Core Viewpoint - CoStar Group (CSGP) is expected to continue strong growth due to reaccelerating commercial revenue growth and successful monetization of Homes.com [1] Group 1: Company Performance - The commercial revenue growth for CoStar Group is reaccelerating, indicating a positive trend in its financial performance [1] - The monetization efforts of Homes.com are progressing well, contributing to the overall growth strategy of the company [1] Group 2: Investment Strategy - The investment approach focuses on value investing principles combined with a long-term growth perspective, aiming to acquire quality companies at a discount to their intrinsic value [1] - The strategy emphasizes holding investments for the long term to allow for compounding of earnings and shareholder returns [1]

Core Insights - The housing market is experiencing sluggishness, yet there is significant innovation occurring within real estate technology according to KBW fintech analyst Ryan Tomasello [1] Group 1 - The current state of the housing market is described as sluggish, indicating potential challenges for traditional real estate transactions [1] - Despite the sluggish housing market, the real estate technology sector is thriving with numerous innovations being introduced [1]

Core Viewpoint - CoStar Group (CSGP) has been downgraded to a 'hold' following its Q3'25 results due to concerns over its expensive valuation and execution challenges, despite initially having a strong competitive position [1] Financial Performance - The investment case for CoStar Group was based on its durable competitive moat, but recent performance raises questions about its execution and valuation [1] Market Position - Homes.com is mentioned positively, indicating potential strengths within the company's portfolio, although specific details are not provided [1]

Core Insights - The article discusses the impact of recent economic trends on the investment banking sector, highlighting both opportunities and challenges faced by firms in the industry [1] Group 1: Economic Trends - Recent fluctuations in interest rates have led to increased volatility in the financial markets, affecting deal-making activities [1] - The ongoing geopolitical tensions are influencing investor sentiment, resulting in a cautious approach to new investments [1] Group 2: Investment Opportunities - There is a growing interest in sustainable finance, with many firms looking to capitalize on the demand for green bonds and ESG-related investments [1] - Technology-driven solutions are becoming essential for investment banks to enhance efficiency and reduce operational costs [1] Group 3: Challenges Faced - Regulatory pressures are increasing, requiring firms to adapt quickly to new compliance requirements [1] - Competition among investment banks is intensifying, particularly in the areas of mergers and acquisitions, leading to margin compression [1]

Core Insights - CoStar Group's stock experienced a significant decline of nearly 10% following the release of its quarterly earnings, despite the S&P 500 index remaining flat on the same day [1] Financial Performance - For Q3, CoStar reported revenue of $834 million, reflecting a robust year-over-year increase of 20%, driven by a 92% rise in net new bookings to $84 million [2] - The company's net income, calculated on a non-GAAP basis, increased by 10% to $97 million, translating to an adjusted earnings per share of $0.23 [3] - Analysts had anticipated a higher adjusted net profit of $0.18 per share, although CoStar exceeded the consensus revenue estimate of slightly over $812 million [4] Future Guidance - CoStar's guidance for adjusted net income for the full year 2025 is projected between $0.82 and $0.84 per share, aligning with the analyst consensus of $0.82 [5] - The revenue forecast for 2025 is set at $3.23 billion to $3.24 billion, slightly above the collective analyst estimate of just below $3.23 billion [5] - The company has raised its guidance for adjusted EBITDA for the full year to a range of $415 million to $425 million, marking an increase of $40 million at the midpoint [6] Market Sentiment - Despite posting double-digit increases in key financial metrics, market professionals had expected higher profitability from CoStar [8]

Revenue Performance - CoStar Group's subscription-based services generated approximately 92% of total revenues for the three months ended September 30, 2025, down from 96% in the same period of 2024[189]. - Total revenues increased by $141 million, or 20%, to $833.6 million for the three months ended September 30, 2025, compared to $692.6 million in the same period of 2024[205]. - Total revenues increased by $320 million, or 16%, to $2.3 billion, driven by a 110% increase in Other Revenues due to the Matterport Acquisition[216]. - North America revenues increased by $285 million, or 15%, to $2.2 billion, with a 35% increase in International revenues attributed to the Domain Acquisition[222]. Subscription Services - Annualized net new bookings of subscription-based services increased to $84 million for the three months ended September 30, 2025, compared to $44 million for the same period in 2024[189]. - Contract renewal rates for existing subscription-based services remained stable at approximately 89% for both the trailing 12 months ended September 30, 2025, and 2024[190]. Revenue Growth Drivers - Information Services revenue growth rate increased for the nine months ended September 30, 2025, primarily due to the Visual Lease Acquisition[183]. - Multifamily revenue growth rate moderated for the nine months ended September 30, 2025, due to the impact of pivoting the Apartments.com sales force to support Homes.com[184]. - LoopNet's revenue growth rate increased for the nine months ended September 30, 2025, driven by higher average revenue per listing and an increase in the number of listings[185]. - Residential revenues increased for the nine months ended September 30, 2025, primarily due to the Domain Acquisition and an increase in Homes.com memberships[186]. - Other revenues increased for the nine months ended September 30, 2025, primarily due to the Matterport Acquisition[187]. Profitability and Expenses - Gross profit increased by $109.4 million, or 20%, to $661.4 million, while the gross profit margin decreased from 80% to 79%[206]. - Selling and marketing expenses rose by $87.1 million, or 26%, to $418.3 million, increasing as a percentage of revenues from 48% to 50%[206]. - General and administrative expenses increased by $51.2 million, or 48%, to $157 million, with the percentage of revenues rising from 15% to 19%[206]. - Customer base amortization expense surged by $21.5 million, or 209%, to $31.8 million, increasing from 1% to 4% of revenues[206]. Net Income and Loss - The company reported a net loss of $30.9 million for the three months ended September 30, 2025, compared to a net income of $53 million in the same period of 2024[205]. - The company reported a net loss of $39.5 million for the nine months ended September 30, 2025, compared to a net income of $78.9 million in the same period of 2024[216]. Cash Flow and Investments - Cash, cash equivalents, and restricted cash totaled $2.0 billion as of September 30, 2025, sufficient to meet cash requirements over the next 12 months[224]. - Cash, cash equivalents, and restricted cash decreased to $2.0 billion as of September 30, 2025, down from $4.7 billion as of December 31, 2024, primarily due to $2.7 billion net cash used in investing activities[231]. - Net cash provided by operating activities for the nine months ended September 30, 2025, was $268 million, a decrease of $30 million compared to the same period in 2024[232]. - Net cash used in investing activities for the nine months ended September 30, 2025, was $2.7 billion, significantly higher than $563 million for the same period in 2024, driven by acquisitions[233]. - Net cash used in financing activities for the nine months ended September 30, 2025, was $162 million, compared to $14 million for the same period in 2024, primarily due to stock repurchases[234]. Future Plans and Investments - CoStar Group plans to continue investing in Homes.com and develop AI-enabled search technology to enhance user experience and attract recurring visitors[192]. - The company is expanding its Richmond, Virginia campus, with an expected cash requirement of $188 million as of September 30, 2025, and plans to spend $73 million of this amount in the remainder of 2025[227]. - The estimated value of tax incentives related to the campus expansion is projected to be between $275 million and $285 million for tax years 2023 to 2032, contingent upon meeting job creation and capital expenditure targets[228]. - The Board of Directors approved a Stock Repurchase Program allowing for the repurchase of up to $500 million of the company's shares, with $385 million remaining available for repurchases as of September 30, 2025[229][230]. Foreign Currency Impact - Approximately 9% of the company's revenues for the three and nine months ended September 30, 2025, were denominated in foreign currencies, with potential revenue impacts of $8 million and $16 million from a 10% change in exchange rates[245]. Goodwill and Intangible Assets - The company had approximately $6.8 billion of goodwill and intangible assets as of September 30, 2025, with ongoing monitoring for potential impairment[248].

Core Insights - CoStar Group (CSGP) reported non-GAAP earnings of 23 cents per share in Q3 2025, exceeding the Zacks Consensus Estimate by 27.78% and marking a 4.5% increase from 22 cents per share in the same quarter last year [1][8] Revenue Performance - Revenues reached $833.6 million, surpassing the Zacks Consensus Estimate by 0.91% and reflecting a 20.4% year-over-year growth, marking the 58th consecutive quarter of double-digit revenue growth [2][8] - Specific revenue contributions included: - CoStar's revenues of $277 million, beating estimates by 0.77% and increasing 7.8% year over year [3] - Information Services revenues of $41.3 million, exceeding estimates by 4.29% and growing 25.2% year over year [3] - Multifamily revenues of $303 million, missing estimates by 0.73% but increasing 11.5% year over year [3] - LoopNet revenues of $79.3 million, beating estimates by 0.76% and increasing 11.8% year over year [4] - Residential revenues of $54.9 million, surpassing estimates by 74.29% and growing 98.2% year over year [4] - Other marketplace revenues of $78.1 million, exceeding estimates by 4.13% and increasing 141.8% year over year [4] Operational Metrics - Net New Bookings reached $84 million, representing a 92% increase year over year [5] - Average monthly unique visitors to CoStar's sites reached 143 million, while Homes.com Network achieved 115 million [5] Expense Overview - Selling and marketing expenses increased 26.3% year over year to $418.3 million, accounting for 50.2% of revenues compared to 47.8% in the previous year [6] - General and administrative expenses rose to 18.8% of revenues, an increase of 360 basis points year over year [6] - Operating expenses increased 34.9% year over year to $712.5 million, representing 85.5% of revenues, an increase of 920 basis points [7] Profitability Metrics - Adjusted EBITDA was $114.6 million, up from $75.9 million in the previous year, with an adjusted EBITDA margin expanding 280 basis points to 13.7% [9] Guidance - For Q4 2025, the company expects revenues between $885 million and $895 million, indicating 25% growth at the midpoint, and anticipates adjusted EBITDA between $150 million and $160 million [11] - For the full year 2025, revenues are expected to be between $3.23 billion and $3.24 billion, indicating 18% year-over-year growth at the midpoint, with adjusted EBITDA anticipated between $415 million and $425 million [12]

Core Insights - The U.S. office market outlook has been slightly upgraded according to CoStar's revised forecast [1] - The near-term projection indicates a positive absorption of 10 million square feet over the next four quarters, contrasting with the previous forecast of a negative absorption of 4 million square feet [1] Summary by Category - **Market Performance** - The third quarter of 2025 is expected to show a performance shift in the U.S. office market [1] - The revised forecast reflects a more optimistic view of the office space demand [1] - **Forecast Changes** - The new forecast anticipates a total of 10 million square feet of positive absorption, an upgrade from the earlier prediction of negative absorption [1]

Core Insights - CoStar, a commercial real estate data and analytics firm, raised its annual revenue forecast and exceeded third-quarter estimates due to increased bookings and growth in its subscription base [1] Financial Performance - The company reported higher bookings which contributed to its revenue growth [1] - CoStar's third-quarter performance surpassed market expectations, indicating strong demand for its services [1] Subscription Growth - Growth across CoStar's subscription base was a significant factor in its improved financial outlook [1]

Core Insights - CoStar Group (CSGP) reported quarterly earnings of $0.23 per share, exceeding the Zacks Consensus Estimate of $0.18 per share, and showing an increase from $0.22 per share a year ago [1] - The company achieved a revenue of $833.6 million for the quarter ended September 2025, surpassing the Zacks Consensus Estimate by 0.91% and up from $692.6 million year-over-year [3] Earnings Performance - The quarterly earnings surprise was +27.78%, following a previous surprise of +21.43% when earnings were $0.17 per share against an expectation of $0.14 [2] - CoStar has consistently surpassed consensus EPS estimates for the last four quarters [2] Revenue Insights - The company has also exceeded consensus revenue estimates in each of the last four quarters [3] - The current consensus EPS estimate for the upcoming quarter is $0.31, with expected revenues of $893.27 million, and for the current fiscal year, the estimate is $0.84 on $3.23 billion in revenues [8] Market Performance - CoStar shares have increased by approximately 9.1% since the beginning of the year, while the S&P 500 has gained 16.9% [4] - The stock currently holds a Zacks Rank 2 (Buy), indicating expectations of outperforming the market in the near future [7] Industry Context - The Computers - IT Services industry, to which CoStar belongs, is currently ranked in the top 18% of over 250 Zacks industries, suggesting a favorable outlook for stocks within this sector [9]