1.927bn in February 2025 and Domain US$1.912bn; in May 2026 CoStar agreed to buy Zonda for US$800m cash, expected to close in the second half. Goodwill of US$4,981m equals about 63% of shareholders' equity, and other commercial revenue fell year on year, suggesting recent acquisitions are not yet compounding.

Cyclical and governance factors. Revenue is tied to commercial transaction activity and to housing markets in the United States and Australia. Chief financial officer Christian Lown is departing; Robin Rossmann, previously managing director for Europe, took the role at last closing. At the 23 June annual meeting all eight directors were re-elected, but the advisory vote on pay drew only 71.38% support, this after April 2025 support agreements with D. E. Shaw and Third Point under which three directors were replaced.

What investors should watch next

Net new bookings. The US$69m recorded in the June quarter is the cleanest forward indicator; acceleration would validate the case that marketing spend has already been converted into demand.

Residential segment adjusted EBITDA. Whether the US$12m positive quarter holds, or proves a single light-spending period.

Third-quarter results, due around late October. The test is revenue within the US$935m-US$945m band and adjusted EBITDA of US$190m-US$210m.

Zonda completion and buyback pace. The US$800m acquisition is expected to close in the second half; about US$913m of the repurchase authorisation remained at 30 June.

Investor takeaway

CoStar Group has done the difficult part of a costly strategic bet: it has stopped the bleeding. Revenue of US$925m in the June quarter, adjusted EBITDA of US$184m and a first positive quarter from the residential division are filed, verifiable numbers, and the balance sheet carries net cash with a shrinking share count.

What the market is not yet paying for is the durability of that turn. Guidance points to slower revenue growth in the second half, bookings are advancing only slowly, and the largest acquisitions of the past two years have not obviously begun to compound. A share price near US$29 embeds much of that scepticism. The question for the next two quarters: does bookings growth reaccelerate while the marketing budget stays flat?

This article is for informational purposes only and does not constitute investment advice or a recommendation to buy, sell, or hold any security. Share prices can rise or fall, and past performance does not guarantee future results. Investors should conduct independent research and consult a licensed financial adviser before making investment decisions.