CoStar Swings to Loss Amid Acquisition Spree, Revenue Jumps 20%

TL;DR

**CoStar's massive M&A push is crushing short-term profits, but it's a calculated land grab for future real estate tech dominance.**

AI Summary

CoStar Group, Inc. (CSGP) reported a significant decline in net income for the three and nine months ended September 30, 2025, primarily due to substantial increases in operating expenses related to recent acquisitions. For the three months ended September 30, 2025, the company posted a net loss of $30.9 million, a sharp contrast to the net income of $53.0 million in the same period of 2024. This represents a 158.3% decrease. Similarly, for the nine months ended September 30, 2025, CSGP reported a net loss of $39.5 million, down from a net income of $78.9 million in 2024, marking a 150.1% decline. Revenues, however, saw robust growth, increasing to $833.6 million for the three months ended September 30, 2025, up 20.4% from $692.6 million in 2024, and to $2,347.1 million for the nine months, up 15.8% from $2,026.8 million. Key business changes include the acquisitions of Visual Lease in November 2024, Matterport in February 2025, and Domain in August 2025, which significantly impacted goodwill and intangible assets, increasing them to $4,915.4 million and $1,844.4 million, respectively, as of September 30, 2025. Operating expenses surged, with selling and marketing up 26.3% to $418.3 million for the quarter, and general and administrative expenses rising 48.4% to $157.0 million, reflecting integration costs and increased headcount. The strategic outlook focuses on leveraging these acquisitions to expand its global real estate information and marketplace offerings, despite the short-term impact on profitability.

Why It Matters

CoStar's aggressive acquisition strategy, highlighted by the Matterport and Domain deals, is driving significant revenue growth but at the cost of short-term profitability. This shift to a net loss of $30.9 million for the quarter could concern investors focused on immediate earnings, but it also signals a long-term play for market dominance in real estate information and 3D digital twin technology. For employees, these integrations could mean new opportunities or restructuring. Customers might benefit from an expanded suite of services, potentially intensifying competition with rivals like Zillow in the residential market. The substantial increase in goodwill and intangible assets to $4,915.4 million and $1,844.4 million, respectively, indicates a bet on future value creation from these acquired entities.

Risk Assessment

Risk Level: medium — The company reported a net loss of $30.9 million for the three months ended September 30, 2025, a significant decline from a $53.0 million net income in the prior year, and a net loss of $39.5 million for the nine months. This is primarily driven by a 34.9% increase in total operating expenses to $712.5 million for the quarter, largely due to integration costs from recent acquisitions like Matterport and Domain. While revenue growth is strong, the immediate impact on profitability and the substantial increase in goodwill to $4,915.4 million introduce integration and impairment risks.

Analyst Insight

Investors should monitor CoStar's ability to successfully integrate its recent acquisitions, particularly Matterport and Domain, and demonstrate a clear path to profitability from these expanded operations. While the revenue growth is positive, the swing to a net loss suggests that the market may need to re-evaluate its valuation based on future earnings potential rather than current performance. Consider holding if you believe in the long-term synergy of the acquisitions, but be prepared for continued short-term earnings volatility.

Financial Highlights

revenue

$2,347.1M

total Assets

$10,819.9M

total Debt

$992.9M

net Income

($39.5M)

eps

($0.09)

gross Margin

79.3%

cash Position

$1,935.3M

revenue Growth

+15.8%

Revenue Breakdown

Key Numbers

• $833.6M — Revenues for Q3 2025 (Increased 20.4% from $692.6 million in Q3 2024)
• ($30.9M) — Net income (loss) for Q3 2025 (Swung from a $53.0 million net income in Q3 2024)
• ($39.5M) — Net income (loss) for YTD Q3 2025 (Swung from a $78.9 million net income in YTD Q3 2024)
• $4,915.4M — Goodwill as of Sep 30, 2025 (Increased significantly from $2,527.6 million at Dec 31, 2024, due to acquisitions)
• $1,844.4M — Intangible assets, net as of Sep 30, 2025 (Increased from $433.2 million at Dec 31, 2024, due to acquisitions)
• $712.5M — Total operating expenses for Q3 2025 (Increased 34.9% from $528.3 million in Q3 2024)
• $418.3M — Selling and marketing expenses for Q3 2025 (Increased 26.3% from $331.2 million in Q3 2024)
• $157.0M — General and administrative expenses for Q3 2025 (Increased 48.4% from $105.8 million in Q3 2024)
• $2,347.2M — Cash paid for acquisitions, net of cash acquired for YTD Q3 2025 (Significant increase from $5.1 million in YTD Q3 2024)
• $1,935.3M — Cash and cash equivalents as of Sep 30, 2025 (Decreased from $4,681.0 million at Dec 31, 2024, due to acquisition spending)

Key Players & Entities

• CoStar Group, Inc. (company) — Registrant and global provider of real estate information
• Matterport (company) — Acquired technology platform for spatial data and digital images
• Domain Holdings Australia Limited (company) — Acquired Australian residential property portal
• Visual Lease (company) — Acquired SaaS platform for integrated lease management
• SEC (regulator) — U.S. Securities and Exchange Commission
• Nasdaq Global Select Market (market) — Exchange where CoStar Group Common Stock is registered
• Zillow (company) — Potential competitor in the residential real estate market

FAQ

Risk Factors

• Increased Debt and Acquisition-Related Expenses [high — financial]: The company has significantly increased its goodwill and intangible assets due to acquisitions (Visual Lease, Matterport, Domain), leading to higher amortization expenses. The substantial cash outflow for acquisitions has reduced cash and cash equivalents by over $2.7 billion from December 31, 2024, to $1.9 billion as of September 30, 2025. This increased financial leverage and reduced liquidity could pose risks if integration is challenging or future financing needs arise.
• Integration Challenges of Acquisitions [high — operational]: CoStar has completed three significant acquisitions (Visual Lease, Matterport, Domain) within a short period. The substantial increases in selling and marketing (26.3%) and general and administrative (48.4%) expenses reflect the costs associated with integrating these new businesses. Failure to effectively integrate these entities could hinder the realization of expected synergies and negatively impact future financial performance.
• Deterioration in Profitability Metrics [medium — financial]: The company reported a net loss of $30.9 million for Q3 2025, a significant swing from a $53.0 million net income in Q3 2024. This is attributed to increased operating expenses, including software development and customer base amortization, which rose by 30.1% and 151.5% respectively for the nine-month period. This decline in profitability, despite revenue growth, raises concerns about the sustainability of earnings.
• Intensified Competition in Real Estate Information [medium — market]: The real estate information and marketplace sector is highly competitive. While CoStar's acquisitions aim to expand its global offerings, the integration of new technologies and platforms from acquired companies like Matterport and Visual Lease needs to be executed flawlessly to maintain a competitive edge against existing and emerging players.
• Litigation Accrual [medium — legal]: The company has recorded a litigation accrual of $98.8 million as of September 30, 2025, which was not present at the end of 2024. The nature and potential outcome of this litigation represent an unquantified financial risk that could impact future earnings or cash flows.

Industry Context

CoStar Group operates in the highly competitive commercial real estate information and marketplaces sector. The industry is characterized by a need for extensive data, advanced analytics, and integrated technology solutions. Key trends include the increasing demand for digital platforms, 3D visualization, and comprehensive lease management tools, driving consolidation through acquisitions as companies seek to expand their service offerings and global reach.

Regulatory Implications

While no specific new regulatory changes are highlighted, CoStar's substantial increase in goodwill and intangible assets from acquisitions could face scrutiny regarding valuation and impairment testing. The company must also ensure compliance with data privacy regulations across its expanded global operations, especially with the integration of new technologies.

What Investors Should Do

1. Monitor acquisition integration progress and synergy realization.
2. Analyze the trend of declining net income despite revenue growth.
3. Evaluate the impact of the litigation accrual.
4. Assess the company's liquidity and debt management post-acquisition.

Key Dates

• 2024-11-01: Acquisition of Visual Lease — Expanded CoStar's lease accounting and management capabilities, contributing to increased goodwill and intangible assets.
• 2025-02-01: Acquisition of Matterport — Strengthened CoStar's spatial data and 3D capture technology, significantly impacting asset values and future integration costs.
• 2025-08-01: Acquisition of Domain — Further broadened CoStar's global real estate marketplace presence, adding to the substantial increase in goodwill and intangible assets.
• 2025-09-30: End of Q3 2025 — Reporting period for the 10-Q, showing a net loss driven by acquisition-related expenses despite strong revenue growth.

Glossary

Goodwill

An intangible asset that arises when a company acquires another company for a price greater than the fair value of its identifiable net assets. It represents the future economic benefits arising from assets acquired in a business combination that are not individually identified and separately recognized. (Significantly increased to $4,915.4 million due to recent acquisitions, indicating substantial premium paid over the fair value of acquired net assets.)

Intangible assets, net

Assets that lack physical substance but are identifiable and provide future economic benefits, such as patents, trademarks, and customer lists. They are amortized over their useful lives. (Increased to $1,844.4 million from $433.2 million, reflecting the value attributed to acquired intellectual property and customer relationships from recent acquisitions.)

Customer base amortization

The systematic expensing of the value of acquired customer relationships over the period those relationships are expected to generate revenue. This is an accounting charge related to acquisitions. (Increased significantly to $75.5 million for the nine months ended September 30, 2025, from $31.5 million in the prior year, directly impacting net income due to acquisition activity.)

Deferred revenue

Revenue that has been received by a company but not yet earned, meaning the goods or services have not yet been delivered or performed. It is recognized as revenue when earned. (Increased to $201.6 million, suggesting strong future revenue streams from services or subscriptions already paid for, which is a positive indicator for future revenue recognition.)

Litigation accrual

A liability recorded on the balance sheet to account for the estimated costs of a legal proceeding that the company is involved in, where the outcome is probable and the amount can be reasonably estimated. (A new liability of $98.8 million recorded as of September 30, 2025, indicating a significant legal matter that could impact future financial results.)

Year-Over-Year Comparison

Compared to the prior year's filing, CoStar Group has experienced a dramatic shift in profitability, moving from net income to net losses for both the three and nine months ended September 30, 2025. This is primarily driven by a significant increase in operating expenses, including selling and marketing, software development, and general and administrative costs, largely due to recent acquisitions. While revenues have shown robust growth (20.4% for the quarter and 15.8% year-to-date), the surge in expenses has outpaced revenue gains, leading to a substantial decline in net income and the recognition of significant goodwill and intangible assets on the balance sheet.

Key Financial Figures

• $0.01 — ange on which registered Common Stock ($0.01 par value) CSGP Nasdaq Global Select Ma
• $4.43 — rrangement for a cash consideration of A$4.43 per ordinary share of Domain Domain S
• $0.0001 — terport Class A common stock, par value $0.0001 per share Matterport Merger Exchange R
• $77.42 M — Floor Price of a symmetrical collar of $77.42 Matterport Merger Agreement On April 21,
• $500 million — that authorizes the repurchase of up to $500 million CoStar Group Shares STR The legal ent

Filing Documents

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FINANCIAL INFORMATION

PART I FINANCIAL INFORMATION

Financial Statements

Item 1. Financial Statements 6 Condensed Consolidated Statements of Operations 6 Condensed Consolidated Statements of Comprehensive Income 7 Condensed Consolidated Balance Sheets 8 Condensed Consolidated Statements of Changes in Stockholders' Equity 9 Condensed Consolidated Statements of Cash Flows 11 Notes to Condensed Consolidated Financial Statements 12

Management's Discussion and Analysis of Financial Condition and Results of Operations

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 46

Quantitative and Qualitative Disclosures About Market Risk

Item 3. Quantitative and Qualitative Disclosures About Market Risk 61

Controls and Procedures

Item 4. Controls and Procedures 62

OTHER INFORMATION

PART II OTHER INFORMATION

Legal Proceedings

Item 1. Legal Proceedings 63

Risk Factors

Item 1A. Risk Factors 63

Unregistered Sales of Equity Securities and Use of Proceeds

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 65

Defaults Upon Senior Securities

Item 3. Defaults Upon Senior Securities 65

Mine Safety Disclosures

Item 4. Mine Safety Disclosures 65

Other Information

Item 5. Other Information 65

Exhibits

Item 6. Exhibits 66

Signatures

Signatures 67 2 Glossary of Terms The following abbreviations or acronyms used in this Quarterly Report on Form 10-Q (this " Report " ) are defined below: Abbreviation or Acronym Definition 2024 Credit Agreement The credit agreement the Company entered into on May 24, 2024 2024 Form 10-K CoStar Group's Annual Report on Form 10-K for the year ended December 31, 2024 filed with the SEC on February 19, 2025 A$ Australian dollars AI Artificial Intelligence AOMs Structured equity vehicles operating under Domain's Agent Ownership Model. The AOMs function as strategic partnership tools that provide residential and commercial real estate agencies an economic stake in Domain-affiliated entities, creating a mechanism to reward long-term engagement and performance through profit-sharing rather than traditional commissions or rebates. ASC Accounting Standards Codification Assumed Matterport Plans The Matterport 2021 Incentive Award Plan and Matterport, Inc. Amended and Restated 2011 Stock Incentive Plan assumed by CoStar Group in connection with the Matterport Acquisition ASU Accounting Standards Update BizBuySell Network BizBuySell.com and its network of business for-sale websites Board of Directors The CoStar Group Board of Directors CECL Current expected credit losses CODM Chief Operating Decision Maker CoStar Group (also the "Company," "we," "us," or "our") The legal entity, CoStar Group, Inc., a Delaware corporation, one or more of its consolidated subsidiaries or operating segments, or the entirety of CoStar Group, Inc. and its consolidated subsidiaries CoStar Group Share A share of the common stock of the Company, par value $0.01 per share CRI The legal entity CoStar Realty Information, Inc., a Delaware corporation and wholly owned subsidiary (and primary operating entity in the United States) of CoStar Group, Inc. Domain Domain Holdings Australia Limited Domain Acquisition CoStar's acquisition of Domain completed on August 27, 2025, pu

— FINANCIAL INFORMATION

PART I — FINANCIAL INFORMATION

Financial Statements

Item 1. Financial Statements COSTAR GROUP, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in millions, except per share data) (unaudited) Three Months Ended September 30, Nine Months Ended September 30, 2025 2024 2025 2024 Revenues $ 833.6 $ 692.6 $ 2,347.1 $ 2,026.8 Cost of revenues 172.2 140.6 493.3 417.6 Gross profit 661.4 552.0 1,853.8 1,609.2 Operating expenses: Selling and marketing (excluding customer base amortization) 418.3 331.2 1,182.1 1,055.7 Software development 105.4 81.0 297.0 243.0 General and administrative 157.0 105.8 420.3 314.3 Customer base amortization 31.8 10.3 75.5 31.5 712.5 528.3 1,974.9 1,644.5 Income (loss) from operations ( 51.1 ) 23.7 ( 121.1 ) ( 35.3 ) Interest income, net 26.0 55.6 97.0 165.3 Other expense, net ( 20.7 ) ( 1.6 ) ( 6.8 ) ( 4.9 ) Income (loss) before income taxes ( 45.8 ) 77.7 ( 30.9 ) 125.1 Income tax expense (benefit) ( 14.9 ) 24.7 8.6 46.2 Net income (loss) $ ( 30.9 ) $ 53.0 $ ( 39.5 ) $ 78.9 Net income (loss) per share - basic $ ( 0.07 ) $ 0.13 $ ( 0.09 ) $ 0.19 Net income (loss) per share - diluted $ ( 0.07 ) $ 0.13 $ ( 0.09 ) $ 0.19 Weighted-average outstanding shares - basic 419.9 406.8 416.7 406.2 Weighted-average outstanding shares - diluted 419.9 408.0 416.7 407.6 See accompanying notes. 6 COSTAR GROUP, INC. CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (in millions) (unaudited) Three Months Ended September 30, Nine Months Ended September 30, 2025 2024 2025 2024 Net income (loss) $ ( 30.9 ) $ 53.0 $ ( 39.5 ) $ 78.9 Other comprehensive income, net of tax Foreign currency translation adjustment 36.8 18.0 82.5 13.5 Total other comprehensive income 36.8 18.0 82.5 13.5 Total comprehensive income $ 5.9 $ 71.0 $ 43.0 $ 92.4 See accompanying notes. 7 COSTAR GROUP, INC. CON DENSED CONSOLIDATED BALANCE SHEETS (in millions) (unaudited) September 30, 2025 December 31, 2024 ASSETS Current assets: Cash and cash equivalents $ 1,935.3 $ 4,681.0

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