CoStar Starting to See Synergies as It Logs 58th Consecutive Double-Digit Growth in Q3

The U.S. digital real estate giant CoStar Group has revealed the numbers around its 58th consecutive quarter of double-digit revenue growth. Highlights from the real estate marketplace operators' report on its performance for the three months ended September 30th include:

• Total revenue was $834 million, up 20% year-on-year
• Net loss was $31 million (in Q3 2024, the figure was a net profit of $53 million)
• Adjusted EBITDA was $115 million, up 51% year-on-year
• Net new bookings totalled $84 million, up 92% year-over-year

Along with its core commercial real estate and data businesses, CoStar Group operates the Apartments.com U.S. rentals marketplace.  Despite increased competition from Zillow, the Apartments business has been flourishing in recent years, surpassing $1.2 billion in annual run rate revenue and generating $303 million in Q3 revenue (up 11% year-on-year).

The company's outspoken founder and CEO, Andy Florance, told investors that Apartments.com added 4,200 new communities during the period, bringing the platform's multifamily property count to over 87,000 with single-family listings now totalling 1.4 million.

The uptick in rental listings for Apartments comes as its main rival, Zillow, is facing a slew of lawsuits and could see its own burgeoning rental revenues come under legal threat, a point the CoStar boss was keen to highlight on a call with investors and analysts.

"Zillow is under siege facing an unprecedented wave of lawsuits. I'm not sure that the market grasps the sheer magnitude of the risk bearing down on Zillow from all sides. These lawsuits are not isolated instance. They collectively target the heart of Zillow's operations exposing alleged antitrust violations, widespread copyright theft and blatant consumer deception. With private plaintiffs and government regulators now alert to Zillow's misconduct, I predict even more aggressive legal and regulatory action in the months ahead."

Domestically, CoStar also operates the real estate portal Homes.com, which competes with Zillow in the lucrative 'for sale' market. Since being acquired by CoStar in 2021, the portal has shifted the way it makes money to a model more common among portals in the rest of the world.

The much-touted 'your listing, your lead' model sees U.S. agents pay for extra visibility on Homes.com rather than paying directly for buyer leads. This monetisation strategy, having been launched in Q1 of 2024, is now starting to take off, according to Florance, and saw net new bookings of $16 million (up 53% compared to Q2). Revenue for the upstart portal rose 20% year-on-year as the number of subscribing agents paying for the platform's pay-for-exposure model topped 26,000.

In the first quarter of 2025, CoStar announced that it was experimenting with a vendor-paid advertising product named 'Boost' on Homes.com. In his latest comments to investors, Florance said that 'Boost', which charges homesellers directly to increase the exposure of their listing on Homes.com, saw 136% growth in Q3 and accounted for $617k in revenue at an average price point of $386. Another new set of customers for Homes.com are home builders who, since August, have been able to purchase exposure plans.

Florance is known for his personal involvement in the product side of CoStar's business and was in an ebullient mood, divulging numbers around the impact of Smart Search, the new AI-powered search tool developed in partnership with Microsoft and released this week on Homes.com.

"Users of AI Smart Search use 69% more search filters, viewed 37% more listing pages per session, and were 5x more likely return to the site within the following week."

CoStar Group is doubling down on AI in its residential business, with the effort to build AI-powered features described as "our single biggest commitment by far to any software development effort".

High hopes for acquisitions as integration continues

CoStar also owns the number three portal in the UK (OnTheMarket) and recently paid $1.9 billion to acquire Australia's number two player (Domain). Residential revenue for CoStar's combined residential portals ticked up to $55 million thanks to a $23 million contribution from Domain, which was incorporated during the quarter.

Despite only constituting six per cent of its overall revenue in Q3, much of CoStar's recent efforts have been concentrated on its residential business. Florance told investors that the residential segment can operate at a margin of more than 40% thanks to synergies between the brands. There were also some comments admonishing Domain's previous ownership.

"Domain was previously constrained under its former media company owner. It received limited management focus, limited expertise and scarce resources, limited expertise in real estate marketplaces. It was operated with short-term EBITDA strategy, keeping it from competing effectively with a market leader, REA."

Elsewhere, the recently acquired Matterport business saw Q3 revenue rise 12% higher than the company's expectations, coming in at $44 million. New bookings for the spatial software product were up 194% year-on-year as CoStar brings its sales force to bear on a product that, Florance believes, was also held back prior to its acquisition.

"I believe that prior to merging with CoStar, Matterport was a world-class transformative technology held back by lack of focus on go-to-market strategy with an underscaled sales and marketing effort."

Florance told investors that CoStar's efforts to put 70,000 Matterport tours on its marketplace sites have driven an uptick in engagement metrics on its portals and believes that the company's suite of products is about to become "hyper-accelerated by some of the most exciting facilitating AI technologies I could have ever imagined."

"The more I live with Matterport, the more impressed I am with this technology, how well it works and how useful it is to real estate."

Commercial business still growing with room to expand global audience in Europe and Australia

CoStar Group's commercial real estate business, which includes the international marketplace brand Loopnet as well as the eponymous 'CoStar' data and information product, continues its solid performance with Florance noting that it saw a profit margin of 47% for the quarter.

The company is continuing to roll out asset-based pricing for its commercial real estate marketplaces and has been busy adding European commercial listings to Loopnet, with Australia next in line for listings integration.

Company CFO Chris Lown told investors and analysts that CoStar Group expects 2025 revenue to be over $3.2 billion, a figure which would represent growth of approximately 18% year-over-year at the midpoint of the range. Adjusted EBITDA guidance for the year was also upgraded to a range of $415 to $425 million (+40% at midpoint of the range).

Despite its impressive growth streak and its sanguine outlook, CoStar Group's share price has remained stubbornly stagnant for the past five years, with investors perhaps waiting to see if the theory behind the big money acquisitions and the numbers touted on investor calls can be translated to the bottom line on the balance sheet.