CoStar Group - Earnings Call - Q3 2025

Executive Summary

• Q3 2025 delivered 20% revenue growth to $833.6M and a non-GAAP EPS of $0.23, with adjusted EBITDA of $114.6M; commercial information and marketplaces margin reached 47% and net new bookings surged 92% YoY to $84M.
• Revenue and non-GAAP EPS modestly beat Wall Street consensus; Q3 revenue actual $833.6M vs $825.2M consensus*, and non-GAAP EPS $0.23 vs $0.189 consensus*; Q4 guidance is broadly in line with consensus* (revenue $885–$895M; EPS $0.26–$0.28).
• Guidance raised materially: FY25 revenue to $3.23–$3.24B (≈18% YoY) and FY25 adjusted EBITDA to $415–$425M; introduced Q4 EBITDA guidance of $150–$160M and non-GAAP EPS of $0.26–$0.28.
• Strategic highlights: Homes.com acceleration (26k Members; Smart Search AI launch), Apartments.com momentum (Q3 revenue $303M, +11% YoY), and integration progress on Domain (Australia) and Matterport; management emphasized AI-led product upgrades and marketplace synergy.

What Went Well and What Went Wrong

What Went Well

• Record momentum in bookings and margins: Net new bookings up 92% YoY to $84M; commercial info/marketplaces profit margin increased to 47% (+400 bps sequentially).
• Apartments.com execution: Q3 revenue $303M (+11% YoY), 99% monthly renewal rate, 93 NPS; 4,200 new communities added, with 223M network site visits and improved lead conversion.
• Homes.com trajectory and AI: 26,000 subscribing agents; Smart Search launch drove deeper engagement (filters +69%, listing pages/session +37%, 5x return rate, +51% leads) and the team sold 3,300 Boosts since July.

“Using proprietary AI and natural language capabilities…Smart Search lets consumers use their own voice to precisely search for a home.” — Andy Florance, CEO.

What Went Wrong

• GAAP profitability headwinds: Q3 GAAP net loss of $(30.9)M (diluted EPS $(0.07)) driven by higher amortization, stock-based comp, and integration costs; operating income fell to $(51.1)M.
• International EBITDA loss: International segment EBITDA was $(20.5)M in Q3 (North America $33.2M; total $12.7M), reflecting ongoing investments and integration.
• Subscription mix impact and other expense: Subscription revenue on annual contracts at 75% (down with Matterport/Domain mix); other expense increased amid integration and FX/other items.

Transcript

Speaker 0

Good day, and thank you for standing by. Welcome to the Q3 2025 CoStar Group earnings conference call. At this time, all participants are in a listen-only mode. Please be advised that today's conference is being recorded. After the speaker's presentation, there will be a question and answer session. To ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. I would now like to hand the conference over to your speaker today, Rich Simonelli, Head of Investor Relations.

Speaker 1

Thank you very much, Operator, and hello and thank you all for joining us to discuss the third quarter 2025 results of CoStar Group. Before I turn the call over to Andy Florance, CoStar's CEO and founder, and Chris Lown, our Chief Financial Officer, I'd like to review our safe harbor statement. Certain portions of the discussion today may contain forward-looking statements, including the company's outlook and expectations for the fourth quarter and the rest of 2025 based on current beliefs and assumptions. Forward-looking statements involve many risks, uncertainties, assumptions, estimates, and other factors that can cause actual results to differ materially from such statements.

Important factors that can cause actual results to differ include, but are not limited to, those stated in CoStar Group's press release issued earlier today and in our filings with the SEC, including our annual report on Form 10-K and quarterly reports on Form 10-Q, included under the heading Risk Factors in these filings, as well as other filings with the SEC available on the SEC's website. All forward-looking statements are based on the information available to CoStar on the date of this call. CoStar assumes no obligation to update these statements, whether as a result of new information, future events, or otherwise, except as required by applicable law. Reconciliation to the most directly comparable GAAP measure or of any non-GAAP financial measure discussed on this call is shown in detail in our press release issued today, along with the definitions for these terms.

Press release is available on our website located at costargroup.com under Press Room. Please refer to today's press release on how to access the replay of this call. Remember, one question during the Q&A session, so make it a good one. With that, I'd like to turn the call over to our founder and CEO, Andy Florance. Andy?

Speaker 0

Thank you for joining CoStar Group's third quarter 2025 earnings call. We achieved another excellent quarter for CoStar Group, with third quarter 2025 revenue reaching $834 million, a 20% year-over-year increase. This is our 58th consecutive quarter of double-digit revenue growth, and we're one quarter closer to potentially 100 sequential quarters of double-digit revenue growth. Stay tuned. Adjusted EBITDA in the third quarter rose to $115 million, up 51% over Q3 2024. Profit margin in our commercial information and marketplace businesses increased to 47% for Q3 2025. Net new bookings totaled $84 million, up 92% year-over-year. CoStar Group's residential real estate portals include Apartments.com, Homes.com, OnTheMarket, and Domain. These are all sites that help people find or market a residence. Assuming we own Domain for the full third quarter, the revenue for the residential portals would now be $411 million in the quarter, or $1.644 billion annualized.

Our residential portals' revenues grew 22.7% quarter over quarter and 31.3% year over year. We expect synergies across these residential portals will continue to drive improvement in our margin profile and believe that long-term margins can operate at more than 40% adjusted EBITDA margins. Apartments.com delivered another strong quarter, surpassing $1.2 billion in annual run-rate revenue and generating $303 million in Q3 revenue, an 11% increase year over year. Apartments.com remains the preferred source for property managers and owners, as reflected by a 99% monthly renewal rate and a 93 NPS score. Our high-quality proprietary content remains central to attracting consumers. Net new bookings rose 37% year over year in Q3. We added 4,200 new apartment communities in Q3. Our sales force has now grown to over 500 representatives, achieving our 2025 sales hiring target ahead of schedule.

In Q3, the team conducted 200,000 client and prospect interactions, with nearly half of them occurring in person, a 66% year-over-year increase in Q3. Our total multifamily property count now exceeds 87,000, an increase of 12,000 in 2025. Apartments.com network site visits totaled 223 million for the quarter, leads for specific models and units increased 64%, and our highest converting apply now leads rose 70% year over year in Q3. In the single-family rental segment, we had 1.4 million availabilities and 260,000 paid rentals, up 51% year over year. Homes.com rental traffic grew 55%, underscoring the synergy between Apartments.com and Homes.com. Advertisers benefit from increased exposure across both platforms at no additional cost. Turning to Homes.com, Homes.com is showing steadily accelerating revenue growth from an increasing number of revenue streams.

Annualized net new bookings of Homes.com subscriptions rose to $16 million in the third quarter, up 53% quarter over quarter from $10 million in the second quarter of 2025, not year over year. That's actually quarter over quarter, up 53% quarter over quarter from $10 million in the second quarter of 2025, not year over year. Much more impressive when it's Q over Q. The net new annualized bookings in the third quarter represented a 1,225% year over year increase. Revenue in Q3 increased 20% year over year. The number of net new subscribers added in the third quarter was 7,035, up 12% over the 6,280 net new subscribers added in the second quarter. In Q3, net new subscriber growth was 1,000% year over year. We now have over 26,000 subscribing agents.

Just one of the many ways in which our business model is superior to competing portals is our ability to provide service to a much larger number of agents than they can. Competing portals in the U.S. business models of lead diversion limit them to selling to about roughly 5% of agents because they need to take leads from the other 95% of agents who are not clients so that they have something to sell to the 5% that are clients. In contrast, we can sell to well more than 50% of agents because we're not taking away leads from any agent. With LoopNet, CoStar, and Apartments.com, we have shown that in many markets we're selling to well more than half of the players in that market. This has the advantage of creating a bigger TAM, but also creating more goodwill among agents.

In competing portal models, 95% of the agents are losing business because of the portal and 5% are gaining business. In our model, almost every agent can gain business because of our portal, and that creates goodwill. Alignment with your clients builds stronger and more durable brands. Sales of our Homes.com Boost product rose 136% quarter over quarter to $617,000 in the third quarter. Homeowners are the primary buyers of Boost, paying on average $386 on a one-time basis to give their home for sale more exposure. At this price point, the U.S. TAM for Boost sold to homeowners alone is already approximately $2 billion. When agents do buy a Boost for one of their listings, we see 25% of those agents convert to full Homes.com membership subscriptions. We began selling enhanced exposure on Homes.com to new home builders on August 25.

In the month of September alone, we sold net new annualized bookings for new homes of $498,000. In total, we've already sold $743,000 annualized bookings since August 25. As Homes.com approaches our seventh quarter since launch, it is now the fastest growing revenue product we've ever launched. Though Apartments.com and CoStar now have more than $1 billion in revenue, they grew revenue at a much slower pace than Homes.com has in their first seven quarters. Homes.com has now grown 50% more incremental revenue in its first seven quarters than did Apartments.com in the same time period. We're continuing to increase the size of our Homes.com sales team. We now have 500 sales reps in production, with another 150 in pre-production. We've now added field sales, new home sales specialists, and major accounts reps.

We believe the highest and best function of a portal is to market real estate and that that is the future of the industry. I do not believe that future revenue models for successful real estate portals will be based on either iBuying or lead diversion to buyer agents. Currently, as I mentioned, we have 26,000 subscribing agents and Boost clients promoting 130,000 active listings on Homes.com, representing 6% of the active 2.2 million properties for sale in the U.S. A recent analyst report from Citi stated that they believe that a core product for Zillow going forward will be its showcase listing product, and estimated in September 2025 that Zillow had only 24,500 listings, or approximately 1.1% of the active market. We have five times the number of listings marketed or Boosted on our site.

Citi further estimated that Zillow had $13 million in revenue in the third quarter for showcase listings. Homes.com is well ahead of Zillow in both revenue and listing count, which is what we believe is the primary sustainable revenue driver for successful residential real estate portals around the world. Our strategy is to grow the share of real estate agents and homeowners relying on us to bring more exposure to their homes for sale, and these numbers show that we're on the way to achieving that goal. Our marketing campaign continues to build out audience and brand awareness. In August, unaided awareness was 42% and unaided attention was 28%. That unaided awareness is up from about 4% when we started, and we are showing a continued long-term upward trend in both categories. In the third quarter, the Homes.com network achieved 115 million unique monthly visitors.

This led to 560 million total visits to the Homes.com network in Q3, up 7% compared to Q2. According to Comscore, unique visitor traffic to Homes.com rose 8.3% compared to a 6.5% decline at Zillow and a 0.7% decline at Realtor.com. I'll just call that last part flat. Comscore continues to rank the unique monthly visitors to the Homes.com network above either Realtor.com or Redfin. Our organic traffic in Q3 climbed 87% year over year. We continue to improve the quality and engagement of traffic to Homes.com, achieving a low 24% bounce rate in Q3, which is a 64% year-over-year reduction in bounce rate. Our average session duration increased to 4 minutes and 29 seconds in Q3, which is a 93% year-over-year increase. I believe that our efforts to put more than 70,000 Matterports on the sites are driving this deeper home shopper engagement on our site.

We are optimizing for quality of traffic from our SEM, generating 112 million listing detail page views from SEM in Q3 for a 374% year-over-year improvement. We achieve this improvement with essentially the same, but a more efficient SEM spend. I believe we are about to see our products hyper-accelerated by some of the most exciting facilitating AI technologies I could have ever imagined. While we're already using AI throughout our organization, I'm excited about the launch of AI Smart Search on Homes.com and the future innovations it foreshadows. Consumers can ask Homes.com precisely what they're looking for in their own words.

This allows for reasonably complex queries such as long conversational phrases with multiple geographies such as, "Show me waterfront properties with a pool with a balcony and a great view in Miami Beach and Fort Lauderdale starting at $1 million." This does away with having to deal with traditional filters and forms that are limiting. If you're a coder, this is like giving people with no coding skills access to the power of full deep Boolean nestled queries against 10 times the number of fields with just simple plain English questions. As a result, Smart Search is highly customizable, intuitive, fun, and easy, and more powerful. This is our own artificial intelligence capability that we're engineering in, and we're doing it in partnership with Microsoft. In the third quarter, AI Smart Search has produced improved user engagement. This new AI Smart Search is producing significant improvement in user engagement.

Users of AI Smart Search use 69% more search filters, viewed 37% more listing pages per session, and were five times more likely to return to the site within the following week. That's amazing. Users submitted 51% more leads after viewing a listing page. It's a more effective way to find what you're looking for. We are now investing 50% of our Homes.com software development efforts in the fourth quarter and beyond towards building a range of AI-empowered features into Homes.com. This is our single biggest commitment by far to any software development effort. This is an incredibly exciting time for Homes.com. All of our products have boundless new opportunities opened up by the enormous potential of generative AI. In the four decades that I've led CoStar Product Vision, a core principle of our success is leaning into new facilitating technologies to unlock their value for real estate.

We were among the first to digitize real estate information, put real estate on a digital map, and present digital real estate photos. We're the first to incorporate digital twins at a scale, and we were actually the first to leverage the internet for real estate. In fact, we actually bought CBRE, Cushman Wakefield, and JLL, their first internet accounts before there was even a Netscape or a Google around. AI offers transformative opportunities to unlock tremendous value in real estate. I believe few products are better positioned to cohesively capitalize on this opportunity than Homes.com, Apartments.com, LoopNet, and CoStar. We have massive and proprietary real estate data resources. We have unmatched expertise in organizing and quality control in that information. We have leading expertise in how to make that information useful and relevant to real estate industry participants.

We believe that it will bring tremendous dislocation generally and open up huge new value opportunities, which we plan to exploit. While Homes.com is our initial priority for AI enhancement, we will apply the lessons learned to Apartments.com and all of our other products as quickly as possible. AI will impact top-of-funnel traffic acquisition. Real estate portals built on SEO foundations need to build strategies to acquire traffic from AEO, answer engine optimization, and GEO, generative engine optimization. SEO remains the foundation of AEO and GEO, though a portal's brand, content, and context remain the key building blocks for success. Today, GEO is sub-1% of top-of-funnel acquisition. For example, one large U.S. real estate portal only draws 0.45% of its top-of-funnel traffic from ChatGPT, and another large portal in Australia only captures 0.15% of its top-of-funnel from ChatGPT.

Brand traffic, direct traffic, SEM, display, social, email, SEO, and AEO remain 99.5% of top-of-funnel source. These traffic sources will remain important in the generative AI future for sure, and likely the majority, but GEO will become a much bigger top-of-funnel traffic feed, and we will position our portals to capture that traffic. Many believe that traffic from GEO may be monetized the way Google monetized SEO with SEM. There are some huge AI, GPU, and energy bills to pay out there. I just spent a few days at the online marketplace conference in Madrid with dozens of real estate portal CEOs and digital real estate experts. All felt the competitive urgency to integrate the range of capabilities of generative AI into their portals, but I did not find one person who thought that generalist generative AI solutions would effectively meet the specialized needs of the real estate world.

To be successful, there's a need to build specialized AI models around buyer personalization and profiles, data capture, listing evaluation, computer vision, digital twin searching, area evaluation, lead management, advertising optimization, valuation, and many other algorithms. That is exactly the exciting work we are leaning into and embracing. There was a time when AOL, Yahoo, or eBay were ascendant and uniquely dominant, and Microsoft and Google are still dominant, though perhaps past their zenith of dominance. All of these impressive general purpose transformative technology innovations enthusiastically built real estate portals and tried to dominate digital real estate. All failed. They've now exited the space. Only eBay has anything left, and it's not much. This is where a FizzBo thing. Specialized solutions, often leveraging these companies' capabilities, repeatedly ultimately dominated the real estate vertical. I believe the past is prologue here.

There are a number of incredible generative AI companies that are building invaluable tools. Those tools will be leveraged by specialized digital real estate companies to create specialized value. A specialized digital real estate company that does it best among them will unlock huge value for its investors. CoStar Group is the largest digital real estate company in the world by market cap, is well positioned to win in an AI future. It's just a brief comment on AI. The Homes.com subscriber net promoter score rose to 36 in the third quarter, rising 84% over Q2 2025. October to date, that NPS score continues to rise and is now at an outstanding 43. We're not done there. We'd like to get it up to Apartments.com 93, but the progress is amazing.

It took less than two years for Homes.com to reach an NPS level that took CoStar about a decade or so to reach. As our NPS increases, so does our subscriber retention rate. In Q3 2025, our retention rate of subscribers we sold six months prior from Q1 to 2025 rose to 86%. The Q3 retention rate rose 7.5% from 81% retention in Q2 2025 and rose 39% year over year from 62% retention in Q3 2024. We are offering Homes.com subscribers the benefits of Matterport for their listings, and agents tell us in focus groups that they really value that benefit. Member listings with Matterport captured nearly 40 times the listing detail views of non-member listings without Matterport. That should be the objective. If any real estate agent is selling a home, get 40 times as many people to inspect that home.

In the quarter, subscribers who had a Matterport on a listing had a 37% higher renewal rate than those that did not. It's working. We are enhancing our Matterport benefit to subscribers by offering a photorealistic 3D view of the exterior of the house to complement the digital twin of the interior. This exciting new technology is called the Gaussian Splot, and we capture it with a short drone flight around the house where legal. I would encourage you to view one live by looking up a home for sale at 5471 Country Club Parkway in San Jose, California, on Homes.com, and view that Matterport 3D exterior. Eventually, the house will sell and it won't be there anymore. In recent focus groups, we're seeing success in raising real estate agent awareness that Homes.com is the only your listing your lead portal.

51% of agents surveyed recognize your listing your lead and overwhelmingly connected to the Homes.com brand. Agents dislike lead diversion, express a strong preference for a portal operating with your listing your lead principle. As we continue to build that awareness, we believe that Homes.com will become the portal agents trust and most recommend to their clients. Now I need to turn to an uncomfortable but important matter. Zillow is under siege, facing an unprecedented wave of lawsuits. I'm not sure that the market grasps the sheer magnitude of the risk bearing down on Zillow from all sides. These lawsuits are not isolated instances. They collectively target the heart of Zillow's operations, exposing alleged antitrust violations, widespread copyright theft, and blatant consumer deception. With private plaintiffs and government regulators now alert to Zillow's misconduct, I predict even more aggressive legal and regulatory action in the months ahead.

There are five federal lawsuits filed against Zillow since June of 2025. First, Zillow threatened to permanently ban any listing that was publicly marketed but not put on the MLS within 24 hours. If you put a for sale sign in the front yard and didn't put it on Zillow within 24 hours, you're banned. If you do a Facebook post and don't put it on Zillow in 24 hours, you're banned. Pretty aggressive. It appeared that Zillow was targeting Compass. Zillow followed through and banned Compass listings that were not put on Zillow in 24 hours. On June 23, 2025, Compass sued Zillow, exposing Zillow's so-called Zillow ban for what it truly is: a ruthless scheme to strangle competition and trap home sellers inside of Zillow's walled garden.

If Compass prevails and home sellers are choosing where to list, where and when to list their homes, Zillow could lose massive swaths of its inventory, calling into question its lead diversion model. I believe that Zillow's actions pushed Compass into defensively merging with Anywhere. When the Compass Anywhere merger is completed, the combined company will be by far the largest real estate brokerage in the U.S., with, as I understand, as many as 300,000 plus agents. I'm pretty sure that Zillow just picked a fight it cannot win. Compass will have the most important listing content in real estate, and Zillow will need them a lot more than Compass needs Zillow. We filed our lawsuit against Zillow on July 30, 2025, to put an end to Zillow's brazen theft and monetization of CoStar's intellectual property. Zillow undoubtedly has used content stolen from Apartments.com to unfairly build their rental business.

The scale of this infringement is staggering. For context, in 2019, Excelgint was caught with 38,489 CoStar copyright photographs, and the federal court awarded $500 million in damages to us. Zillow's conduct is even more egregious, and we're determined to hold them fully accountable. In September, Zillow was sued in a class action suit by a group of plaintiffs who alleged that they were being deceived into overpaying hidden fees through Zillow's notorious contact agent button. This case tears straight to the heart of Zillow's business model, laying bare a system built on deception. The complaint exposes Zillow's tactics, saying Zillow actually directs the buyer away from the listing agent and directs the buyer to an unrelated buyer agent who lacks any specialized knowledge about the subject property. The fallout isn't just limited to duped buyers.

Zillow's lead diversion racket is bleeding home sellers by diverting their potential home buyers to agents that may compete with their listing. Most recently, September 30, 2025, the United States Federal Trade Commission filed suit against Zillow Group and Redfin over an illegal agreement to suppress competition. They stated that the illegal deal stunts multifamily rental advertising competition, harming American renters and property managers. The FTC went on to say that the Zillow partnership with Redfin was nothing more than an end run around competition that insulates Zillow from head-to-head competition on the merits with Redfin for customers advertising multifamily buildings. The FTC is seeking injunctive relief, meaning a potential unwinding of the deal. The lawsuit was followed up the next day by another lawsuit on behalf of a bipartisan coalition of attorney generals from Virginia, Arizona, Connecticut, New York, and Washington State.

You might assume that CoStar Group sees deals like this when they come up, like the Redfin deal. My immediate and clear reaction would have been that obviously the FTC would not allow such an illegal deal, and any effort to end run the FTC regulatory process would necessarily bring unnecessarily excruciating pain and damage to anyone foolish enough to try it. We never would have pursued it. If Zillow is ordered by federal courts, the FTC, or attorney generals of states to discourage their allegedly illegally gained apartment revenue and content, I believe it will seriously damage Zillow's reputation in the apartment industry. These lawsuits will take years to resolve. The full extent of Zillow's conduct as alleged in these complaints and the various remedies from these lawsuits is yet to be seen. Moving to the United Kingdom, it was a strong quarter for OnTheMarket, our UK residential marketplace.

With leads up 21% year over year in Q3 2025, we delivered significant ROI to our 16,000 subscribing customers there. Bringing some Homes.com-inspired features to OnTheMarket has resulted in positive changes to the site that are generating more consumer engagement. We are building an audience of serious property seekers with total page views up 24% year over year in Q3. Average time on site per active user is up 79% year over year, and lead-to-visit conversions are up 31% year over year. Net new bookings increased for the 17th month in a row and has delivered nearly $11 million of annualized net new bookings since its acquisition. We closed the acquisition of Domain in August. I'm excited to work with the Domain team and their customers to bring Homes.com, CoStar, and LoopNet platforms to Australia.

Domain's residential marketplace and commercial marketplace, Domain's residential marketplace is very successful and generates more than 50% direct contribution margin. Its commercial marketplace generates a 40% direct margin. Both marketplaces have long-term growth potential under the CoStar umbrella. The Domain brand is very well known in Australia, and there's significant potential to expand market share there, where homeowners invest significantly in digital real estate advertising. Domain has an excellent management team led by Jason Pellegrino, who knows the Australian market well. He used to be the MD for Google there, and his vision for the business aligns with ours. We have made fast progress since taking ownership of the Domain business on August 28, delivering 7.4 million unique users in September on Domain's residential platforms, which was the largest number of unique users on Domain's own platforms in its history.

The quality of this increased audience was retained, delivering the highest consumer reviews per listing in Domain's history. We're on track to significantly beat those records in October. We have already delivered a 24% year-over-year increase in audiences on our commercial real estate platforms in Australia. These strong audience results were driven by a mix of greater marketing investment supported by an improved mix of marketing investment across every step of the consumer journey and rapid product improvement supported by a refocused product team and access to CoStar platforms, relationships, and talent. Examples of product improvements already executed and planned within the first 60 days of ownership include improvements in platform speeds and latency, removal of all advertising interrupting the consumer experience, and improvements in image quality.

A key highlight was the growth achieved in our audience metrics, where we saw Domain apps average 138% increase year over year in downloads across iOS and Android, allowing us to successfully overtake our main competitor in App Store rankings. Domain was previously constrained under its former media company owner. It received limited management focus, limited expertise, and scarce resources, limited expertise in real estate marketplaces. It was operated with short-term EBITDA strategy, keeping it from competing effectively with the market leader at REA Group. We believe that with CoStar Group's technology and resources, Domain will compete more effectively and will achieve stronger long-term profitability. A dozen members of my management team and I recently spent two weeks in Sydney for a deep dive into the Domain business and believe there are clear opportunities to make changes that will create value for our shareholders.

Most of the significant software resources and products we offer, we believe, are compatible with the Australian market, and we can integrate Domain into them to create competitive advantage and cost efficiencies. We hope to improve Domain's focus and profitability by rationalizing some of its product portfolio. Under prior ownership, Domain allocated significant resources to about 10 non-core initiatives at the expense of the highly profitable residential and commercial portals. I believe that most of the software development resources were allocated to products generating less than 20% of its revenue. We will refocus Domain's resources towards its successful scalable core and competing against its main competitor. We expect to offer LoopNet, Homes.com, and CoStar in Australia within 18 months. There is currently, we believe, no equivalent to CoStar in Australia.

While Domain Holdings and REA Group offer products similar to LoopNet, I do not believe that they're on par with what LoopNet offers. This presents a significant opportunity for us to quickly establish a leading presence. The more I live with Matterport, the more impressed I am with its technology, how well it works, and how useful it is to real estate. Matterport creates a strategic advantage in both our residential and commercial product portfolios. Matterport digital twins unlock value by bringing a new and important dimension of digitizing real estate in every product we offer. As part of CoStar Group, we see Matterport set on two pillars. On one pillar, Matterport is a standalone solution for industries such as insurance, construction, public safety, facilities management, and similar, which we believe is by itself a multi-billion dollar revenue opportunity.

In the second pillar, Matterport is brought to market as an integrated solution within our marketplaces and information solutions through our existing sales forces of 2,000 some people. We believe that in the second pillar, Matterport can help CoStar compete and achieve more than a billion dollars in incremental value. Integration of Matterport on the second pillar is well underway, and you can see deeper than ever integration of Matterport within our products. I believe that prior to merging with CoStar, Matterport was a world-class transformative technology held back by lack of focus on go-to-market strategy with an under-scaled sales and marketing effort. Matterport had fewer than 30 sales representatives globally, leaving many huge revenue opportunities untapped. We plan to expand the sales force by 200 by the end of 2026 and drive accelerated revenue growth.

Matterport's Q3 revenue is 12% higher than our expectations, $44 million versus $40 million, and our Q3 2025 net bookings were up 194% over Q3 last year. We emphasize new customer acquisition, which resulted in a 94% increase year over year in incremental new customer logos. Our Matterport Max rollout for Apartments.com began at the NAA conference in June of this year. We have already sold over 530 Matterport Max subscriptions, which are adding upwards of $5,000 per year in annual subscription revenue per unit. We just completed a successful developer summit and hackathon with the Matterport team. Coming out of that, I'm very confident that we have an outstanding and innovative product roadmap that will delight our customers and, for you all, more importantly, our shareholders. Turning to CoStar, CoStar generated $277 million in Q3 of 2025 revenue, reflecting 8% year-over-year growth.

Revenue growth has steadily improved in 2025 as net new bookings remain strong. Per rep productivity in Q3 was at its highest since Q3 2023. Cancellation rates have declined over the past two quarters, and our renewal rate reached 93.3%, the highest since 2023. Our subscriber count rose to 284,000 in the third quarter, up 20% year over year. Our lender business achieved a record quarter, closing $4.3 million annual net new bookings. With nearly $100 million in revenue and over 450 clients, including banks, credit unions, private lenders, regulators, and insurers, CoStar for lenders has demonstrated strong success and has significant potential. CoStar lender has already uploaded over a trillion dollars of loans into CoStar. Clients' loan portfolios are securely uploaded to our SOC 2 compliant platform, unavailable to any AI scraper, and integrated with CoStar's proprietary data analytics and credit modeling, informed by our research and marketplace solutions.

This comprehensive ecosystem delivers unmatched value for regulatory examinations, asset examinations, asset allocation, and responsible growth. In 2026, we plan to launch our benchmarking product and have begun developing a loan origination system, expanding our total addressable market. One of our core goals for all of our emerging businesses is to cross that oh-so-important $100 million revenue milestone. Congratulations to John Vecchioni, Zhao Zheng, and the entire lender team. Well done, and dinner is on me. LoopNet remains the world's largest and most active real estate marketplace, capturing 8.5 times more searches than our nearest competitor. In the third quarter of 2025, LoopNet achieved 10% revenue growth based on net new bookings from the last three quarters of 2025. We expect the platform to deliver low double-digit growth next year. I firmly believe that LoopNet should and can return to 20% plus annual growth rates soon.

Our strategic focus has been on offering LoopNet advertising packages that enable clients to promote their entire property portfolios rather than just select assets. These silver ads that are portfolio comprehensive designed are designed to drive higher renewal rates, deliver strong ROI for clients, expand listing coverage, and enhance both the consumer and customer experience. We are also continuing to roll out asset-based pricing for renewals, aligning our service pricing with the value delivered to clients. International expansion remains a key pillar of LoopNet's growth. Many of the largest multinational companies in the world are heavy users of LoopNet, and we can provide them even more value if we carried listings in more countries. In August of 2025, we integrated all French listings from Vero Loco into LoopNet, bringing the total number of European listings to 100,000 across France, Spain, and the UK.

We can see major tenants like Amazon and many others searching LoopNet for commercial real estate not only in the U.S., but also in Canada, France, the UK, and Spain. Wherever we're going, they're searching. We will soon add Australia, as I mentioned, through our Domain Holdings acquisition, further growing our global reach. We believe that LoopNet can deliver more value to local advertisers if we're delivering a unique and valuable global audience with high buying power. Our data consistently shows that properties listed on LoopNet sell and lease faster. For properties listed in January 2024, 30% of those on LoopNet transacted, while only 22% of those not listed on LoopNet transacted. For firms listing 90% to 100% of their listings on LoopNet, their 24-month close rate was 36%, while those not listed on LoopNet only had a 20% close rate.

If a few hundred dollars invested in LoopNet could increase your chance of transacting a commercial property by 80%, I believe that's a no-brainer. Turning to CoStar Real Estate Manager, CoStar Real Estate Manager and Visual Lease now support real estate lease management, accounting, and project management needs for 2,000 corporate clients, including more than half of the Fortune 500. Third quarter 2025 revenue climbed 63% year over year to $30.6 million. The business is very profitable with growing margins. We are making good progress integrating CoStar Real Estate Manager, Visual Lease, and CoStar into one extremely valuable corporate real estate solution. We expect to launch lease benchmarking capabilities mid 2026, creating a new level of transparency, helping investors, brokers, corporates, and lenders gain a more accurate and timely understanding of serious rents and potential income.

We expect to release an integrated product with Real Estate Manager and CoStar suite in 2026, late 2026. Clients will be able to access comprehensive market data and gain visibility into previously unseen opportunities to optimize their real estate portfolios. This will allow them to perform detailed analysis to make the most informed decisions that we believe will significantly drive significant ROI and cost savings for these clients. We shared our new product roadmap in our recent customer advisory meeting with major clients, which include real estate finance and accounting leaders, and we received extremely positive feedback on the new product direction. CoStar Group's European business continues to deliver record net new bookings, reaching $5.7 million in Q3 2025 and $16.9 million year to date, representing a 51% year-over-year growth.

The UK business achieved another record quarter with year-to-date net new bookings up 125% and revenue up 17% year over year. In France, our research team has curated over 260,000 buildings, 50,000 availabilities, 140,000 tenants, and 60,000 sale and lease comps. Business IMO now fully integrated into CoStar News reaches over 100,000 French CRE professionals monthly, and we're confident that CoStar will soon become the leading source for CRE data in France, connecting global and French investors. In closing, I believe that our results this quarter demonstrate that my colleagues here at CoStar Group are making great progress, continuing to successfully grow our existing businesses while effectively investing into new real estate segments and new global markets.

With $350 trillion of real estate in the world, we believe we're creating value digitizing it with leading marketplaces and information solutions that can result in a trillion-dollar addressable market with a deep moat. We're busy building it one brick at a time. At this point, I'll turn the call over to our CFO, Chris.

Speaker 1

Thank you, Andy. Good evening. I'm happy to report that CoStar has now posted its 58th consecutive quarter of double-digit revenue growth, coming in at 20%. We achieved an impressive commercial information and marketplaces brand margin of 47% in the third quarter versus 43% in Q3 2024. Net new bookings for the third quarter were $84 million, representing a 92% increase year over year. Every major product contributed to this record as our growing dedicated sales force of over 2,000 people is delivering for CoStar. Revenue for the third quarter was $834 million, which included a $25 million contribution from the Domain acquisition. Revenue excluding Domain of $808 million exceeded the high end of our guidance. Third quarter adjusted EBITDA came in at $115 million, also exceeding the high end of our guidance at a 14% margin.

The outperformance in adjusted EBITDA was a result of continued expense discipline and better than expected revenue. Our CoStar product saw revenue grow 8% in the third quarter ahead of our guidance. We are excited about this product's renewed growth, especially given continued volatility in the commercial real estate sector. Net new bookings have steadily increased throughout 2025 and are now at the highest level seen since 2022. With this increasing momentum, we expect to see the CoStar product grow between 8% and 9% in the fourth quarter, with full-year growth firmly in the 7% range from our original guidance of 6% to 7%. Residential revenue was $55 million in the third quarter, with $23 million coming from the Domain acquisition. The $32 million in organic revenue was consistent with last quarter's guidance.

With the addition of revenue from Domain, we now expect fourth quarter revenue of $100 million to $105 million, with Domain contributing around $67 million. For full-year 2025, we expect residential revenue to more than double to $210 million to $215 million from $101 million in 2024. Apartments.com's third quarter revenue growth came in at 11% year over year. Our Apartments.com sales reps are consistently the most productive of our large brands, and we have increased the size of this team by 20% year to date. We now have more than 500 Apartments.com sales reps for the first time in its history. These reps will take time to ramp up their productivity, but this investment puts us in a great position for longer-term growth. For Q4 2025, we expect 11% to 12% revenue growth, resulting in full-year 2025 revenue growth of 11% to 12%.

LoopNet revenue grew 12% in the third quarter, with a two percentage point lift from the Domain acquisition. LoopNet's organic performance was in line with last quarter's guidance. Our sales team is consistently outperforming prior productivity levels, and in conjunction with the Domain contribution, we now expect Q4 revenue growth of between 15% to 17% and full-year revenue growth of 10% to 11%. On an organic basis, Q4 revenue growth is expected to be 11%, its highest growth rate since 2023. This acceleration throughout 2025 sets us up nicely for 2026. Revenue from information services was $41 million in the third quarter. We expect fourth quarter revenue to be consistent with the third quarter and full-year revenue growth of between 18% to 20%. We are excited about launching our new rent analytics product in the first half of 2026 and our new lease platform in the fourth quarter of 2026.

Other revenue was $78 million in the third quarter, with Matterport contributing $44 million. For the fourth quarter, we expect other revenue to range between $70 million and $72 million. The fourth quarter is expected to be slightly impacted by revenue recognition timing for 10x and lower camera sales at Matterport as we sunset the Pro2 camera. As previously stated, adjusted EBITDA for the third quarter was $115 million, meaningfully above the high end of our $75 million to $85 million guidance. The favorable performance came from higher than projected revenue, higher than anticipated professional services, lower than anticipated professional services costs, and greater than expected headcount savings, as we remain laser-focused on expenses. Our contract renewal rate was 89% for the third quarter, with the renewal rate for customers who have been subscribers for five years or longer holding steady at 94%.

Subscription revenue on annual contracts was 75% for the third quarter. The acquisitions of Matterport and Domain are the driving factors for the change in our subscription revenue metric. Our September 30th balance sheet included $2 billion in cash, which earned net interest income of $26 million in the third quarter, a 4% rate of return. We repurchased 576,000 shares in the third quarter for $51 million, bringing our year-to-date total to 1.4 million shares repurchased for $115 million. We expect to purchase approximately $50 million of additional shares in the fourth quarter, bringing our 2025 total to approximately $165 million of the $500 million share repurchase authorization. We closed on the Domain Holdings acquisition on August 27. The total consideration was $1.9 billion. Domain contributed $25 million of revenue for the stub period from August 28 to September 30.

For context, around 90% of Domain's revenues is residential, while the remaining 10% is split between commercial marketplaces and information services. With nine months of 2025 in the books and with the closing of Domain, we now expect full-year revenue of between $3.23 billion to $3.24 billion, broadly in line with our guidance excluding Domain. Fourth quarter revenue is now expected to be between $885 million and $895 million. Full-year adjusted EBITDA is now expected to range between $415 million and $425 million, with Domain contributing approximately $15 million. This $25 million increase in our guidance, excluding the impact from Domain, is indicative of our strong third quarter performance. Fourth quarter adjusted EBITDA is expected to range between $150 million and $160 million. I will now turn the call back to our call operator to open the lines for questions.

Speaker 0

Thank you. As a reminder, to ask a question, please press *11 on your telephone and wait for your name to be announced. To withdraw your question, please press *11 again. Please limit yourself to one question. Our first question comes from Peter Christiansen with Citi. You may proceed.

Good evening. Thanks for the question here. Nice results, guys. Good trends here. Andy, it's interesting. I was looking across the last eight years, and sequential change in bookings, excluding COVID, so 2020, was roughly 15%. This quarter's sequential change in bookings was 10% down. Clearly, the new salesforce capacity is contributing, and other things also contributing to some of that growth being above seasonality. I'm just curious if you could point out any seasonal behaviors that you notice and maybe special attention on the residential side. Are agents canceling now? Plan to come back later? Are you seeing the same type of seasonality that you normally see in the apartments business? Any deeper thoughts there would be helpful. Thank you.

Sure. I guess you got the first question because we sourced Citi during our script. Apartments.com does have seasonality in that, as you know, the prior quarter you have usually unusually large sales because of the NAA event, where major property managers do their annual purchasing for the year to come. We would expect some limited seasonality from residential agents as they get to year-end holidays and the like. Their peak season is the spring selling season. What we're seeing right now, if I look at a line of our sales production at Homes.com, it is a very linear line, and the only seasonality in that sales line is Saturday and Sunday. It's a very smooth progression up right now, and I'm not yet seeing seasonality. Maybe in the Christmas holidays you might get something, but not yet.

Thank you.

Thank you. Our next question comes from Stephen Sheldon with William Blair. You may proceed.

Hey, thanks. Just wanted to follow up on that question. I guess, can you just give more detail on the sequential booking trends in the third quarter as we look at the core businesses? Looking at Suite, Apartments.com, and LoopNet, how are things shaping up in the seasonally important fourth quarter around bookings, especially with a bigger sales force and the ramping in productivity? How are you thinking about the bookings trajectory into Q4?

Chris?

Speaker 1

I think as you see.

Speaker 0

It didn't like my SEU try.

Speaker 1

I think what you see is you see our full-year guidance. You see our sequential trends. We're very pleased with the bookings, and I think we're just getting started from the salesforce expansion. A lot of the salesforce came in at the end of the first quarter, second quarter, et cetera. Productivity takes time to ramp. Seasonality and what we're modeling is pretty much in line with what we're expecting, and therefore you saw the increase in our full-year guidance and our expectations. I think we're on track from what we're expecting.

Speaker 0

Thank you. I do want to point out and remind everyone that the bookings at Homes.com from Q2 to Q3 was up 53%. As we're going into the third quarter, we're seeing a significant uptick in bookings at Homes.com, and again, because of the number of people, a very smooth upward growth trajectory.

Speaker 1

Yeah, and I'd just expand that a little further. CoStar's trend is very positive. We're seeing re-acceleration there, which we're very excited by. We talked about LoopNet. Andy, you talked about LoopNet and what's going on there. On Apartments.com, as I said, the trends are as expected and as modeled. I think we feel really good on the underlying trends and resulting in our change in guidance.

Speaker 0

Thank you. Our next question comes from Ryan Tomasello with KBW. You may proceed.

Hi, everyone. Thanks for taking the questions. At Apartments.com, in terms of bookings, can you say how those perform sequentially versus, I think, $45 million in the second quarter? Looking at the guidance for the fourth quarter, Chris, I think you're calling for 11% to 12% on multifamily, which would be pretty unchanged growth from the third quarter. I'm sorry, yes, from the third quarter. Just curious what's driving that despite the ramp in the sales force and just generally how you're thinking about demand trends at Apartments.com heading into the end of the year.

Speaker 1

You know, what's important is what you saw across a number of fronts. One, we continue to see rooftop expansion at Apartments.com. We're expanding the sales force. We've talked historically about the seasonality or the contributions on a quarterly basis as we look back historically, with the second quarter being the largest quarter, the third and fourth quarters being relatively similar, although there can be an uptick in the fourth quarter. I think we feel generally good about the trends, which has resulted in our numbers and our forecast. Obviously, solid growth, increased rooftop expansion, and then that's actually across all segments, 1% to 49% obviously had a pretty significant increase year over year. Both 50% to 99% and 100% plus also showing growth at or higher than what we've seen over the last four or five quarters.

Speaker 0

Ryan, did I mention that the FTC was suing our competitor?

Yes, I think I caught that, Andy. Thank you.

Okay, I just wanted to make sure. Thank you. Our next question comes from Curtis Nagle with Bank of America. You may proceed.

Great. Thanks so much for taking the question. I guess, Andy, I just wanted to go back to the point. You're investing 50% of your software costs now into AI. Where are you redirecting those expenses from? Any thoughts you could give on how to think about total expenses for 2026 for Homes.com?

I thought you'd never ask. The 50% of our software development going into AI features in Homes.com is an allocation of the existing resources. It does not reflect an increase in total spend. As we go into any particular quarter or season, we're always looking at what the headline investment initiatives are going to be. We are most excited about the potential of these AI features and functions, which are just remarkable and awesome. When we look at 2026, we anticipate, I would say, same or lower spend on Homes.com investment in 2026. You agree with that, Chris, or are you going to go?

Speaker 1

You're the CEO. I agree with whatever you say, Andy.

Speaker 0

Okay, great. Yeah, we don't see any, other than the increased salesforce size that we've already baked in and that rollover to 2025, the costs are not materially going up in any way I see.

Okay. Thank you, Andy.

Thank you. Our next question comes from Brett Huff with Stephens. You may proceed.

Hey, good afternoon, and thanks for the time. Can you detail a little bit, unpack a little bit the bookings number that you gave us for Homes.com, which we appreciate? Just in terms of rep productivity, you know, are the newer folks getting more up to speed? Do we still have more of those folks to get up to speed? Pricing, sort of any of the numbers that go into that bookings number would be super helpful as we try and tweak our model. Thanks.

Sure. We are in a period of remarkable headcount growth at Homes.com. We've never seen anything like it, where you have classes of 100 and some coming in at any given point. That is difficult to manage. You would fully expect you'd see a drop-off in per-person productivity as you bring that many people in. We are seeing consistent growth in those bookings. What was the second part of the question?

Speaker 1

Yeah, productivity.

Speaker 0

Yeah, the productivity is still, we're seeing a very positive ROI in each incremental salesperson added, but you are seeing the effects of so many people coming in. We are slowing the growth, or I believe sort of have capped the growth of salespeople to allow for training and onboarding to catch up.

Speaker 1

Right, and you haven't made adjustments to pricing to improve penetration.

Speaker 0

Slight increase in pricing in this quarter over prior quarter, but we're focusing on penetration, as you can see. Thank you. Our next question comes from Basil Witte with Deutsche Bank. You may proceed.

Yes, hi, thank you. Andy, you mentioned in your opening remarks that you think that you can get to 40% profitability or margins on the residential business. I'm curious how you think about the timeframe on that and sort of what needs to happen for you to get there.

Yeah, the residential business, obviously, you have Domain in there, you have OnTheMarket, you have Homes in there, you have Apartments.com, and past this prologue, you see us adding components to it through time. When you look at our business model, it's uniform across all four of those platforms. It is around marketing the real estate. If I look around the world at all of the precedent models that use marketing real estate as their core business, be it Rightmove or Idealista or CLoget or REA Group and the like, they all operate up at margins that are typically around 50%, and in some cases as high as 75%. It's really continued blocking and tackling over the next number of years.

I don't have a specific date for that, but when I look at the margin numbers for the combined residential businesses, I like the progression of EBITDA margin that I see in that group of companies. You can combine all these things together this way or that way, but when you look at them, I think they're making good progress towards our intermediate to long-term margin goals. Thank you. I would now like to turn the call back over to Andy Florance for any closing remarks. I think our participants of the call today have probably modeled good behavior in keeping it brief. I'll try to be briefer in my next set of comments, but thank you guys for joining us. We're very excited about what's happening here at CoStar Group, and we look forward to updating you in 2026 for our next earnings call. Thank you. Thank you.

This concludes the conference. Thank you for your participation. You may now disconnect.