Executive Summary
CoStar Group delivered 19% revenue growth to $3.2 billion in 2025, driven by the Matterport and Domain acquisitions and strength across both commercial and residential segments. However, net income plunged 95% to $7 million as integration costs, higher amortization, and increased marketing investments weighed heavily on profitability.
What happened
CoStar Group reported $3.2 billion in total revenue for 2025, reflecting 19% year-over-year growth. This acceleration from 11% growth in 2024 was driven substantially by the February 2025 acquisition of Matterport (contributing $147 million to Other Commercial Real Estate) and the August 2025 acquisition of Domain (contributing $95 million to Residential Real Estate). Organic growth remained solid: CoStar subscription revenue increased 9% from subscriber additions and inflation-based pricing, LoopNet grew 11% from higher listing volumes and prices, and the core Residential business expanded through increased agent participation and property listings. Subscription-based services represented 93% of total revenue. Annualized net new bookings reached $308 million, up from $250 million in 2024, while the renewal rate held steady at 89%. However, profitability deteriorated sharply. Net income declined 95% to just $7 million as operating income swung to a $72 million loss. Gross margin compressed from 80% to 79% due to acquisition-related amortization and higher equipment and hosting costs. Operating expenses surged 21% to $2.6 billion, driven by $74 million of additional customer base amortization from acquisitions, $196 million higher selling and marketing costs (largely personnel and commissions from Matterport and Domain headcount), and $110 million increased general and administrative expenses. Interest income fell $103 million to $110 million as cash was deployed for acquisitions. The effective tax rate spiked to 77% due to lower pretax income. Cash declined from $4.7 billion to $1.7 billion as the company deployed $2.8 billion in acquisitions and $500 million in share repurchases, partially offset by $430 million in operating cash flow.
Why it matters for investors
The headline revenue growth demonstrates CoStar's ability to scale through both M&A and organic expansion, but the earnings collapse reveals the near-term profitability cost of that strategy. The 95% decline in net income and swing to an operating loss indicate that integration and growth investments are overwhelming the benefit of revenue scale in the current period. The shift is structural: acquisition-driven amortization now represents 4% of revenue versus 2% previously, and the addition of Matterport's lower-margin hardware and services business (equipment sales, capture services) is diluting overall gross margin. The sharp rise in selling and marketing expenses as a percentage of revenue, despite scale benefits, reflects significant investments in Homes.com monetization and integration of Domain and OnTheMarket into the residential platform. The company is sacrificing near-term profitability to build long-term market position, particularly in residential and international markets. The $1.5 billion share repurchase authorization signals management confidence in long-term value creation despite near-term margin pressure, but the $3 billion reduction in cash limits financial flexibility. Segment Adjusted EBITDA shows Commercial improving by $70 million to $672 million, while Residential losses widened by $131 million despite higher revenue, underscoring the heavy spend required to scale Homes.com and integrate Domain. The steady 89% renewal rate and $308 million in net new bookings suggest the underlying subscription model remains healthy, but margin recovery will depend on the pace of integration synergies and marketing efficiency gains.
Bullish points
Revenue growth accelerated to 19% from 11%, driven by both acquisitions and organic subscriber and listing growth, demonstrating the company's ability to scale its commercial and residential platforms and expand market share across property types.
Annualized net new bookings increased 23% to $308 million from $250 million, indicating strong sales momentum and demand for CoStar's information, analytics, and marketplace services despite a challenging macro environment.
Subscription-based services represented 93% of total revenue with an 89% renewal rate, providing high revenue visibility and recurring cash flow to fund growth investments and weather cyclical downturns in real estate activity.
The company completed two major acquisitions (Matterport and Domain) that expand capabilities into 3D digital twin technology and strengthen international presence in Australia, positioning CoStar for long-term geographic and product diversification.
Management authorized a new $1.5 billion share repurchase program and plans to buy back approximately $700 million in 2026, signaling confidence in intrinsic value and commitment to returning capital to shareholders despite near-term margin pressure.
Bearish points
Net income plunged 95% to $7 million from $139 million as operating income swung to a $72 million loss, driven by acquisition-related amortization, integration costs, and heavy marketing spend, raising concerns about the profitability of the growth strategy.
Gross margin compressed from 80% to 79% and is expected to face continued pressure from the addition of Matterport's lower-margin hardware and capture services business, which differs materially from CoStar's historically high-margin subscription software model.
Residential Real Estate Adjusted EBITDA losses widened despite 20% revenue growth, reflecting significant marketing investments in Homes.com and integration costs for Domain, with no clear timeline provided for when the segment will reach profitability.
Cash declined from $4.7 billion to $1.7 billion due to $2.8 billion in acquisition spending and $500 million in share repurchases, reducing financial flexibility to pursue additional M&A or weather an extended downturn in real estate market conditions.
The effective tax rate spiked to 77% from 34%, and interest income fell 48% to $110 million due to lower cash balances, creating additional headwinds to earnings growth as the company absorbs acquisition-related costs and investments.
Key highlights
CoStar Group completed transformative acquisitions of Matterport in February 2025 and Domain in August 2025, expanding into 3D digital twin technology and strengthening its international residential presence. The company reported $3.2 billion in revenue for 2025, up 19%, with Commercial Real Estate revenue increasing 18% to $1.8 billion and Residential Real Estate revenue rising 20% to $1.5 billion. Matterport contributed $147 million to Other Commercial Real Estate revenue, while Domain added $95 million to Residential revenue. CoStar subscription revenue grew 9% from subscriber additions and pricing, LoopNet increased 11% from higher listing volumes, and the core Residential business expanded from increased agent participation. However, net income collapsed 95% to $7 million as operating income swung to a $72 million loss, driven by $74 million higher customer base amortization, $196 million increased selling and marketing costs, and $110 million higher general and administrative expenses related to acquisitions and growth investments. Gross margin compressed from 80% to 79%. The company maintained an 89% renewal rate and generated $308 million in annualized net new bookings. Cash declined from $4.7 billion to $1.7 billion as CoStar deployed $2.8 billion in acquisitions and completed $500 million in share repurchases. In December 2025, the Board authorized a new $1.5 billion share repurchase program, with plans to buy back approximately $700 million in 2026.
Management commentary
Management outlined key priorities for 2026 including integration of residential platforms by deploying Homes.com in Australia and the U.K. through Domain and OnTheMarket, leveraging rentals marketing across Apartments.com and Homes.com, and scaling Homes.com through new product releases including depth advertising and a new homes builder program. The company plans to launch AI-enabled features across its portfolio including Apartments.com, CoStar, LoopNet, Land.com and BizBuySell, drawing from property data, Matterport 3D digital twin technology, images, proprietary school data, neighborhood insights, and market intelligence. Management expects to expand CoStar offerings with additional modules including new homes data, valuation capabilities, lease benchmarking data, and debt benchmarking to drive new subscribers and usage under one platform. The company plans international expansion of LoopNet and CoStar, having launched LoopNet in Spain and France and planning to launch LoopNet in Australia and CoStar in France and Australia. Management stated it is leveraging AI capabilities in internal processes to improve data collection, generation, and quality, driving research efficiencies and increasing the pace of product development. The company expects Commercial Real Estate revenue growth to moderate in 2026 compared to 2025 due to the lack of benefit from the Matterport Acquisition, while Residential Real Estate revenue growth is expected to accelerate due to a full year benefit of the Domain Acquisition and an increase in Homes.com members.
What to watch next
Investors should monitor:
Execution on the integration of Matterport and Domain acquisitions and whether management can realize anticipated synergies, cross-selling opportunities, and cost efficiencies to offset the significant acquisition-related amortization and integration costs weighing on near-term profitability.
Progress on Homes.com monetization and whether the company can increase agent subscriptions and improve unit economics to narrow Residential Real Estate segment losses, which widened despite 20% revenue growth in 2025.
Operating margin trajectory and whether the company can improve from the current operating loss as acquisition-related costs moderate and the business scales, or if continued heavy investment in growth initiatives will sustain profitability pressure.
Cash flow generation and whether operating cash flow can support the planned $700 million in share repurchases in 2026, capital expenditures for the Richmond campus expansion, and ongoing product development investments without requiring additional debt or reducing strategic flexibility.
Renewal rates and net new bookings trends as leading indicators of organic revenue momentum, particularly in light of macroeconomic headwinds, elevated interest rates, and ongoing uncertainty in commercial and residential real estate transaction volumes.
This summary is based solely on excerpts from the company's Form 10-K filing.
