CoStar Group runs a network of websites and data tools that help people find, analyse, and transact in real estate. The core business is simple: professionals and consumers pay a monthly fee to access property databases, analytics, and marketplace listings across brands including CoStar, LoopNet, Apartments.com, and Homes.com. In 2025, about 93% of total revenue came from these subscriptions. The company earns the rest through one-off transactions — auction fees on Ten-X, premium single listings, Matterport camera sales, and data capture services. The diagram below traces where the money goes.

Five years of financial data tell a clear story: revenue has grown every single year, from $1.9 billion in 2021 to $3.2 billion in 2025. That is meaningful, consistent growth. But the costs have grown even faster. Selling and marketing expenses alone hit $1.6 billion in 2025 — nearly half of all revenue. The company swung from a net income of $375 million in 2023 to just $7 million in 2025. Free cash flow turned negative in 2024 before recovering slightly to $0.1 billion in 2025. The business is deliberately spending its way toward a bigger position, particularly in residential real estate through Homes.com.

Gross margins have held up remarkably well given the scale of investment. The company kept gross margins above 78% every year from 2021 through 2025 — meaning for every dollar of revenue, roughly 79 cents remained after direct costs. That is a sign the underlying subscription product is not getting cheaper to deliver. What is eating into profits is the deliberate choice to spend heavily on sales staff, TV advertising, and software development as CoStar tries to take share from established residential competitors like Zillow and Realtor.com.

The acquisitions of Matterport in February 2025 and Domain (Australia's leading property marketplace) in August 2025 mark a significant shift in ambition. These deals added new revenue — Matterport contributed $147 million in 2025, and Domain added $95 million to residential revenue — but they also piled on costs. Customer base amortisation expense jumped 168% to $118 million in 2025. Integration of these businesses is expensive and still in progress. The company is simultaneously trying to merge Matterport's hardware supply chain, Domain's Australian marketplace, and its existing US platforms into one coherent product.

The balance sheet has shifted notably. Net debt — that is, debt minus cash on hand — moved from negative $4.2 billion in 2023 (meaning the company held far more cash than debt) to negative $0.6 billion in 2025. In plain terms, CoStar spent down a large cash cushion to fund these acquisitions. It still holds more cash than debt, but the buffer is much thinner than it was two years ago. At the same time, the company is building a large research and technology campus in Richmond, Virginia, which will consume additional capital over several years.

There are four documented risks worth understanding. First, most of CoStar's customers are real estate professionals. If high interest rates or an economic slowdown cause those professionals to cut spending, subscription cancellation rates could rise. The company's own data shows renewal rates already ticked down slightly, from 90% in 2023 to 89% in 2025. Second, Google and Bing send the majority of visitors to CoStar's websites. A change in how those search engines rank real estate sites could drain traffic overnight. Third, Matterport relies on a small number of suppliers — some in China — for its cameras and hardware. Tariffs, shipping disruptions, or supply shortages could raise costs or delay product availability. Fourth, integrating three large acquisitions at the same time — Matterport, Domain, and Visual Lease — while also building a new campus creates real execution risk. If any of these integrations stalls, the expected revenue and cost benefits may not materialise.