CoStar Group runs a collection of real estate websites and databases that people pay to use every month. Its two main businesses are Commercial Real Estate, which sells data and analytics tools to brokers, landlords, and lenders through brands like CoStar and LoopNet, and Residential Real Estate, which helps renters and homebuyers find properties through Apartments.com and Homes.com. About 93% of revenue comes from subscriptions: customers sign up, pay a fixed monthly fee, and the contract renews automatically. The company also earns smaller amounts from one-off transactions, like auction fees on its Ten-X platform and hardware sales from its newly acquired Matterport cameras. The diagram below traces where the money goes.
How CoStar Group Makes Money
flowchart TD
A["Real Estate Data Collection
35+ years of databases"] --> B["Standardized Commercial
Database with 100s fields"]
B --> C["CoStar Platform
$1.3B revenue"]
B --> D["LoopNet Marketplace
$0.3B revenue"]
B --> E["Residential Marketplaces
Apartments.com, Homes.com"]
C --> F["Subscription Fees
Fixed monthly charges"]
D --> F
E --> F
B --> G["Matterport 3D Twins
Capture and subscriptions"]
G --> H["Transaction Services
Camera sales, auction fees"]
F --> I["Total Revenue
$3.2B, 78.9% margin"]
H --> I
I --> J["R&D Investment
Product development, AI"]
J --> A
J --> K["Field Research Team
Property inspections, photos"]
K --> A
Five years of financials tell a clear story: revenue keeps growing, but profit is shrinking. Revenue climbed from $1.9 billion in 2021 to $3.2 billion in 2025, a gain of roughly 68% over four years. That is the good news. The harder news is what happened to cash and earnings along the way.
Annual Revenue 2021 to 2025 ($B)
Revenue has grown every year, but the pace of spending has grown alongside it.
Gross margin, the share of each dollar left after paying direct costs, has slid steadily from about 82% in 2021 to about 79% in 2025. That is still high by most standards, but the direction matters. More telling is what happened to free cash flow, which is the cash a company has left after paying for buildings, equipment, and software. In 2024, free cash flow turned negative, at minus $0.2 billion. It recovered to $0.1 billion in 2025, but that is a long way from the $0.4 billion generated in 2022 and 2023. The reason is spending. CoStar has been pouring money into sales forces, marketing campaigns (including roughly $35 million on Super Bowl commercials in 2024), a new technology campus in Richmond, Virginia, and a string of acquisitions.
What is free cash flow?
Free cash flow is the money a company has left over after it pays all its bills and buys the equipment and software it needs to run. It is different from profit because it counts actual cash moving in and out, not accounting estimates. A company can show a profit on paper while actually running short of real cash.
Net income followed the same pattern. The company earned $375 million in 2023, then $139 million in 2024, then just $7 million in 2025. That near-zero profit came despite $3.2 billion in revenue, because selling and marketing expenses alone hit $1.6 billion in 2025, equal to 48% of all revenue. CoStar is deliberately spending heavily today in hopes of winning a bigger share of the residential real estate market tomorrow.
$1.6B
Selling and marketing expenses in 2025, equal to 48% of total revenue
The balance sheet gives CoStar room to keep spending. Net debt has been negative throughout this period, meaning the company holds more cash than it owes in debt. Net debt stood at minus $3.7 billion in 2024 and minus $0.6 billion in 2025. The drop between those two years reflects the cash spent on the Matterport acquisition in February 2025 and the Domain acquisition in August 2025. CoStar is drawing down its cash cushion to fund growth.
2025
milestone
Three acquisitions in under a year
CoStar acquired Visual Lease in November 2024, Matterport in February 2025, and Domain in August 2025. Matterport brought 3D camera technology and digital property tours. Domain added a leading real estate marketplace in Australia. Together these deals added new revenue streams but also pushed operating losses and customer base amortization costs sharply higher in 2025.
The acquisitions also introduced new risks that did not exist before. Matterport depends on a small number of suppliers in China for its camera hardware. Disruptions from tariffs, trade restrictions, or supplier failures could delay production and hurt that part of the business. Integrating Matterport and Domain into CoStar's wider platform requires management time and money, and the company has acknowledged that if those integrations do not go as planned, it could lose money on both deals. There is also a structural risk tied to search engines. Google and Bing send a large portion of visitors to CoStar's residential websites. If those search engines change their ranking systems, or begin competing directly in real estate, traffic to Apartments.com and Homes.com could fall sharply.
Why does search engine traffic matter so much?
Most people find real estate websites by typing a search into Google or Bing. If those search engines decide to show their own property listings at the top of results instead of linking to Apartments.com or Homes.com, fewer people visit CoStar's sites. Fewer visitors means fewer landlords and agents willing to pay for advertising there.
The real estate market itself is another pressure point. When interest rates are high, fewer people buy homes and fewer businesses move into new offices. That reduces the urgency that drives real estate professionals to pay for CoStar's data tools and marketplace listings. Contract renewal rates have held at 89% for two years running, but the company notes that a weak property market could push that number lower.
89%
Subscription contract renewal rate in both 2024 and 2025, down from 90% in 2023
CoStar also faces a well-funded rival in the residential market. Zillow has greater name recognition among homebuyers and renters. CoStar's response has been to spend aggressively on brand awareness through television advertising, and to differentiate Homes.com through a conversational AI search tool called Homes AI. Whether that approach pulls enough agents and property managers away from Zillow to justify the spending is the central question the financials cannot yet answer.
Annualized net new bookings of subscription services rose from $250 million in 2024 to $308 million in 2025, which the company treats as a forward-looking signal of subscription revenue growth.
$1.0B
Residential Real Estate revenue 2023
$1.5B
Residential Real Estate revenue 2025
Residential revenue has grown fast, but so has the cost of chasing it.
The Bet
CoStar can turn Homes.com into a destination that enough agents and property managers prefer over Zillow, and can do it before the current spending cycle exhausts the cash reserves that fund it. The entire residential build-out, the Super Bowl ads, the AI search tools, the Domain and Matterport integrations, all of it only makes financial sense if Homes.com reaches a scale where its marketplace becomes the default place agents go to reach homebuyers. If that tipping point does not arrive before the cash cushion runs thin, the company will have spent billions on a market position it could not hold.
Open question
CoStar's commercial data business is stable, highly recurring, and genuinely hard to replicate. But the company is directing enormous resources toward a residential marketplace fight against an entrenched competitor, while simultaneously absorbing three acquisitions and building a new campus. Free cash flow has barely recovered from going negative, net income is nearly zero, and the cash buffer that made this strategy possible is shrinking. Can Homes.com grow fast enough to justify the spending before CoStar runs out of room to keep paying for it?
Compiled · 10-K · FY2025
Real Estate Market Dependency
The company's revenue depends heavily on the real estate industry. If interest rates stay high, fewer people buy or rent property, which reduces demand for the company's marketplace services and information products that real estate professionals rely on.
Search Engine Traffic Dependency
Google, Bing, and other search engines send a large portion of visitors to the company's websites. If search engines change how they rank results or start competing directly in real estate, the company could lose traffic and advertisers, which would hurt revenue significantly.
Matterport and Domain Integration Risk
The company recently acquired Matterport (a 3D technology company) and Domain (a real estate platform). These deals cost significant money and management attention. If the company cannot successfully combine these businesses and realize expected benefits, it could lose money on these investments.
Matterport Hardware Supply Chain
Matterport depends on a small number of suppliers in China to provide camera hardware parts. Disruptions from tariffs, trade restrictions, natural disasters, or supplier failures could prevent Matterport from manufacturing and selling products on time.
Richmond Campus Capital Costs
The company is spending large amounts of cash to build a new technology campus in Richmond, Virginia over several years. This reduces cash available for debt payments and other business needs, and actual costs could be much higher than expected.
10-K Item 1A · Risk Factors
