CoStar Group, Inc. (CSGP) Earnings & Analysis

Latest quarter

CoStar reported Q3 FY2026 revenue of $952.0 million, above the $951.0 million consensus. Adjusted EPS was $0.38, also above the $0.34 consensus. Revenue rose 14.1% from $834.0 million a year earlier.

The filing says commercial revenue grew to $492 million, helped by CoStar price increases and subscribers, while residential revenue rose to $460 million as memberships and advertised properties increased. Other commercial revenue fell, primarily because fewer properties were transacted on Ten-X.

Gross margin narrowed to 77.8% from 79.4%, while operating margin rose to 8.82% from −6.12%. The filing attributes lower selling and marketing expenses partly to reduced marketing spending. Free cash flow was $106.0 million, compared with −$24.0 million a year earlier.

Reported revenue exceeded CoStar’s $935.0 million–$945.0 million quarterly guide. CFO Robin Rossmann said revenue excluding Zonda, which was not included in that guidance, was below its midpoint because of lower Domain transaction volumes and Apartments.com subscription revenue. He said adjusted EPS also exceeded the company’s guidance.

Adjusted EPS is the figure the consensus estimates, not the GAAP EPS above.

Revenue came in within or above the company’s guide in 2 of the last 2 quarters it guided.

What management said on the call

CEO Andy Florance said annualized net new bookings fell short of expectations at $37 million in the third quarter. He attributed the result to economic headwinds and slower-than-expected sales-force growth. CFO Robin Rossmann said the decline was concentrated in residential, where sales capacity affected Apartments.com and Homes.com bookings moderated after a sales-force reduction.

Florance said CoStar is shifting much of its sales hiring toward experienced field representatives and moving recruiting into major city hubs. He said the company had about 2,000 sales professionals, down about 10% from a year earlier. Rossmann expects bookings to improve sequentially in the fourth quarter.

At Apartments.com, Florance said the team lacked time to serve existing customers and pursue new business. Responding to an analyst’s question about cancellations and competition, he cited elevated vacancies and pressure on property owners to reduce costs. Rossmann said adding sales representatives would give them more time to service customers and help reduce cancellations.

Florance said Homes.com introduced Platinum Premium Advertising in September, giving selected listings higher placement and additional promotion. He said its average sales price rose to $429 in October. Rossmann said Homes.com membership was roughly flat sequentially in the third quarter, with revenue growth driven by pricing and mix.

On costs, Rossmann said an expense review had identified approximately $200 million of additional efficiency opportunities, alongside the $150 million in savings anticipated against the original 2026 expense guidance. Asked how savings would be used, he said decisions remained on their allocation between margin improvement and investment.

Florance also discussed CoStar’s agreement to acquire aerial-imagery provider Vexcel, saying the company plans to combine imagery and AI with its existing property information. Rossmann said the purchase would be funded with cash and the company’s undrawn revolving credit facility.

Guidance

CoStar updated its full-year 2026 revenue guidance to $3.75 to $3.77 billion. Florance said the midpoint was $25 million above the previous guide, including approximately $60 million from Zonda; excluding Zonda, the outlook was $35 million below the July guide.

Rossmann said CoStar raised its full-year adjusted EBITDA guidance to $820.0 million–$840.0 million and adjusted EPS guidance to $1.38–$1.41. He said the guidance includes Zonda but excludes the proposed Vexcel acquisition.