CoStar Group Inc.
10/28/2026 | Press release | Distributed by Public on 10/28/2026 15:12
Quarterly Report for Quarter Ending September 30, 2026 (Form 10-Q)
Management's Discussion and Analysis of Financial Condition and Results of Operations
The following Management's Discussion and Analysis of Financial Condition and Results of Operations contains "forward-looking statements," including statements about our beliefs and expectations. There are many risks and uncertainties that could cause actual results to differ materially from those discussed in the forward-looking statements. Potential factors that could cause actual results to differ materially from those discussed in any forward-looking statements include, but are not limited to, those stated under the heading "Cautionary Statement Concerning Forward-Looking Statements" at the end of this Item 2, "Risk Factors" in Item 1A of Part I of our 2025 Form 10-K, as well as those described from time to time in our filings with the SEC.
All forward-looking statements are based on information available to us on the date of this filing, and we assume no obligation to update such statements, whether as a result of new information, future events, or otherwise, except as required by applicable law. The following discussion should be read in conjunction with our 2025 Form 10-K, our subsequent Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, other filings with the SEC, and the condensed consolidated financial statements and related notes included in this Report.
Overview
CoStar Group is a leading global provider of online real estate marketplaces, information, analytics, and 3D digital twin technology in the property markets, based on the numbers of unique visitors and site visits per month; providing more information, analytics, and marketing services than many of our competitors; offering the most comprehensive commercial real estate database available; and having the largest commercial real estate research department in the industry. We have created and compiled a standardized platform of real estate information, analytics, and online marketplaces where industry professionals, consumers of commercial and residential real estate, including apartments, and the related business communities, can continuously interact and facilitate transactions by efficiently accessing and exchanging accurate and standardized real estate-related information. Our service offerings span all property types, including office, retail, industrial, multifamily, residential, land, mixed-use, and hospitality.
Our services are primarily derived from a database of building-specific, marketplace, and residential development information and visual content and offer customers specialized tools for accessing, analyzing, and using our information and advertising on our marketplaces. Over time, we have expanded, and we expect to continue to expand, our existing real estate information, analytics, and online marketplaces. We have developed and we expect to continue to develop additional services leveraging our centralized database and 3D digital twin technology to meet the needs of our existing customers as well as potential new categories of customers. With the Zonda Acquisition, we have expanded our proprietary data, analytics, software, and marketplace capabilities into the new-home construction market, giving us a significant position in another major part of the residential real estate ecosystem.
Our services are typically distributed to our customers under subscription-based license agreements that generally renew automatically, the majority of which have a term of at least one year. Upon renewal, many of the subscription contract rates may change in accordance with contract provisions or as a result of contract renegotiations. To encourage customers to use our services regularly, we generally charge a fixed monthly amount for our subscription-based services rather than charging fees based on actual platform usage or number of paid clicks. Depending on the type of service, contract rates are generally based on the number of sites, number of users, organization size, the customer's business focus, the customer's geographic location, the number of properties reported on or analyzed, the number and types of services to which a customer subscribes, the number of digital twins hosted, the number of transactions and average transaction size a broker or agent has closed, the number of properties or residential communities a customer advertises, and the prominence and placement of a customer's advertised properties in the search results. Our subscription customers generally pay contract fees on a monthly basis, but in some cases may pay us on a quarterly or annual basis. Our transaction-based services primarily consist of (i) providing premium listings for individual properties and residential communities on our marketplaces, (ii) providing data capture services to create digital twins, (iii) the sale of Matterport cameras and capture equipment, (iv) Ten-X auction fees, (v) one-time sales of housing market data, advisory services, digital advertising, home plans, and software and related services, and (vi) ancillary products and services that are sold on an ad hoc basis.
Services
We operate, develop products, and deliver our services in two reportable segments, Commercial Real Estate and Residential Real Estate. Our Commercial Real Estate segment offers commercial real estate information, analytics, online marketplaces, and 3D digital twin technology. Our Residential Real Estate segment hosts marketplaces that aggregate consumer demand for homes and apartments and we sell marketing and leads to the agents, owners, landlords, and property management companies that need to reach those consumers with their offerings. Our principal services are described in the following paragraphs:
Commercial Real Estate
CoStar
CoStar is our subscription-based integrated platform for commercial real estate intelligence, which includes information about commercial real estate properties, properties for sale, comparable sales, tenants, space available for lease, industry professionals and their business relationships, industry news, and market status. CoStar also provides benchmarking for the hospitality industry under the STR brand, lease analytical capabilities, and risk management and other debt solutions for lenders. We also offer SaaS for lease management under the CoStar Real Estate Manager and Visual Lease brands.
LoopNet
Our LoopNet Network of commercial real estate websites offers online marketplaces across the U.S., Europe, and the U.K. that enable commercial property owners, landlords, and real estate agents to advertise properties for sale or for lease. Commercial real estate agents, buyers, and tenants use the LoopNet Network of online marketplaces to search for available property listings that meet their criteria. With the Domain Acquisition, we also offer commercial real estate listings in Australia.
Other Commercial Real Estate
Other Commercial Real Estate includes revenue from the Matterport Acquisition, BizBuySell Network, and Ten-X's online auctions for commercial real estate. Matterport primarily provides hosting services for its 3D digital twins on a subscription basis. Matterport also provides capture services of spatial data and other add-on services to existing subscription customers and sells 3D capture cameras and accessories. Our BizBuySell Network provides online marketplaces for businesses and franchises for sale.
We expect Commercial Real Estate's revenue growth rate for the year ending December 31, 2026 to moderate compared to the revenue growth rate for the year ended December 31, 2025 primarily due to the nonrecurring benefit realized in 2025 from the Matterport Acquisition.
Residential Real Estate
Our residential marketplaces enable renters and homebuyers to find their dream homes by combining our proprietary research and neighborhood content with listing information, while enabling property owners, managers, and real estate agents to advertise their properties. Our flagship brands in the U.S. are Apartments.com, Homes.com, and Land.com. Apartments.com and Land.com provide comprehensive advertising on a subscription basis. Homes.com offers real estate agents subscription memberships promoting the agent's listings and profile on our websites, as well as the ability for real estate agents and homeowners to promote a single listing. Domain and OnTheMarket are our primary brands in Australia and the U.K., respectively. Domain primarily provides agents premium listings for individual properties. OnTheMarket hosts agents' listings on a subscription basis. With the Zonda Acquisition, we provide data, analytics, and software solutions, primarily on a subscription basis, and offer marketplace advertising solutions for the residential construction industry, primarily on a transactional basis.
We expect Residential Real Estate's revenue growth rate for the year ending December 31, 2026 to accelerate compared to the revenue growth rate for the year ended December 31, 2025 due to a full year's benefit of the Domain Acquisition completed in August 2025, a partial year's benefit of the Zonda Acquisition completed in August 2026, and an increase in the number of Homes.com agent memberships.
Subscription-based Services
For the three months ended September 30, 2026 and 2025, our annualized net new bookings of subscription-based services on all contracts were $37 million and $84 million, respectively. The decrease in net new bookings was primarily attributable to economic headwinds and slower-than-expected sales force growth within a competitive environment. Net new bookings is
calculated based on the annualized amount of change in our sales bookings resulting from new subscription-based contracts, changes to existing subscription-based contracts, and cancellations of subscription-based contracts for the period reported. Net new bookings is calculated on all subscription-based contracts without regard to contract term. Net new bookings is considered an operating metric that is an indicator of future subscription revenue growth and is also used as a metric of sales force productivity by us and investors. However, information regarding net new bookings is not comparable to, nor should it be substituted for, an analysis of our revenue over time. Revenue from our subscription-based contracts was approximately 89% and 92% of total revenue for the three months ended September 30, 2026 and 2025, respectively. The decrease in our percentage of subscription-based revenue was primarily due to Domain, which sells premium listings for individual properties, as well as the transactional products and services sold by Matterport.
For the trailing 12 months ended September 30, 2026 and 2025, our contract renewal rate for existing company-wide CoStar Group subscription-based services for contracts with a term of at least one year was approximately 88% and 89%, respectively, and our cancellation rate for those services during the same periods was approximately 12% and 11%, respectively. Contract renewal rates are calculated on all subscription-based contracts with a term of at least one year. Our contract renewal rate is a quantitative measurement that is typically closely correlated with our revenue results. As a result, we believe that the rate may be a reliable indicator of short-term and long-term performance absent extraordinary circumstances. Our trailing 12-month contract renewal rate may decline as a result of negative economic conditions, consolidations among our customers, reductions in customer spending, or decreases in our customer base. Revenue from our subscription-based contracts with a term of at least one year was approximately 72% and 75% of total revenue for the trailing 12 months ended September 30, 2026 and 2025, respectively. The decrease in the percentage of revenue from our subscription-based contracts with a term of at least one year was primarily due to the Domain products, which are sold as premium listings for individual properties, as well as the transactional products and services sold by Matterport.
In response to inflation risk and other macroeconomic concerns, each of the U.S. Federal Reserve and The Reserve Bank of Australia have raised target interest rates in 2026 and borrowing costs for property owners remain elevated. These factors have contributed to a slowdown in real estate markets with lower transaction volumes and higher inventory in both the U.S. and Australia. This slowdown has resulted in increased economic headwinds for our residential and multifamily customers in the U.S. and reduced transaction volumes in our Domain business in Australia year-over-year.
During the fourth quarter of 2025, we changed the composition of our segments from geography-based to product portfolio-based. This change aligns with the internal reporting used by the CODM for assessing performance and allocating resources. See Notes 2, 3, and 12 of the Notes to the Condensed Consolidated Financial Statements included in Part I of this Report for additional information on the segment change.
Development, Investments, and Expansion
We plan to continue to invest in our business and our services, evaluate strategic growth opportunities, and pursue our key priorities as described below. We are committed to supporting, improving, and enhancing our real estate information, analytics, and online marketplaces solutions, including expanding and improving our offerings for our client base and site users, including property owners, property managers, buyers, commercial tenants, and residential renters and buyers. We expect to continue our software development efforts to improve existing services, introduce new services, integrate and cross-sell services, integrate recently completed acquisitions, and expand and develop supporting technologies for our research, sales, and marketing organizations. We may reevaluate our priorities as economic conditions continue to evolve.
Our key priorities for the remainder of 2026 currently include:
•Enhancement of our residential products and platforms. Leveraging rentals marketing and lead generation across platforms, in particular, Apartments.com and Homes.com. Scaling Homes.com through new product releases including depth advertising. Continuing to develop new and improved tools for residential agents and brokers to help amplify their reach.
•International expansion of LoopNet and CoStar. We launched our LoopNet branded advertising products in Spain and France and continue to expand our footprint of commercial listings in these markets. In addition, we launched CoStar in France and are continuing our plan to launch CoStar in Australia early next year.
•Launching additional AI-enabled features across our products. We plan to extend the revolutionary capability of Homes Ai and Apartments Ai across the Company's portfolio of leading platforms, including CoStar and LoopNet, ushering in a new era of intelligent, conversational real estate discovery. Our AI capabilities draw from property data, Matterport 3D digital twin technology, images, proprietary school data, neighborhood insights, and market intelligence.
•Continuing to expand our CoStar offerings with additional modules, including new data and enhanced analytics. We have launched CoStar Rent Benchmark, an AI-abstracted dataset built from 4 million actual leases and lease documents. This product allows users to make more confident decisions with real data rather than using less reliable asking rents or broker report information. We are launching CoStar Debt Solutions Benchmark. This feature will give lenders visibility to improve decisions across origination, portfolio risk, and compliance. We expect these enhancements will drive new subscribers and additional usage under one platform.
•Leveraging technology and AI capabilities in our internal processes. We are using advanced technology, including AI, to improve data collection, data generation, and data quality. AI is driving research efficiencies, improving data quality, and increasing the pace of product development. Proprietary data, an integrated delivery platform, and bespoke research processes underpin our product solutions.
We intend to continue to assess the need for additional investments in our business in order to develop and distribute new services and functionality within our current platform or expand the reach of, or otherwise improve, our current service offerings. Any future product development or expansion of services, combination and coordination of services, or elimination of services or corporate expansion, development, or restructuring efforts could reduce our profitability and increase our capital expenditures. Any new investments, changes to our service offerings, or other unforeseen events could cause us to experience reduced revenue or generate losses and negative cash flow from operations in the future. Any development efforts must comply with our credit facility, which contains restrictive covenants that restrict our operations and use of our cash flow and may prevent us from taking certain actions that we believe could increase our profitability or otherwise enhance our business.
Non-GAAP Financial Measures
We prepare and publicly release quarterly unaudited financial statements prepared in accordance with GAAP. We also disclose and discuss certain non-GAAP financial measures in our public releases, investor conference calls, and filings with the SEC. The non-GAAP financial measures that we may disclose include EBITDA, Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Net Income, and Adjusted EPS.
EBITDA is our net income (loss) before interest income or expense, net; other expense or income, net; income taxes; depreciation; and amortization.
Adjusted EBITDA is different from EBITDA because we further adjust EBITDA for stock-based compensation expense; acquisition- and integration-related costs; restructuring and related costs, including certain advisory fees; and settlements and impairments incurred outside our ordinary course of business, including judgments and related recoveries thereon. Adjusted EBITDA margin represents Adjusted EBITDA divided by revenue for the period.
We typically disclose EBITDA, Adjusted EBITDA, and Adjusted EBITDA Margin on a consolidated and on an operating segment basis in our earnings releases, investor conference calls, and filings with the SEC.
Adjusted Net Income represents our net income (loss) adjusted for stock-based compensation expense; acquisition- and integration-related costs, including gains or losses on equity investments acquired in prospective targets and related to deal-contingent financial instruments; restructuring costs; settlement and impairment costs incurred outside our ordinary course of business, including judgments and related, non-recurring interest and recoveries thereon; and amortization of acquired intangible assets and other related costs, and then subtracting an assumed provision for income taxes.
Adjusted EPS represents Adjusted Net Income divided by the number of diluted shares outstanding for the period used in the calculation of GAAP earnings per diluted share. For periods with GAAP net losses and Adjusted Net Income, the weighted average outstanding shares used to calculate Adjusted EPS includes potentially dilutive securities that were excluded from the calculation of GAAP earnings per share as the effect was anti-dilutive.
We disclose Adjusted EPS and Adjusted Net Income on a consolidated basis in our earnings releases, investor conference calls, and filings with the SEC.
The non-GAAP financial measures that we use may not be comparable to similarly titled measures reported by other companies. Also, in the future, we may disclose different non-GAAP financial measures in order to help our investors meaningfully evaluate and compare our results of operations to our previously reported results of operations or to those of other companies in our industry.
We view EBITDA, Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Net Income, and Adjusted EPS as operating performance measures. We believe that the most directly comparable GAAP financial measure to EBITDA, Adjusted EBITDA, and Adjusted Net Income is net income (loss). We believe the most directly comparable GAAP financial measure to Adjusted
EPS and Adjusted EBITDA margin are earnings per diluted share and net income (loss) divided by revenue, respectively. In calculating EBITDA, Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Net Income, and Adjusted EPS, we exclude from net income (loss) the financial items that we believe should be separately identified to provide additional analysis of the financial components of the day-to-day operation of our business. We have outlined below the type and scope of these exclusions and the material limitations on the use of these non-GAAP financial measures as a result of these exclusions. EBITDA, Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Net Income, and Adjusted EPS are not measurements of financial performance under GAAP and should not be considered as a measure of liquidity, as an alternative to net income (loss), or as an indicator of any other measure of performance derived in accordance with GAAP. Investors and potential investors in our securities should not rely on EBITDA, Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Net Income, and Adjusted EPS as a substitute for any GAAP financial measure, including net income (loss) and earnings per diluted share. In addition, we urge investors and potential investors in our securities to carefully review the GAAP financial information included as part of our Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q that are filed with the SEC, as well as our quarterly earnings releases, and compare the GAAP financial information with our EBITDA, Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Net Income, and Adjusted EPS.
EBITDA, Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Net Income, and Adjusted EPS may be used by management to internally measure our operating and management performance and may be used by investors as supplemental financial measures to evaluate the performance of our business. We believe that these non-GAAP measures, when viewed with our GAAP results and accompanying reconciliations, provide additional information to investors that is useful to understand the factors and trends affecting our business without the impact of certain acquisition-related items. We have spent more than 35 years building our database of commercial real estate information and expanding our markets and services partially through acquisitions of complementary businesses. Due to these acquisitions, our net income (loss) has included significant charges for amortization of acquired intangible assets; depreciation and other amortization; acquisition- and integration-related costs, including gains or losses on equity investments acquired in prospective targets and related to deal-contingent financial instruments; interest income (expense); and restructuring and related costs, including certain advisory fees. Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Net Income, and Adjusted EPS exclude these charges and provide meaningful information about the operating performance of our business, apart from charges for amortization of acquired intangible assets; depreciation and other amortization; acquisition- and integration-related costs; restructuring and related costs, including certain advisory fees; and settlement and impairment costs incurred outside our ordinary course of business, including judgments and related, non-recurring interest and recoveries thereon. We believe the disclosure of non-GAAP measures can help investors meaningfully evaluate and compare our performance from quarter to quarter and from year to year without the impact of these items. We also believe the non-GAAP measures we disclose are measures of our ongoing operating performance because the isolation of non-cash charges, such as amortization and depreciation, and other items, such as interest income or expense, net; other expense or income, net; income taxes; stock-based compensation expenses, acquisition- and integration-related costs; interest income (expense); restructuring and related costs, including certain advisory fees; and settlement and impairment costs incurred outside our ordinary course of business, including judgments and related, non-recurring interest, and recoveries thereon, provides additional information about our cost structure, and, over time, helps track our operating progress. In addition, investors, securities analysts, and others have regularly relied on EBITDA and may rely on Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Net Income, or Adjusted EPS to provide a financial measure by which to compare our operating performance against that of other companies in our industry.
Set forth below are descriptions of financial items that have been excluded from net income (loss) to calculate EBITDA and the material limitations associated with using this non-GAAP financial measure as compared to net income (loss):
•Amortization of acquired intangible assets in cost of revenue may be useful for investors to consider because it represents the diminishing value of any acquired trade names and other intangible assets and the use of our acquired technology, which is one of the sources of information for our database of commercial real estate information. We do not believe these charges necessarily reflect the current and ongoing cash charges related to our operating cost structure.
•Amortization of acquired intangible assets in operating expenses may be useful for investors to consider because it represents the estimated attrition of our acquired customer base. We do not believe these charges necessarily reflect the current and ongoing cash charges related to our operating cost structure.
•Depreciation and other amortization may be useful for investors to consider because they generally represent the wear and tear on our property and equipment used in our operations. We do not believe these charges necessarily reflect the current and ongoing cash charges related to our operating cost structure.
•The amount of interest income or expense, net and other expense or income, net we generate and incur may be useful for investors to consider and may result in current cash inflows and outflows. However, we do not consider the amount
of interest income or expense, net and other expense or income, net to be a representative component of the day-to-day operating performance of our business.
•Income tax expense (benefit) may be useful for investors to consider because it generally represents the taxes that may be payable, or the benefit, for the period and the change in deferred income taxes during the period and may reduce the amount of funds otherwise available for use in our business. However, we do not consider the amount of income tax expense (benefit) to be a representative component of the day-to-day operating performance of our business.
Set forth below are descriptions of additional financial items that have been excluded from EBITDA to calculate Adjusted EBITDA and the material limitations associated with using this non-GAAP financial measure as compared to net income (loss):
•Stock-based compensation expense may be useful for investors to consider because it represents a portion of the compensation of our employees and executives. Determining the fair value of the stock-based instruments involves a high degree of judgment and estimation and the expenses recorded may bear little resemblance to the actual value realized upon the future exercise or termination of the related stock-based awards. Therefore, we believe it is useful to exclude stock-based compensation in order to better understand the long-term performance of our core business.
•The amount of acquisition- and integration-related costs incurred may be useful for investors to consider because such costs generally represent professional service fees and direct expenses related to acquisitions. Because we do not acquire businesses on a predictable cycle, we do not consider the amount of acquisition- and integration-related costs to be a representative component of the day-to-day operating performance of our business.
•The amount of settlement and impairment costs incurred outside of our ordinary course of business, including judgments, may be useful for investors to consider because they generally represent gains or losses from the settlement of litigation matters, including judgments, charges related to terminations of contracts, or impairments of acquired intangible assets or other long-lived assets. We do not believe these charges necessarily reflect the current and ongoing cash charges related to our operating cost structure.
•The amount of restructuring and related costs, including certain advisory costs, incurred may be useful for investors to consider because they generally represent costs incurred in connection with changes to the structure of our operations, governance, offices and related properties, and suppliers or employees used to deliver services and include costs to terminate contracts, advisory fees and other professional services, and severance. Because we do not carry out restructuring activities on a predictable cycle, we do not consider the amount of restructuring-related costs to be a representative component of the day-to-day operating performance of our business.
The financial items that have been excluded from our net income (loss) to calculate Adjusted Net Income and Adjusted EPS are amortization of acquired intangible assets and other related costs; stock-based compensation; acquisition- and integration-related costs, including gains or losses on equity investments acquired in prospective targets and related to deal-contingent financial instruments; restructuring and related costs; and settlement and impairment costs incurred outside our ordinary course of business, including judgments. These items are the same as discussed above with respect to the calculation of Adjusted EBITDA together with the material limitations associated with using non-GAAP financial measures as compared to net income (loss). We further exclude non-recurring interest charges related to judgments and recoveries thereon from Adjusted Net Income and Adjusted EPS as this may be useful for investors to consider because these non-recurring interest charges generally represent costs associated with the settlement of litigation matters, including judgments. We do not believe these charges necessarily reflect the current and ongoing cash charges related to our operating cost structure. In addition to these exclusions from net income (loss), we subtract an assumed provision for income taxes to calculate Adjusted Net Income. In both 2026 and 2025, we assume a 26.0% tax rate, which approximates our historical long-term statutory corporate tax rate, excluding the impact of discrete items.
Management compensates for the above-described limitations of using non-GAAP measures by using a non-GAAP measure only to supplement our GAAP results and to provide additional information that is useful to investors to understand the factors and trends affecting our business.
Consolidated Results of Operations
The Three Months Ended September 30, 2026 Compared to the Three Months Ended September 30, 2025
The following table compares our selected condensed consolidated results of operations for the three months ended September 30, 2026 and 2025 (in millions):
|
Three Months Ended September 30, |
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| 2026 | 2025 | Increase (Decrease) ($) | Increase (Decrease) (%) | ||||||||||||||||||||
|
Revenue
|
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| CoStar | $ | 344 | $ | 318 | $ | 26 | 8 | % | |||||||||||||||
| LoopNet | 89 | 79 | 10 | 13 | |||||||||||||||||||
| Other Commercial Real Estate | 59 | 64 | (5) | (8) | |||||||||||||||||||
|
Total Commercial Real Estate
|
492 | 461 | 31 | 7 | |||||||||||||||||||
|
Residential Real Estate
|
460 | 373 | 87 | 23 | |||||||||||||||||||
| Total revenue | 952 | 834 | 118 | 14 | |||||||||||||||||||
| Cost of revenue | 211 | 172 | 39 | 23 | |||||||||||||||||||
| Gross profit | 741 | 662 | 79 | 12 | |||||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||
| Selling and marketing (excluding customer base amortization) | 366 | 418 | (52) | (12) | |||||||||||||||||||
| Software development | 109 | 106 | 3 | 3 | |||||||||||||||||||
| General and administrative | 138 | 157 | (19) | (12) | |||||||||||||||||||
| Customer base amortization | 44 | 32 | 12 | 38 | |||||||||||||||||||
| Total operating expenses | 657 | 713 | (56) | (8) | |||||||||||||||||||
| Income (loss) from operations | 84 | (51) | 135 | NM | |||||||||||||||||||
| Interest income (expense), net | (1) | 26 | (27) | NM | |||||||||||||||||||
| Other income (expense), net | 1 | (21) | 22 | NM | |||||||||||||||||||
| Income (loss) before income taxes | 84 | (46) | 130 | NM | |||||||||||||||||||
| Income tax expense (benefit) | 10 | (15) | 25 | NM | |||||||||||||||||||
| Net income (loss) | $ | 74 | $ | (31) | $ | 105 | NM | ||||||||||||||||
| __________________________ | |||||||||||||||||||||||
| NM - Not meaningful | |||||||||||||||||||||||
Revenue. Revenue increased by $118 million, or 14%, to $952 million, driven by the following:
Commercial Real Estate revenue increased by $31 million, or 7%, to $492 million due to:
•an increase in CoStar revenue of $26 million, or 8%, due to inflation-based price increases, an increase in subscribers, and additional sales of STR Benchmarking,
•an increase in LoopNet revenue of $10 million, or 13%, due to an increase in the number of listings and the Domain Acquisition completed in August 2025, partially offset by,
•a decrease in Other Commercial Real Estate revenue of $5 million, or 8%, primarily due to fewer properties transacted on Ten-X.
Residential Real Estate revenue increased by $87 million, or 23%, to $460 million, primarily due to:
•$58 million of revenue from the Domain and Zonda Acquisitions and
•an increase in the number of memberships and properties advertised on our network.
Gross Profit and Cost of Revenue. Gross profit increased by $79 million, or 12%, to $741 million, and the gross profit margin decreased from 79% to 78%. The increase in gross profit was due to higher revenue, partially offset by, an increase in the cost of revenue. Cost of revenue increased by $39 million, or 23%, to $211 million and, as a percentage of revenue, increased from 21% to 22%. The increase in cost of revenue included:
•an increase in amortization expense related to acquired technology and trade names due to the Domain and Zonda Acquisitions,
•an increase in software and equipment costs of $7 million, primarily due to higher web hosting costs associated with our existing brands,
•an increase in personnel-related costs of $6 million, primarily due to incremental headcount added through the Domain and Zonda Acquisitions,
•an increase in depreciation expense of $4 million, primarily due to the Richmond, Virginia campus being placed in service during the second quarter of 2026,
•an increase in fulfillment costs of $3 million, primarily due to the digital twin capture equipment and services,
•an increase in credit card processing fees of $3 million, primarily due to higher transaction volumes resulting from increased revenue, and
•an increase in data and content costs of $2 million, primarily due to the Domain Acquisition.
Selling and Marketing (Excluding Customer Base Amortization) Expenses. Selling and marketing (excluding customer base amortization) expenses decreased by $52 million, or 12%, to $366 million and, as a percentage of revenue, decreased from 50% to 38%. The decrease included:
•a decrease in marketing expense, primarily due to reduced marketing expenditures across our brands,
•a decrease in commission expense of $14 million, primarily due to lower sales force headcount and lower sales within our existing brands,
•a decrease in other personnel-related costs of $9 million, primarily due to accelerated stock-based compensation recognized for certain Matterport employees in the prior-year period, and
•a decrease in professional services, recruiting, and relocation expenses of $3 million due to transaction-related costs associated with the Matterport Acquisition in the prior-year period, partially offset by,
•an increase in depreciation expense of $3 million, primarily due to the Richmond, Virginia campus being placed in service during the second quarter of 2026, and
•an increase in occupancy costs of $3 million, primarily due to facilities associated with the Domain Acquisition.
Software Development Expenses. Software development expenses increased by $3 million, or 3%, to $109 million and, as a percentage of revenue, decreased from 13% to 11%. The increase included:
•an increase in software and equipment costs, primarily due to increased spending on AI-related software, and
•an increase in depreciation expense of $3 million, primarily due to the Richmond, Virginia campus being placed in service during the second quarter of 2026, partially offset by,
•a decrease in personnel-related costs of $2 million, primarily due to accelerated stock-based compensation recognized for certain Matterport employees in the prior-year period.
General and Administrative Expenses. General and administrative expenses decreased by $19 million, or 12%, to $138 million and, as a percentage of revenue, decreased from 19% to 14%. The decrease included:
•a decrease in personnel-related costs, primarily due to accelerated stock-based compensation recognized for certain Matterport employees in the prior-year period,
•a decrease in acquisition-related costs of $7 million, due to the transaction costs of $10 million for the Zonda Acquisition in the current period compared to $17 million of costs for the Domain Acquisition in the prior-year period and
•a recovery of $7 million related to the Brown Judgment, partially offset by,
•an impairment charge of $10 million for an office lease assumed in the Domain Acquisition and subsequently vacated,
•an increase in professional services fees of $6 million, primarily due to higher legal expenses and operating costs associated with the Richmond, Virginia campus, and
•an increase in software and equipment costs of $4 million, primarily due to the Domain Acquisition and increased investments in enterprise technology supporting our existing brands.
Customer Base Amortization Expense. Customer base amortization expense increased by $12 million, or 38%, to $44 million, and, as a percentage of revenue, increased from 4% to 5%. The increase was primarily due to amortization of intangible assets recognized in connection with the Domain and Zonda Acquisitions.
Interest Income (Expense), Net. Interest income (expense), net changed by $27 million to a net expense of $1 million. The change was primarily due to a decrease in our cash and cash equivalents, as well as a $4 million increase in interest expense recognized during the current quarter due to no capitalized interest associated with the Richmond, Virginia campus construction project.
Other Income (Expense), Net. Other income (expense), net improved by $22 million, from a net expense of $21 million to a net income of $1 million. The improvement was due to:
•the non-recurrence of a realized loss in the prior-year period on the deal-contingent forward U.S. dollar to Australian dollar contracts entered into in conjunction with the Domain Acquisition, partially offset by,
•the non-recurrence of a net gain of $3 million in the prior-year period consisting of dividend income of $6 million, partially offset by $3 million fair value loss on previously held equity interests in Domain.
Income Tax Expense (Benefit). Income tax expense (benefit) changed by $25 million from a tax benefit of $15 million to an income tax expense of $10 million, and the effective tax rate was 12% of income before income taxes for the three months ended September 30, 2026, compared to 33% of loss before income taxes for the three months ended September 30, 2025. The change in income tax expense was primarily due to higher income before taxes.
The Three Months Ended September 30, 2025 Compared to the Three Months Ended September 30, 2024
The following table compares our selected condensed consolidated results of operations for the three months ended September 30, 2025 and 2024 (in millions):
|
Three Months Ended September 30, |
|||||||||||||||||||||||
| 2025 |
2024(1)
|
Increase (Decrease) ($) | Increase (Decrease) (%) | ||||||||||||||||||||
|
Revenue
|
|||||||||||||||||||||||
| CoStar | $ | 318 | $ | 290 | $ | 28 | 10 | % | |||||||||||||||
| LoopNet | 79 | 71 | 8 | 11 | |||||||||||||||||||
| Other Commercial Real Estate | 64 | 19 | 45 | 237 | |||||||||||||||||||
|
Total Commercial Real Estate
|
461 | 380 | 81 | 21 | |||||||||||||||||||
|
Residential Real Estate
|
373 | 313 | 60 | 19 | |||||||||||||||||||
| Total revenue | 834 | 693 | 141 | 20 | |||||||||||||||||||
| Cost of revenue | 172 | 141 | 31 | 22 | |||||||||||||||||||
| Gross profit | 662 | 552 | 110 | 20 | |||||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||
| Selling and marketing (excluding customer base amortization) | 418 | 331 | 87 | 26 | |||||||||||||||||||
| Software development | 106 | 81 | 25 | 31 | |||||||||||||||||||
| General and administrative | 157 | 106 | 51 | 48 | |||||||||||||||||||
| Customer base amortization | 32 | 10 | 22 | 220 | |||||||||||||||||||
| Total operating expenses | 713 | 528 | 185 | 35 | |||||||||||||||||||
| Income (loss) from operations | (51) | 24 | (75) | NM | |||||||||||||||||||
| Interest income, net | 26 | 55 | (29) | (53) | |||||||||||||||||||
| Other expense, net | (21) | (2) | (19) | NM | |||||||||||||||||||
| Income (loss) before income taxes | (46) | 77 | (123) | NM | |||||||||||||||||||
| Income tax expense (benefit) | (15) | 24 | (39) | NM | |||||||||||||||||||
| Net income (loss) | $ | (31) | $ | 53 | $ | (84) | NM | ||||||||||||||||
| __________________________ | |||||||||||||||||||||||
|
(1) We have recast certain prior period disclosures to align with the way we internally manage our business. See Note 2 of the Notes to the Condensed Consolidated Financial Statements included in Part I of this Report for additional information.
|
|||||||||||||||||||||||
| NM - Not meaningful | |||||||||||||||||||||||
Revenue. Revenue increased by $141 million, or 20%, to $834 million, driven by the following:
Commercial Real Estate revenue increased by $81 million, or 21%, to $461 million due to:
•an increase in CoStar revenue of $28 million, or 10%, due to increased sales driven by inflation-based price increases on renewals and an increase in subscribers, as well as the Visual Lease Acquisition,
•an increase in LoopNet revenue of $8 million, or 11%, due to an increase in the average price per listing, as well as the number of listings, and
•an increase in Other Commercial Real Estate revenue of $45 million, or 237%, primarily due to the Matterport Acquisition.
Residential Real Estate revenue increased by $60 million, or 19%, to $373 million, primarily due to:
•an increase in the number of memberships and properties advertised on our network and
•an increase of $23 million due to the Domain Acquisition.
Gross Profit and Cost of Revenue. Gross profit increased by $110 million, or 20%, to $662 million, and the gross profit margin decreased from 80% to 79%. The increase in gross profit was due to higher revenue, partially offset by, an increase in cost of revenue. Cost of revenue increased by $31 million, or 22%, to $172 million and, as a percentage of revenue, increased from 20% to 21%. The increase in cost of revenue primarily included:
•an increase in amortization expense related to the acquired technology and trade names due to the Matterport and Domain Acquisitions,
•an increase in costs related to sales of Matterport capture equipment and services of $7 million, primarily due to the Matterport Acquisition,
•an increase in personnel-related costs of $6 million, primarily due to additional headcount from the Matterport and Domain Acquisitions, and
•an increase in software and equipment costs of $4 million, primarily due to higher web hosting costs.
Selling and Marketing (Excluding Customer Base Amortization) Expenses. Selling and marketing (excluding customer base amortization) expenses increased by $87 million, or 26%, to $418 million and, as a percentage of revenue, increased from 48% to 50%. The increase primarily included:
•an increase in personnel-related cost, primarily due to sales hiring and additional sales force headcount from the Matterport and Domain Acquisitions,
•an increase in commissions costs of $20 million, primarily due to increased sales force headcount, and
•an increase in marketing expenses of $17 million, primarily due to advertising expenses for our brands.
Software Development Expenses. Software development expenses increased by $25 million, or 31%, to $106 million and, as a percentage of revenue, increased from 12% to 13%. The increase primarily included:
•an increase in personnel costs of $21 million, primarily due to additional headcount from the Matterport and Domain Acquisitions, as well as higher costs associated with our existing employees.
General and Administrative Expenses. General and administrative expenses increased by $51 million, or 48%, to $157 million and, as a percentage of revenue, increased from 15% to 19%. The increase primarily included:
•an increase in personnel-related costs, primarily due to additional headcount from the Matterport and Domain Acquisitions, as well as higher costs associated with our existing employees,
•an increase in professional service and third-party costs of $9 million, primarily due to acquisition-related activities, and
•an increase in software and equipment costs of $3 million, primarily due to the Matterport Acquisition.
Customer Base Amortization Expense. Customer base amortization expense increased by $22 million, or 220%, to $32 million, and, as a percentage of revenue, increased from 1% to 4%. The increase was primarily due to the Matterport, Visual Lease, and Domain Acquisitions.
Interest Income, Net. Interest income, net decreased by $29 million, or 53%, to $26 million. The decrease was primarily due to a decrease in our cash and cash equivalents.
Other Expense, Net. Other expense, net increased by $19 million to $21 million. The increase primarily included:
•a realized loss on the deal-contingent forward U.S. dollar to Australian dollar contracts entered into in conjunction with the Domain Acquisition, partially offset by,
•a gain of $3 million relating to the previously held equity interests in Domain, inclusive of dividend income of $6 million.
Income Tax Expense (Benefit). Income tax benefit was $15 million for the three months ended September 30, 2025, a change of $39 million from income tax expense of $24 million for the three months ended September 30, 2024. The effective tax rate was 33% of loss before income taxes for the three months ended September 30, 2025, compared to 31% of income
before income taxes for the three months ended September 30, 2024. The change was primarily due to lower income before taxes.
Business Segment Results for the Three Months Ended September 30, 2026 Compared to the Three Months Ended September 30, 2025
We manage our business by product portfolios in two operating segments, with the primary areas of measurement and decision-making being Commercial Real Estate and Residential Real Estate. Segment reporting is based on the management approach, whereby external segment reporting is aligned with the internal reporting used by the CODM, which is the Company's Chief Executive Officer. The CODM relies on an internal management reporting process that provides operating segment revenue, EBITDA, and Adjusted EBITDA for making decisions and assessing performance as the source of the Company's reportable segments. Adjusted EBITDA is used by management internally to measure operating and management performance and to evaluate the performance of the business. Operating results by segment include items that are directly attributable to each segment and also include shared expenses such as legal, including settlements and fines, corporate infrastructure and support costs, facilities, and IT expenses from our integrated platform. Shared expenses are primarily allocated based on revenue or headcount. There are no intersegment transactions. Refer to Note 2 and Note 12 of the Notes to the Condensed Consolidated Financial Statements included in Part I of this Report for additional information. See "Non-GAAP Financial Measures" for further information regarding our segment operating results.
Segment Adjusted EBITDA. Commercial Real Estate Adjusted EBITDA decreased by $3 million to $180 million. The decrease was due to:
•an increase in personnel-related costs, primarily due to higher costs in our existing brands as we prepare to launch CoStar in Australia and additional features in CoStar, and to a lesser extent, the Domain Acquisition, and
•an increase in general and administrative expenses of $13 million, primarily due to higher product web hosting costs, occupancy costs and, higher hardware expenses related to Matterport, partially offset by,
•an increase in revenue discussed above.
Residential Real Estate Adjusted EBITDA improved by $118 million to $49 million. The improvement was due to:
•an increase in revenue discussed above,
•a decrease in marketing expenses, primarily due to lower marketing expenditures within existing brands, and
•a decrease in personnel-related costs of $20 million, primarily due to lower costs within existing brands, partially offset by, costs associated with the Domain and Zonda Acquisitions, partially offset by,
•an increase in general and administrative expenses of $18 million, primarily due to the costs associated with the Domain and Zonda Acquisitions.
Business Segment Results for the Three Months Ended September 30, 2025 Compared to the Three Months Ended September 30, 2024
Segment Adjusted EBITDA. Commercial Real Estate Adjusted EBITDA increased by $30 million to $183 million. The increase was due to:
•an increase in revenue discussed above, partially offset by,
•an increase in personnel-related costs, primarily due to the Matterport, Domain, and Visual Lease Acquisitions, and
•an increase in general and administrative expenses and marketing expenses of $14 million and $5 million, respectively, primarily due to incremental costs associated with the Matterport, Domain, and Visual Lease Acquisitions.
Residential Real Estate Adjusted EBITDA improved by $8 million to a loss of $69 million. The improvement was due to:
•an increase in revenue discussed above, partially offset by,
•an increase in personnel-related costs, primarily due to increased sales headcount within existing brands and the Domain Acquisition,
•an increase in marketing expenses of $11 million, consisting of $7 million increase from existing brands and $4 million increase related to Domain, and
•an increase in general and administrative expenses of $3 million, primarily due to the Domain Acquisition.
The Nine Months Ended September 30, 2026 Compared to the Nine Months Ended September 30, 2025
The following table provides a comparison of our selected condensed consolidated results of operations for the nine months ended September 30, 2026 and 2025 (in millions):
|
Nine Months Ended September 30, |
|||||||||||||||||||||||
| 2026 | 2025 | Increase (Decrease) ($) | Increase (Decrease) (%) | ||||||||||||||||||||
|
Revenue
|
|||||||||||||||||||||||
| CoStar | $ | 1,012 | $ | 933 | $ | 79 | 8 | % | |||||||||||||||
| LoopNet | 261 | 228 | 33 | 14 | |||||||||||||||||||
| Other Commercial Real Estate | 172 | 155 | 17 | 11 | |||||||||||||||||||
|
Total Commercial Real Estate
|
1,445 | 1,316 | 129 | 10 | |||||||||||||||||||
|
Residential Real Estate
|
1,329 | 1,031 | 298 | 29 | |||||||||||||||||||
| Total revenue | 2,774 | 2,347 | 427 | 18 | |||||||||||||||||||
| Cost of revenue | 604 | 493 | 111 | 23 | |||||||||||||||||||
| Gross profit | 2,170 | 1,854 | 316 | 17 | |||||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||
| Selling and marketing (excluding customer base amortization) | 1,182 | 1,182 | - | - | |||||||||||||||||||
| Software development | 330 | 297 | 33 | 11 | |||||||||||||||||||
| General and administrative | 378 | 420 | (42) | (10) | |||||||||||||||||||
| Customer base amortization | 117 | 76 | 41 | 54 | |||||||||||||||||||
| Total operating expenses | 2,007 | 1,975 | 32 | 2 | |||||||||||||||||||
| Income (loss) from operations | 163 | (121) | 284 | NM | |||||||||||||||||||
| Interest income, net | 7 | 97 | (90) | (93) | |||||||||||||||||||
| Other expense, net | - | (7) | 7 | (100) | |||||||||||||||||||
| Income (loss) before income taxes | 170 | (31) | 201 | NM | |||||||||||||||||||
| Income tax expense | 38 | 9 | 29 | 322 | |||||||||||||||||||
| Net income (loss) | $ | 132 | $ | (40) | $ | 172 | NM | ||||||||||||||||
| __________________________ | |||||||||||||||||||||||
|
NM - Not meaningful
|
|||||||||||||||||||||||
Revenue. Revenue increased by $427 million, or 18%, to $2.8 billion, driven by the following:
Commercial Real Estate revenue increased by $129 million, or 10%, to $1.4 billion due to:
•an increase in CoStar revenue of $79 million, or 8%, due to an increase in subscribers, inflation-based price increases, and additional sales of STR Benchmarking,
•an increase in LoopNet revenue of $33 million, or 14%, due to an increase in the number of listings and the Domain Acquisition completed in August 2025, and
•an increase in Other Commercial Real Estate revenue of $17 million, or 11%, primarily due to the Matterport Acquisition completed in February 2025, partially offset by, lower transaction volume on Ten-X.
Residential Real Estate revenue increased by $298 million, or 29%, to $1.3 billion, primarily due to:
•an increase in revenue of $189 million from the Domain and Zonda Acquisitions and
•an increase in the number of memberships and properties advertised on our network, partially offset by, a reduction in average price.
Gross Profit and Cost of Revenue. Gross profit increased by $316 million, or 17%, to $2.2 billion, and the gross profit margin decreased from 79% to 78%. The increase in gross profit was due to higher revenue, partially offset by, an increase in cost of revenue. Cost of revenue increased by $111 million, or 23%, to $604 million and, as a percentage of revenue, increased from 21% to 22%. The increase in cost of revenue primarily included:
•an increase in amortization expense related to acquired technology and trade names, primarily due to the Domain, Matterport, and Zonda Acquisitions,
•an increase in $32 million in software hosting, data and content, and fulfillment costs of digital twin capture equipment and services attributable to the additional revenue,
•an increase in personnel-related costs of $18 million, primarily due to the additional headcount from the Domain, Matterport, and Zonda Acquisitions,
•an increase in data and content expense of $11 million, primarily due to the Domain Acquisition,
•an increase in credit card processing fees of $7 million, primarily due to higher transaction volumes resulting from increased revenue,
•an increase in office supplies expense of $6 million, primarily related to field research equipment used for CoStar and Domain, and
•an increase in depreciation expense of $4 million, primarily due to the Richmond, Virginia campus being placed into service during the second quarter of 2026.
Selling and Marketing (Excluding Customer Base Amortization) Expenses. Selling and marketing (excluding customer base amortization) expenses were consistent at $1.2 billion and, as a percentage of revenue, decreased from 50% to 43%. The change included:
•a decrease in marketing expenses, primarily due to lower advertising expenditures across our brands,
•a decrease in recruiting and relocation costs and professional services fees of $8 million, partially offset by,
•an increase in personnel-related costs of $11 million, primarily due to additional sales force headcount associated with the Domain Acquisition, offset by a decrease in commissions cost and stock-based compensation expense due to lower commission expense for existing brands and accelerated stock-based compensation costs recognized for certain Matterport employees in the prior-year period,
•an increase in depreciation expense of $7 million, primarily due to the Richmond, Virginia campus being placed into service during the second quarter of 2026,
•an increase in occupancy-related costs of $6 million, primarily due to the Domain Acquisition, and
•an increase of $4 million in events and sales force development costs.
Software Development Expenses. Software development expenses increased by $33 million, or 11%, to $330 million and, as a percentage of revenue, decreased from 13% to 12%. The increase primarily included:
•an increase in personnel-related costs, primarily due to additional headcount associated with the Domain Acquisition,
•an increase in software and equipment costs of $8 million, primarily due to increased spending on AI software,
•an increase in depreciation expense of $4 million, primarily due to the Richmond, Virginia campus being placed into service during the second quarter of 2026, and
•an increase in professional services fees of $2 million, primarily due to the Domain Acquisition.
General and Administrative Expenses. General and administrative expenses decreased by $42 million, or 10%, to $378 million and, as a percentage of revenue, decreased from 18% to 14%. The decrease primarily included:
•a decrease in personnel-related costs, primarily due to lower stock-based compensation expense resulting from accelerated compensation recognized for certain Matterport employees in the prior-year period, offset by additional headcount associated with the Domain and Zonda Acquisitions,
•a gain from recoveries related to the Brown Judgment of $24 million,
•a decrease in acquisition-related costs of $24 million, due to the transaction costs of $14 million for the Zonda Acquisition in the current period compared to $38 million of costs for the Matterport and Domain Acquisitions in the prior-year period,
•a decrease in legal settlement fees of $7 million related to a prior year settlement, partially offset by,
•an increase in software and equipment costs of $17 million, primarily due to the Domain Acquisition,
•an impairment charge of $10 million for an office lease assumed in the Domain Acquisition and subsequently vacated, and
•an increase in professional services fees of $6 million, primarily due to higher legal expenses and operating costs associated with the new campuses.
Customer Base Amortization Expense. Customer base amortization expense increased by $41 million, or 54%, to $117 million and, as a percentage of revenue, increased from 3% to 4%. The increase was primarily due to amortization associated with intangible assets acquired in the Domain and Zonda Acquisitions, partially offset by, lower amortization expense related to Matterport and legacy customer base.
Interest Income, Net. Interest income, net decreased by $90 million, or 93%, to $7 million. The decrease was primarily due to a decrease in our cash and cash equivalents, as well as $9 million of interest on the Brown Judgment.
Other Expense, Net. Other expense, net improved by $7 million due to:
•a realized loss on the deal-contingent forward U.S. dollar to Australian dollar contracts entered into in conjunction with the Domain Acquisition in the prior-year period,
•a decrease in foreign currency exchange loss of $5 million, partially offset by,
•a decrease in gain on investments of $12 million related to the previously held equity interests in Domain inclusive of dividend income of $6 million in the prior-year period, and
Income Tax Expense. Income tax expense increased by $29 million, or 322%, to $38 million and the effective tax rate was 22% of income before income taxes for the nine months ended September 30, 2026, compared to (29)% of loss before income taxes for the nine months ended September 30, 2025. The increase in income tax expense was primarily due to higher income before income taxes.
The Nine Months Ended September 30, 2025 Compared to the Nine Months Ended September 30, 2024
The following table provides a comparison of our selected condensed consolidated results of operations for the nine months ended September 30, 2025 and 2024 (in millions):
|
Nine Months Ended September 30, |
|||||||||||||||||||||||
| 2025 |
2024(1)
|
Increase (Decrease) ($) | Increase (Decrease) (%) | ||||||||||||||||||||
|
Revenue
|
|||||||||||||||||||||||
| CoStar | $ | 933 | $ | 859 | $ | 74 | 9 | % | |||||||||||||||
| LoopNet | 228 | 210 | 18 | 9 | |||||||||||||||||||
| Other Commercial Real Estate | 155 | 54 | 101 | 187 | |||||||||||||||||||
|
Total Commercial Real Estate
|
1,316 | 1,123 | 193 | 17 | |||||||||||||||||||
|
Residential Real Estate
|
1,031 | 904 | 127 | 14 | |||||||||||||||||||
| Total revenue | 2,347 | 2,027 | 320 | 16 | |||||||||||||||||||
| Cost of revenue | 493 | 418 | 75 | 18 | |||||||||||||||||||
| Gross profit | 1,854 | 1,609 | 245 | 15 | |||||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||
| Selling and marketing (excluding customer base amortization) | 1,182 | 1,055 | 127 | 12 | |||||||||||||||||||
| Software development | 297 | 243 | 54 | 22 | |||||||||||||||||||
| General and administrative | 420 | 315 | 105 | 33 | |||||||||||||||||||
| Customer base amortization | 76 | 31 | 45 | 145 | |||||||||||||||||||
| Total operating expenses | 1,975 | 1,644 | 331 | 20 | |||||||||||||||||||
| Loss from operations | (121) | (35) | (86) | 246 | |||||||||||||||||||
| Interest income, net | 97 | 165 | (68) | (41) | |||||||||||||||||||
| Other expense, net | (7) | (5) | (2) | 40 | |||||||||||||||||||
| Income (loss) before income taxes | (31) | 125 | (156) | NM | |||||||||||||||||||
| Income tax expense | 9 | 46 | (37) | (80) | % | ||||||||||||||||||
| Net income (loss) | $ | (40) | $ | 79 | $ | (119) | NM | ||||||||||||||||
| __________________________ | |||||||||||||||||||||||
|
(1) We have recast certain prior period disclosures to align with the way we internally manage our business. See Note 2 of the Notes to the Condensed Consolidated Financial Statements included in Part I of this Report for additional information.
|
|||||||||||||||||||||||
|
NM - Not meaningful
|
|||||||||||||||||||||||
Revenue. Revenue increased by $320 million, or 16%, to $2.3 billion, driven by the following:
Commercial Real Estate revenue increased by $193 million, or 17%, to $1.3 billion due to:
•an increase in CoStar revenue of $74 million, or 9%, due to an increase in subscribers and inflation-based price increases on renewals, and the Visual Lease Acquisition,
•an increase in LoopNet revenue of $18 million, or 9%, due to an increase in the number of listings, as well as an increase in the average price per listing, and
•an increase in Other Commercial Real Estate revenue of $101 million, or 187%, primarily due to the Matterport Acquisition.
Residential Real Estate revenue increased by $127 million, or 14%, to $1.0 billion, primarily due to:
•an increase in the number of memberships and properties advertised on our network, as well as customers selecting higher-priced ad packages and
•an increase of $23 million due to the Domain Acquisition, partially offset by,
•a decrease due to the discontinuation of certain products that were inconsistent with our long-term business strategy.
Gross Profit and Cost of Revenue. Gross profit increased by $245 million, or 15%, to $1.9 billion, and the gross profit margin was consistent at 79%. The increase in gross profit was due to higher revenue, partially offset by, an increase in cost of revenue. Cost of revenue increased by $75 million, or 18%, to $493 million and, as a percentage of revenue, was consistent at 21%. The increase in cost of revenue primarily included:
•an increase in personnel-related costs and depreciation expense, primarily due to additional headcount associated with the Matterport and Domain Acquisitions,
•an increase in amortization expense of $25 million due to acquired technology and trade names associated with the Matterport and Domain Acquisitions,
•an increase in costs related to sales of Matterport capture equipment and services of $19 million due to the Matterport Acquisition, and
•an increase in software and equipment costs of $11 million, primarily due to higher web hosting costs.
Selling and Marketing (Excluding Customer Base Amortization) Expenses. Selling and marketing (excluding customer base amortization) expenses increased by $127 million, or 12%, to $1.2 billion and, as a percentage of revenue, decreased from 52% to 50%. The increase primarily included:
•an increase in personnel-related costs, primarily due to sales hiring and additional sales force headcount associated with the Matterport and Domain Acquisitions,
•an increase in commission expense of $32 million due to increased sales force headcount,
•an increase in occupancy and equipment costs of $7 million due to growth in the sales force across the brands,
•an increase in depreciation expense of $6 million, primarily due to additional headcount associated with the Matterport and Domain Acquisitions,
•an increase in third-party photography fees of $4 million due to the Matterport Acquisition, and
•an increase for conferences and development of $3 million due to growth in our sales force, partially offset by,
•a decrease in marketing expenses of $20 million.
Software Development Expenses. Software development expenses increased by $54 million, or 22%, to $297 million and, as a percentage of revenue, increased from 12% to 13%. The increase primarily included:
•an increase in personnel-related costs, primarily due to additional headcount associated with the Matterport and Domain Acquisitions, as well as higher costs associated with our existing workforce, and
•an increase in depreciation expense of $5 million due to additional headcount.
General and Administrative Expenses. General and administrative expenses increased by $105 million, or 33%, to $420 million and, as a percentage of revenue, increased from 16% to 18%. The increase primarily included:
•an increase in personnel-related costs, primarily due to additional headcount associated with the Matterport and Domain Acquisitions, as well as higher costs associated with our existing workforce,
•an increase in professional service fees of $35 million, primarily related to acquisition-related activities and costs incurred to defend our intellectual property, and
•an increase in software and equipment costs of $9 million, primarily related to the Matterport Acquisition, partially offset by,
•a decrease in depreciation expense of $11 million, primarily due to headcount changes.
Customer Base Amortization Expense. Customer base amortization expense increased by $45 million, or 145%, to $76 million and, as a percentage of revenue, increased from 2% to 3%. The increase was primarily due to the Matterport, Visual Lease, and Domain Acquisitions.
Interest Income, Net. Interest income, net decreased by $68 million, or 41%, to $97 million. The decrease was primarily due to a decrease in our cash and cash equivalents.
Other Expense, Net. Other expense, net was $7 million for the nine months ended September 30, 2025, a change of $2 million over the nine months ended September 30, 2024. The change primarily included:
•a realized loss of $10 million on the deal-contingent forward U.S. dollar to Australian dollar contracts entered into in conjunction with the Domain Acquisition, partially offset by,
•a gain of $12 million related to the previously held equity interests in Domain, inclusive of dividend income of $6 million.
Income Tax Expense. Income tax expense decreased by $37 million, or 80%, to $9 million and the effective tax rate was (29)% of loss before income taxes for the nine months ended September 30, 2025 compared to 37% of income before income taxes for the nine months ended September 30, 2024. The decrease in income tax expense was primarily due to lower income before income taxes.
Business Segment Results for the Nine Months Ended September 30, 2026 Compared to the Nine Months Ended September 30, 2025
Segment Adjusted EBITDA. Commercial Real Estate Adjusted EBITDA increased by $18 million to $513 million. The increase was due to:
•an increase in revenue discussed above, partially offset by,
•an increase in personnel-related costs, primarily due to higher costs in our existing brands as we prepare to launch CoStar in Australia and additional features in CoStar, and to a lesser extent, the Domain Acquisition,
•an increase in general and administrative expenses of $39 million, primarily due to higher product web hosting costs, office expenses and supplies, professional service fees, credit card processing fees, and costs associated with sales of Matterport product equipment.
Residential Real Estate Adjusted EBITDA improved by $262 million to a profit of $32 million. The improvement was due to:
•an increase in revenue discussed above, and
•a decrease in marketing expense, primarily due to lower marketing expenditures within existing brands, net of additional marketing expense associated with the Domain Acquisition, partially offset by,
•an increase in general and administrative expenses of $57 million, primarily due to the Domain and Zonda Acquisitions, and
•personnel costs were consistent with the $86 million of costs associated with the Domain and Zonda Acquisitions being offset by lower costs for our existing brands.
Business Segment Results for the Nine Months Ended September 30, 2025 Compared to the Nine Months Ended September 30, 2024
Segment Adjusted EBITDA. Commercial Real Estate Adjusted EBITDA increased by $55 million to $495 million. The increase was due to:
•an increase in revenue discussed above, partially offset by,
•an increase in personnel-related costs, primarily due to the Matterport and Visual Lease Acquisitions completed in February 2025 and November 2024, respectively, as well as higher costs related to headcount growth within existing brands,
•an increase in general and administrative expenses of $37 million, primarily due to incremental expenses associated with Matterport's post-acquisition operations, including product web hosting costs, sales of Matterport equipment, capture services, and third-party commissions, and
•an increase in marketing expense of $8 million, primarily due to the Matterport Acquisition.
Residential Real Estate Adjusted EBITDA improved by $81 million to a loss of $230 million. The improvement was due to:
•an increase in revenue discussed above,
• a decrease in marketing expense of $30 million, partially offset by,
•an increase in personnel-related costs, primarily due to the Domain Acquisition and higher sales headcount within existing brand, and
•an increase in general and administrative costs of $9 million, primarily due to higher product hosting costs and merchant fees associated with revenue growth, as well as higher relocation, conference, occupancy, and related overhead costs resulting from increased sales headcount within existing brands.
Liquidity and Capital Resources
We believe the balance of cash and cash equivalents, which was $500 million as of September 30, 2026, along with cash generated by ongoing operations and continued access to capital markets, will be sufficient to satisfy our cash requirements over the next 12 months and beyond. Other than the matters discussed below, our cash requirements have not changed materially from what is described in the 2025 Form 10-K.
Construction Commitments. In June 2026, we substantially completed the expansion of our Richmond, Virginia campus in advance of the grand opening on July 6, 2026. As of September 30, 2026, we had accrued $65 million for estimated final invoices and retainage amounts, which we expect to pay during the remainder of 2026. We intend to fund these expenditures with cash on hand.
In conjunction with this expansion, we negotiated various tax incentives with the Commonwealth of Virginia and the City of Richmond, including the allowance to use market-based income apportionment for income taxes and partial reimbursements of property tax assessments related to the value of the campus expansion. These incentives are conditional upon achieving job creation and capital expenditure targets from 2022 to 2029. Failure to meet these targets could result in a reduction of the value of the tax incentives and repayment of previous tax reductions. The value of the allowance to use a market-based income apportionment for income taxes is dependent on our taxable income. We estimate the value of the allowance to use market-based income apportionment for income taxes for tax years 2023 to 2032 and partial reimbursements of property tax assessments related to the value of the campus expansion to be in the range of $275 million to $285 million.
We are currently renovating our corporate headquarters in Arlington, Virginia. The renovation is expected to result in a material cash commitment requirement in 2026 and 2027. We have engaged a project manager, architects, and a general contractor on terms that generally require payments as services are provided or construction is performed. As of September 30, 2026, we were obligated to spend an additional $26 million as construction service is performed and expect to amend these contracts as the project advances. We intend to fund these expenditures with cash on hand.
Acquisitions. On October 26, 2026, the Company, through CRI, entered into the Vexcel Merger Agreement to acquire Vexcel for $730 million in cash, subject to customary working capital and other post-closing adjustments. We expect to fund the acquisition with cash on hand, including accessing our revolving credit facility, and expect the transaction to close in the first half of 2027. The Vexcel Acquisition remains subject to expiration or termination of the applicable waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, and certain foreign regulatory laws and other closing conditions. Accordingly, there can be no assurance that the Vexcel Acquisition will be consummated on the anticipated terms or timing.
Stock Repurchase Program. In December 2025, the Board of Directors approved a Stock Repurchase Program which authorizes, but does not obligate, the repurchase of up to $1.5 billion of CoStar Group Shares. Stock repurchases may be effected through open market and privately negotiated purchases, from time to time as market conditions warrant, or such other method as advised by our advisors, including without limitation pursuant to an accelerated share repurchase program or issuer self-tender offer. Repurchases may be made from time to time at management's discretion, and the timing and amount of any such repurchases will be determined based on share price, market conditions, legal requirements, and other relevant factors. The program has no time limit and can be discontinued at any time at our discretion.
During the nine months ended September 30, 2026, we repurchased 16.5 million CoStar Group Shares with a market value of $668 million under the Stock Repurchase Program. In connection with the repurchases, the Company incurred $2 million of direct costs for estimated excise taxes, transaction fees, and other costs that are excluded from the market value used to measure the amount authorized under the Stock Repurchase Program. As of September 30, 2026, $832 million remains available for
repurchases under the Stock Repurchase Program. We anticipate repurchasing at least $32 million of additional CoStar Group Shares in the remainder of 2026.
Cash on Hand. Cash and cash equivalents decreased to $500 million as of September 30, 2026, compared to cash, cash equivalents, and restricted cash of $1.7 billion as of December 31, 2025. The decrease in cash, cash equivalents, and restricted cash for the nine months ended September 30, 2026 was due to $706 million of net cash used in financing activities and $981 million of net cash used in investing activities, partially offset by, $455 million of net cash provided by operating activities.
Net cash provided by operating activities for the nine months ended September 30, 2026 was $455 million compared to $268 million for the nine months ended September 30, 2025. The $187 million increase in net cash provided by operating activities was primarily due to an increase in non-cash expenses of $77 million and higher net income, partially offset by, a decrease in working capital of $62 million, primarily due to the $109 million settlement payment related to the Brown Judgment.
Net cash used in investing activities for the nine months ended September 30, 2026 was $981 million compared to $2.8 billion for the nine months ended September 30, 2025, primarily due to the $789 million net cash paid for the Zonda Acquisition in 2026 and the $2.6 billion net cash paid for the Matterport and Domain Acquisitions in 2025, including the initial purchase of equity securities in Domain, and a decrease in purchases of property, equipment, and other assets for new campuses in 2026, partially offset by, proceeds from the sale of investments in 2025.
Net cash used in financing activities for the nine months ended September 30, 2026 was $706 million compared to $162 million for the nine months ended September 30, 2025. The increase was primarily due to repurchases of our outstanding common stock under the Stock Repurchase Program and AOMs buyout, partially offset by, a reduction in the repurchases of restricted stock to satisfy tax withholding obligations.
Critical Accounting Estimates
The preparation of financial statements and related disclosures in conformity with GAAP requires management to make estimates, judgments, and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses, and related disclosures. While we have used our best estimates based on facts and circumstances available to us at the time, different acceptable assumptions would yield different results. Changes in the accounting estimates are reasonably likely to occur from period to period, which may have a material impact on the presentation of our financial condition and results of operations. We review these estimates and assumptions periodically and reflect the effects of revisions in the period that they are determined to be necessary. We consider the accounting for the following matters to contain critical accounting estimates:
•Intangible assets and goodwill,
•Income taxes, and
•Business combinations.
For an in-depth discussion of each of our significant accounting policies, including the related critical accounting estimates and further information regarding estimates and assumptions involved in their application, see the 2025 Form 10-K and Note 2 of the Notes to the Condensed Consolidated Financial Statements included in Part I of this Report. During the nine months ended September 30, 2026, there were no material changes to our critical accounting estimates from those described in the 2025 Form 10-K.
Recent Accounting Pronouncements
See Note 2 of the Notes to the Condensed Consolidated Financial Statements included in Part I of this Report.
Cautionary Statement Concerning Forward-Looking Statements
We have made forward-looking statements in this Report and make forward-looking statements in our other reports filed with the SEC, press releases, and conference calls that are subject to risks and uncertainties. Forward-looking statements include information that is not purely historic fact.
Our forward-looking statements are also identified by words such as "hope," "anticipate," "may," "likely," "might," "believe," "expect," "observe," "consider," "think," "intend," "envision," "will," "should," "could," "would," "plan," "target," "estimate," "predict," "continue," "commit," and "potential" or the negative of these terms or other comparable terminology. You should understand that these forward-looking statements are estimates reflecting our judgment, beliefs, and expectations, not guarantees of future performance. They are subject to a number of assumptions, risks, and uncertainties that could cause actual results to differ materially from those expressed or implied in the forward-looking statements. The following important
factors, in addition to those discussed or referred to under the heading "Risk Factors" in Item 1A of Part I of our 2025 Form 10-K and "Risk Factors" in Item 1A of Part II of this Report and other unforeseen events or circumstances, could affect our future results and could cause those results or other outcomes to differ materially from those expressed or implied in our forward-looking statements:
•our inability to attract and retain new clients;
•our inability to successfully develop and introduce new or updated real estate information, analytics, and online marketplaces;
•the risks related to AI Technologies, such as Homes Ai and Apartments Ai;
•the planned CoStar Ai launch may be delayed or changed;
•our inability to compete successfully against existing or future competitors in attracting advertisers and in general;
•the effects of fluctuations and market cyclicality;
•the effects of global economic uncertainties and downturns or a downturn or consolidation in the real estate industry;
•our inability to hire qualified persons for, or retain and continue to develop, our sales force, or unproductivity of our sales force;
•our inability to retain and attract highly capable management and operating personnel;
•the downward pressure that our internal and external investments may place on our operating margins;
•our inability to increase brand awareness;
•our inability to maintain or increase internet traffic to our marketplaces, and the risk that the methods, including Google Analytics, that we use to measure average monthly unique visitors to our portals may misstate the actual number of unique persons who visit our network of mobile applications and websites for a given month or may differ from the methods used by competitors;
•our inability to attract new advertisers;
•our inability to successfully identify, finance, integrate, and/or manage costs related to acquisitions;
•our inability to complete certain strategic transactions if a proposed transaction is subject to review or approval by regulatory authorities pursuant to applicable laws or regulations;
•our inability to realize the benefits of the Matterport Acquisition, the Domain Acquisition, the Zonda Acquisition, or the Vexcel Acquisition, or to complete the Vexcel Acquisition in a timely manner, or at all, or realize the expected benefits of the Vexcel Acquistion;
•the inability of third-party suppliers upon which Matterport relies to fulfill its needs;
•the effects of cyberattacks and security vulnerabilities, and technical problems or disruptions;
•the significant costs associated with undertaking a large infrastructure project;
•our inability to generate increased revenue from our current or future geographic expansion plans;
•the risks related to acceptance of credit cards and debit cards and facilitation of other customer payments;
•the effects of climate-related events and other events beyond our control;
•the effects related to attention to climate-related risks and opportunities;
•our inability to obtain and maintain accurate, comprehensive, or reliable data;
•our inability to obtain and maintain stable data feeds, or disruption of our data feeds;
•our inability to enforce or defend our ownership and use of intellectual property;
•the effects of use of new and evolving technologies, including AI, on our ability to protect our data and intellectual property from misappropriation by third parties;
•our inability to defend against potential legal liability for collecting, displaying, or distributing information;
•our inability to obtain or retain listings from real estate brokers, agents, property owners, and apartment property managers;
•our inability to maintain or establish relationships with third-party listing providers;
•our inability to comply with the rules and compliance requirements of MLSs;
•the risks related to open source software;
•the risks related to international operations;
•the effects of foreign currency exchange rate fluctuations;
•our indebtedness;
•the effects of a lowering or withdrawal of the ratings assigned to our debt securities by rating agencies;
•the effects of any actual or perceived failure to comply with privacy or data protection laws, regulations, or standards;
•the effects of changes in tax laws, regulations, or fiscal and tax policies;
•the effects of third-party claims, litigation, regulatory proceedings, or government investigations;
•the risks related to return on investment; and
•the risks related to the specific timing, price, and size of repurchases under the Stock Repurchase Program, including that the Stock Repurchase Program may be suspended or discontinued at any time at the Company's discretion.
Accordingly, you should not place undue reliance on forward-looking statements, which speak only as of, and are based on information available to us on, the date of this Report. All subsequent written and oral forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. We do not undertake any obligation to update any such statements or release publicly any revisions to these forward-looking statements to reflect new information or events or circumstances after the date of this Report or to reflect the occurrence of unanticipated events, except as required by applicable law. Additionally, certain information disclosed herein or elsewhere (such as our website) is informed by various stakeholder expectations and third-party frameworks. Such information is not necessarily material for purposes of our SEC reporting, even if we use "material" or similar language. Particularly with respect to climate-related risks and opportunities, materiality is subject to various definitions that differ from, and are often more expansive than, the definition under U.S. federal securities laws.
CoStar Group Inc. published this content on October 28, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on October 28, 2026 at 21:12 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]