Core Insights - CoStar Group, Inc. operates as an information services provider in the commercial real estate industry with a market cap of $36.6 billion, offering services across the Americas, Europe, and the Indo-Pacific [1][2] Financial Performance - CoStar's stock reached a 52-week high of $97.43 on August 5 and is currently trading 10.6% below that peak, with a 6.4% gain over the past three months, underperforming the Nasdaq Composite's 12.4% increase during the same period [3] - Year-to-date, CoStar's stock has increased by 21.6% and 9.4% over the past 52 weeks, outperforming the Nasdaq's 14.2% gains in 2025 but lagging behind its 26.7% surge over the past year [4] - Following the release of Q2 results on July 22, CoStar's stock surged 6.9% in the trading session and maintained positive momentum for the next five sessions, marking the 57th consecutive quarter of double-digit topline growth [5] - Q2 2025 revenues surged 15.2% year-over-year to $781 million, exceeding Street expectations by 1.3%, while adjusted EBITDA skyrocketed 107.3% year-over-year to $85 million [5] - Adjusted EPS increased 13.3% year-over-year to $0.17, surpassing consensus estimates [6] Market Position - CoStar has underperformed compared to its peer, Jones Lang LaSalle Incorporated, which saw a 24.2% surge in 2025 and 23.9% gains over the past 52 weeks [7] - Among 16 analysts covering CoStar stock, the consensus rating is a "Moderate Buy," with a mean price target of $97, suggesting an 11.4% upside potential from current price levels [7]

Core Insights - The article compares two companies, Epam (EPAM) and CoStar Group (CSGP), to determine which stock is more undervalued for investors in the Computers - IT Services sector [1] Valuation Metrics - EPAM has a Zacks Rank of 2 (Buy), indicating a stronger earnings outlook compared to CSGP, which has a Zacks Rank of 4 (Sell) [3] - EPAM's forward P/E ratio is 13.84, significantly lower than CSGP's forward P/E of 100.94, suggesting EPAM is more attractively priced [5] - The PEG ratio for EPAM is 1.75, while CSGP's PEG ratio is 2.37, indicating that EPAM's valuation is more favorable when considering expected earnings growth [5] - EPAM's P/B ratio is 2.36, compared to CSGP's P/B of 4.25, further supporting the argument that EPAM is undervalued [6] Investment Conclusion - Based on the stronger estimate revision activity and more attractive valuation metrics, EPAM is positioned as the superior option for value investors at this time [7]

Core Insights - Homes.com, a leading online residential marketplace by CoStar Group, released a report analyzing home price trends in August, indicating that U.S. home price growth remained muted [1] - The national median home price increased by 2.4% year-over-year to $389,000, which is an increase of $9,000 from last August, although prices are still below previous levels [1] Price Trends - Preliminary data shows that the growth in home prices across major metros and house types has been limited in August [1] - The reported increase in the national median home price reflects a modest recovery in the housing market [1]

Core Viewpoint - Goldman Sachs maintains a Buy rating and a $105 price target on CoStar Group, emphasizing the growth potential in the U.S. residential real estate market [1] Group 1: Market Potential - CoStar identifies inefficiencies in current real estate portals, which prioritize lead generation over property marketing [1] - The estimated total addressable market for U.S. residential real estate is $3 billion, with potential EBITDA of $1.5 billion, significantly larger than Apartments.com [1] Group 2: Business Performance - Residential bookings have remained robust, with 2,000 to 2,500 new memberships added monthly since April [2] - CoStar anticipates residential spending to reach approximately $900 million this year [2] Group 3: Expansion Strategy - CoStar is pursuing international expansion through the acquisition of Domain in Australia and investment in OnTheMarket in the UK [2] - CoStar Suite and Apartments.com continue to perform well despite challenges in the commercial real estate sector [2]

Core Viewpoint - Markets are anticipating the Federal Reserve to cut rates before the end of the year, which is typically bullish for equities as it stimulates corporate activity and consumer demand [1] Group 1: Real Estate Sector Impact - Real estate is expected to benefit significantly from lower mortgage rates, which will attract buyers back into the housing market and accelerate commercial leasing activity [2] - Zillow Group is highlighted as a strong candidate for benefiting from rate cuts, having seen a 40% increase in stock price since April [2][3] - CoStar Group, operating in the commercial property market, is also well-positioned to benefit from a rate-cut environment, although its stock has rallied less aggressively compared to Zillow [6][7] Group 2: Company Performance and Analyst Ratings - Zillow Group has shown strong performance despite issuing softer forward guidance, with analysts from Evercore ISI and KeyCorp maintaining Overweight ratings and setting price targets as high as $95, indicating nearly 20% upside potential [4][5] - CoStar Group has consistently topped analyst expectations and has received an Outperform rating from Wolfe Research with a price target of $105, suggesting about 15% upside from current levels [8][9] Group 3: Market Outlook and Expectations - There is high market confidence in a rate cut occurring soon, with indications that labor markets are cooling and price pressures are easing, making a modest rate cut widely anticipated [10] - For real estate-linked stocks like Zillow and CoStar, lower borrowing costs are expected to reignite housing and commercial activity, enhancing investor appetite for rate-sensitive sectors [11]

Core Viewpoint - CoStar Group's recent earnings report shows strong revenue growth and earnings performance, but there are concerns about downward revisions in estimates and overall stock momentum [2][10][12]. Financial Performance - CoStar Group reported non-GAAP earnings of 17 cents per share for Q2 2025, exceeding the Zacks Consensus Estimate by 21.43% and increasing 13.3% year over year [2]. - Revenues reached $781.3 million, surpassing the consensus estimate by 1.25% and reflecting a 15.3% year-over-year increase, marking the 57th consecutive quarter of double-digit revenue growth [3]. Revenue Breakdown - CoStar's revenues from its primary segments include: - CoStar: $270.9 million (34.7% of total revenues), beating estimates by 1.12% and increasing 7.1% year over year [4]. - Multifamily: $292 million (37.4% of total revenues), missing estimates by 0.33% but increasing 10.6% year over year [5]. - LoopNet: $75.7 million (9.7% of total revenues), beating estimates by 1.41% and increasing 8.5% year over year [5]. - Other marketplace revenues: $74.7 million (9.6% of total revenues), beating estimates by 48.81% and increasing 139.4% year over year [6]. Operating Expenses - Selling and marketing expenses rose 10.2% year over year to $394.9 million, constituting 50.5% of revenues, down from 52.9% in the previous year [7]. - Total operating expenses increased 14.8% year over year to $640.7 million, with the operating expense ratio decreasing to 82% [8]. Cash Flow and Balance Sheet - As of June 30, 2025, CoStar reported cash and cash equivalents of $3.62 billion, down from $3.68 billion as of March 31, 2025 [9]. - Cash generated by operating activities was $199.7 million in the reported quarter, significantly up from $53.2 million in the previous quarter [9]. Guidance - For Q3 2025, CoStar expects revenues between $800 million and $805 million, indicating a year-over-year growth of 16% at the mid-point [10]. - For the full year 2025, revenues are projected to be between $3.135 billion and $3.155 billion, reflecting a year-over-year growth of 15% at the mid-point [10][11]. Market Sentiment - Following the earnings release, there has been a downward trend in estimates, with the consensus estimate shifting down by 35.9% [12]. - CoStar currently holds a Zacks Rank of 3 (Hold), indicating expectations for an in-line return in the coming months [14].

Core Points - CoStar is suing Zillow for allegedly using tens of thousands of its copyrighted photographs to enhance its online rental listings business [1][4] - CoStar claims that Zillow displayed nearly 47,000 copyrighted images, profiting from them while many images included CoStar's watermark [1][4] - The lawsuit highlights that Zillow's misconduct extends beyond its own websites, as it distributes CoStar's images through syndication agreements with competitors like Realtor.com and Redfin [4] Company Actions - CoStar has invested billions to create a comprehensive real estate information database and claims to have the world's largest library of real estate photographs [5] - The company employs thousands of professional photographers who have produced millions of copyrighted images [5] Legal Context - This lawsuit against Zillow is the second legal challenge the company has faced in a short period, following a lawsuit from real estate brokerage Compass [7] - Compass is seeking an injunction against Zillow to change its practices and is also pursuing monetary damages [8] Market Presence - Zillow has a substantial market presence with approximately 160 million homes in its database and receives 227 million unique visitors monthly [10] - The company recorded 2.4 billion visits between January and March [10]

PART I — FINANCIAL INFORMATION [Financial Statements](index=5&type=section&id=Item%201.%20Financial%20Statements) Presents unaudited condensed consolidated financial statements, detailing a 15% revenue increase, net income decline, and asset growth from acquisitions Condensed Consolidated Statements of Operations Highlights (Q2 & H1 2025 vs 2024) | Metric | Q2 2025 (in millions) | Q2 2024 (in millions) | H1 2025 (in millions) | H1 2024 (in millions) | | :--- | :--- | :--- | :--- | :--- | | **Revenues** | $781.3 | $677.8 | $1,513.5 | $1,334.2 | | **Gross Profit** | $613.5 | $542.0 | $1,192.4 | $1,057.2 | | **Loss from Operations** | $(27.2) | $(16.1) | $(70.0) | $(58.9) | | **Net Income (Loss)** | $6.2 | $19.2 | $(8.6) | $25.9 | | **Net Income (Loss) per Share - Diluted** | $0.01 | $0.05 | $(0.02) | $0.06 | Condensed Consolidated Balance Sheet Highlights (as of June 30, 2025) | Account | June 30, 2025 (in millions) | Dec 31, 2024 (in millions) | | :--- | :--- | :--- | | Cash and cash equivalents | $3,628.6 | $4,681.0 | | Goodwill | $3,689.6 | $2,527.6 | | Intangible assets, net | $915.6 | $433.2 | | **Total Assets** | **$10,507.1** | **$9,256.8** | | Total Liabilities | $1,905.7 | $1,703.3 | | **Total Stockholders' Equity** | **$8,601.4** | **$7,553.5** | Condensed Consolidated Statements of Cash Flows Highlights (Six Months Ended June 30) | Cash Flow Activity | 2025 (in millions) | 2024 (in millions) | | :--- | :--- | :--- | | Net cash provided by operating activities | $199.7 | $197.7 | | Net cash used in investing activities | $(1,061.4) | $(477.6) | | Net cash used in financing activities | $(98.4) | $(15.3) | | **Net decrease in cash** | **$(954.0)** | **$(296.4)** | [Notes to Condensed Consolidated Financial Statements](index=12&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Details operating segments, subscription services, Matterport and Visual Lease acquisitions, litigation, and stock repurchases - The company operates in two segments: North America (U.S. and Canada) and International (Europe, Asia-Pacific, Latin America), with most services being subscription-based for at least one year, and recent significant events including the Visual Lease acquisition in November 2024 and the Matterport acquisition in February 2025[22](index=22&type=chunk)[23](index=23&type=chunk) Disaggregated Revenue by Service (Six Months Ended June 30) | Service Line | 2025 Revenue (in millions) | 2024 Revenue (in millions) | | :--- | :--- | :--- | | CoStar | $536.0 | $503.3 | | Information Services | $79.1 | $66.4 | | Multifamily | $574.8 | $519.0 | | LoopNet | $148.5 | $138.9 | | Residential | $55.6 | $44.8 | | Other Revenues | $119.5 | $61.8 | | **Total Revenues** | **$1,513.5** | **$1,334.2** | - The Matterport acquisition was completed on February 28, 2025, for a total purchase consideration of **$1.9 billion**, resulting in **$1.1 billion** of goodwill, while the Visual Lease acquisition in November 2024 for **$276.0 million** added **$149.5 million** in goodwill[97](index=97&type=chunk)[101](index=101&type=chunk)[105](index=105&type=chunk) - A litigation accrual of **$96.7 million** was recorded related to the Matterport acquisition concerning a stockholder lawsuit, considering a damages award and estimated interest[135](index=135&type=chunk) - In February 2025, the Board approved a stock repurchase program authorizing up to **$500 million**, and during the first six months of 2025, the company repurchased **825,000 shares** for **$63.8 million**[143](index=143&type=chunk)[144](index=144&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=43&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses 15% Q2 revenue growth, driven by acquisitions, outlining strategic priorities, increased operating expenses, and strong liquidity - Key strategic priorities for the remainder of 2025 include continuing to invest in Homes.com, integrating Matterport's AI and 3D digital twin technology, expanding CoStar and LoopNet internationally, and leveraging data from CoStar Real Estate Manager and Visual Lease to create new information products[181](index=181&type=chunk)[186](index=186&type=chunk) Q2 2025 vs Q2 2024 Revenue Performance by Service | Service | Q2 2025 Revenue (in millions) | Q2 2024 Revenue (in millions) | YoY Growth (%) | | :--- | :--- | :--- | :--- | | CoStar | $270.9 | $253.0 | 7% | | Information Services | $39.3 | $33.4 | 18% | | Multifamily | $292.3 | $264.2 | 11% | | LoopNet | $75.7 | $69.8 | 8% | | Residential | $28.4 | $26.2 | 8% | | Other Revenues | $74.7 | $31.2 | 139% | | **Total Revenues** | **$781.3** | **$677.8** | **15%** | - The company's liquidity position remains strong with **$3.7 billion** in cash, cash equivalents, and restricted cash as of June 30, 2025, despite major cash uses for the Matterport acquisition, the pending Domain transaction (expected to cost **~$1.5 billion**), the Richmond campus expansion (additional **$260 million** commitment), and the stock repurchase program[211](index=211&type=chunk)[212](index=212&type=chunk)[217](index=217&type=chunk) - Net cash used in investing activities increased significantly to **$1.1 billion** for the first six months of 2025, up from **$478 million** in the same period of 2024, primarily driven by the Matterport acquisition and the purchase of Domain equity securities[222](index=222&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=58&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Primary market risks include foreign currency fluctuations, equity price volatility, and interest rate changes, with currency hedges for the Domain acquisition - The company is exposed to foreign currency risk, primarily from the British Pound, Canadian Dollar, Australian Dollar, and Euro; for H1 2025, a 10% strengthening of the U.S. dollar would have decreased revenues by approximately **$9 million**[232](index=232&type=chunk) - The equity investment in Domain is subject to market price volatility, where a 10% change in Domain's share price would impact the investment's value by approximately **$30 million**, also exposed to Australian dollar exchange rate risk[233](index=233&type=chunk) - To manage currency risk for the pending Domain acquisition, the company entered into deal-contingent foreign currency forward contracts with a notional amount of **A$2.4 billion** (**$1.5 billion**)[234](index=234&type=chunk) [Controls and Procedures](index=59&type=section&id=Item%204.%20Controls%20and%20Procedures) CEO and CFO concluded disclosure controls were effective as of June 30, 2025, with ongoing financial system implementation and acquisition integration - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of June 30, 2025[239](index=239&type=chunk) - Ongoing projects include a multi-year financial system implementation and the integration of internal controls from recent acquisitions, such as Matterport[240](index=240&type=chunk)[241](index=241&type=chunk) PART II — OTHER INFORMATION [Legal Proceedings](index=60&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in routine litigation, with no expected material adverse effect on financial position, referring to Note 12 for details - The company is not a party to any lawsuit that management believes is likely to have a material adverse effect on its financial position or results of operations, with specific details on litigation referred to Note 12 of the financial statements[244](index=244&type=chunk) [Risk Factors](index=60&type=section&id=Item%201A.%20Risk%20Factors) Updates risk factors, highlighting new risks from Matterport's supplier reliance, Domain equity investment, and open-source software use - A new risk factor highlights Matterport's reliance on a limited number of suppliers for its camera hardware, which could lead to production delays, increased costs, and an inability to meet customer demand if supply is disrupted[246](index=246&type=chunk)[247](index=247&type=chunk) - The company's significant equity investment in Domain introduces risk of material variability in reported earnings due to fluctuations in Domain's stock price and currency exchange rates[249](index=249&type=chunk) - Risks associated with the pending acquisition of Domain include the possibility of non-completion, loss of key employees, higher-than-expected costs, and failure to realize anticipated synergies and growth prospects[251](index=251&type=chunk)[253](index=253&type=chunk)[256](index=256&type=chunk) - The use of third-party open-source software in products presents a risk, where failure to comply with license terms could force the company to release proprietary source code, re-engineer products, or face litigation[257](index=257&type=chunk)[258](index=258&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=62&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) Details Q2 2025 stock repurchase activities, with 585,000 shares bought for $45.3 million, leaving $436.2 million available Issuer Purchases of Equity Securities (Q2 2025) | Period | Total Shares Purchased | Average Price Paid per Share | Shares Purchased as Part of Program | Approx. Value Remaining in Program (in millions) | | :--- | :--- | :--- | :--- | :--- | | April 2025 | 4,299 | $79.41 | — | — | | May 2025 | 287,344 | $75.54 | 285,000 | $460.0 | | June 2025 | 307,860 | $79.19 | 300,000 | $436.2 | | **Total Q2** | **599,503** | **$77.45** | **585,000** | **$436.2** | - In February 2025, the Board approved a stock repurchase program for up to **$500 million**; during Q2 2025, the company repurchased **585,000 shares** for **$45.3 million** under this program[263](index=263&type=chunk) [Exhibits](index=63&type=section&id=Item%206.%20Exhibits) Lists all exhibits filed with the Form 10-Q, including the 2025 Stock Incentive Plan, Domain acquisition deed, and officer certifications - Key exhibits filed with this report include the CoStar Group, Inc. 2025 Stock Incentive Plan, the Scheme Implementation Deed for the acquisition of Domain Holdings Australia Limited, and certifications of the Principal Executive Officer and Principal Financial Officer pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002[268](index=268&type=chunk)

Core Insights - CoStar Group (CSGP) reported non-GAAP earnings of 17 cents per share in Q2 2025, exceeding the Zacks Consensus Estimate by 21.43% and showing a 13.3% increase year over year [1][9] - Revenues reached $781.3 million, surpassing the Zacks Consensus Estimate by 1.25% and reflecting a 15.3% year-over-year growth, marking the 57th consecutive quarter of double-digit revenue growth [2][9] Revenue Breakdown - CoStar's revenues from its primary segments included $270.9 million from CoStar (34.7% of total revenues), which beat estimates by 1.12% and increased 7.1% year over year [4] - Information Services generated $39.3 million (5% of revenues), exceeding estimates by 6.97% and growing 17.7% year over year [4] - Multifamily revenues totaled $292 million (37.4% of revenues), slightly missing estimates by 0.33% but increasing 10.6% year over year [5] - LoopNet revenues were $75.7 million (9.7% of revenues), beating estimates by 1.41% and growing 8.5% year over year [5] - Other marketplace revenues reached $74.7 million (9.6% of revenues), significantly exceeding estimates by 48.81% and increasing 139.4% year over year [6] Operating Performance - Selling and marketing expenses rose 10.2% year over year to $394.9 million, accounting for 50.5% of revenues, down from 52.9% in the previous year [7] - General and administrative expenses decreased to 15.6% of revenues, a contraction of 60 basis points year over year [7] - Operating expenses increased 14.8% year over year to $640.7 million, but as a percentage of revenues, they decreased to 82% [8] Guidance and Future Outlook - CSGP raised its revenue guidance for Q3 2025 to between $800 million and $805 million, indicating a year-over-year growth of 16% at the mid-point [12] - For the full year 2025, revenues are expected to be between $3.135 billion and $3.155 billion, reflecting a 15% growth at the mid-point [12][13] Financial Position - As of June 30, 2025, CoStar reported cash and cash equivalents of $3.62 billion, down from $3.68 billion as of March 31, 2025 [11] - Long-term debt remained stable at $992.5 million as of June 30, 2025 [11] - Cash generated by operating activities was $199.7 million in the reported quarter, a significant increase from $53.2 million in the previous quarter [11]

Group 1 - The core viewpoint is a positive outlook on CoStar Group (NASDAQ: CSGP) with a buy rating due to strong commercial revenue growth and robust engagement on Homes.com [1] - The company is expected to benefit from a long-term growth story, emphasizing the importance of fundamental analysis and identifying undervalued companies [1] - The investment strategy focuses on value investing principles, aiming to purchase quality companies at a discount to their intrinsic value for long-term holding [1]