CoStar Group (NASDAQ:CSGP) has once again delivered an exceptional quarter, posting its 58th consecutive period of double-digit revenue growth in Q3 2025, fueled by robust performance across its diverse real estate platforms. Beyond the impressive financials, the company is making significant strides in AI innovation, particularly with Homes.com, and its leadership is taking an aggressive stance in the competitive real estate portal market, signaling a long-term vision for market leadership that investors should carefully consider.
CoStar Group (NASDAQ:CSGP), the real estate data, analytics, and online marketplace giant, announced better-than-expected revenue and adjusted EBITDA for the third quarter of fiscal year 2025. This performance marks a significant milestone, extending the company’s streak of double-digit revenue growth to an astounding 58 consecutive quarters. For individual investors, these results provide a crucial window into CoStar’s strategic direction, particularly its aggressive moves in the residential market and its foundational investments in artificial intelligence.
Financial Highlights: A Quarter of Strong Beats and Strategic Growth
CoStar Group reported Q3 CY 2025 revenue of $833.6 million, a substantial 20.4% increase year-over-year, and comfortably surpassing analyst estimates of $814.4 million. This strong top-line performance was bolstered by a $25 million contribution from the recently completed acquisition of Domain, an Australian residential real estate platform.
Profitability metrics also impressed, with non-GAAP adjusted earnings per share (EPS) reaching $0.23, exceeding consensus estimates of $0.19 by 21.8%. Adjusted EBITDA soared to $115 million, beating analyst expectations of $93.33 million by 23.2% and reflecting a robust 14% margin.
Christian Lown, CoStar’s Chief Financial Officer, highlighted that net new bookings for the quarter were $84 million, representing a 92% increase year-over-year. This surge was attributed to contributions from every major product segment and the expansion of the company’s dedicated sales force, now numbering over 2,000 professionals.
Looking ahead, CoStar provided optimistic guidance for Q4 CY 2025, projecting revenue between $885 million and $895 million, with the midpoint of $890 million exceeding analyst estimates by 3.3%. Full-year adjusted EBITDA guidance was also raised to between $415 million and $425 million, indicating continued confidence in operational efficiency and market demand.
Homes.com Leads the Residential Charge with AI-Powered Innovation
The residential sector emerged as a significant growth driver, with CoStar’s residential portals—including Apartments.com, Homes.com, OnTheMarket, and the newly acquired Domain—collectively generating an estimated $411 million in revenue for the quarter on a pro forma basis. This represents a 22.7% quarter-over-quarter increase, underscoring the success of CoStar’s comprehensive strategy in residential real estate.
Homes.com, in particular, showcased phenomenal growth. Its annualized net new bookings for subscriptions climbed to $16 million, a remarkable 53% increase quarter-over-quarter and a staggering 1,225% jump year-over-year. The platform added 7,035 new subscribers in Q3, pushing its total subscribing agents past 26,000. CEO Andrew Florance proudly stated that Homes.com is now the fastest-growing revenue product CoStar has ever launched.
A key differentiator for Homes.com is its “your listing, your lead” model, which contrasts sharply with competitors who divert leads. This approach fosters goodwill among agents, allowing CoStar to serve a much larger percentage of agents compared to models that limit sales to a small fraction of the market. Homes.com’s marketing campaign has significantly boosted brand awareness, with unaided awareness reaching 42% and unaided intent at 28%, up from approximately 4% when the campaign began.
CoStar is aggressively integrating artificial intelligence into Homes.com, with 50% of its software development efforts in Q4 2025 and beyond dedicated to AI-powered features. The recently launched AI SmartSearch, developed in partnership with Microsoft, allows users to conduct complex, conversational property searches, moving beyond traditional filters. Early results are compelling:
- Users applied 69% more search filters.
- Viewed 37% more listing pages per session.
- Were five times more likely to return within a week.
- Submitted 51% more leads after viewing a listing page.
This strategic AI investment, while substantial, is achieved through reallocation of existing resources, not increased total spend, and is expected to either remain flat or decrease in 2026, as confirmed during the earnings call.
Dominance in Commercial and Global Expansion
CoStar’s core commercial information and marketplace businesses also performed strongly, posting a profit margin of 47%, up four points from Q3 2024. The flagship CoStar segment generated $277 million in revenue, an 8% year-over-year increase, with subscriber counts rising 20% to 284,000.
LoopNet, the world’s largest commercial real estate marketplace, saw 10% revenue growth in Q3 and is targeting a return to 20%+ annual growth. Its international expansion continues, with integration of French listings and plans to launch in Australia via the Domain acquisition. CoStar’s data shows LoopNet-listed properties sell and lease faster, offering an 80% increased chance of transaction.
The Lender business achieved a record quarter with $4.3 million in annual net new bookings, nearing the significant $100 million revenue milestone and serving over 450 clients. Furthermore, the Matterport acquisition continues to exceed expectations, delivering $44 million in Q3 revenue, 12% above projections. Matterport’s strategic role involves both standalone solutions and deep integration across CoStar’s platforms, significantly enhancing listing engagement with digital twins and new Gaussian splat 3D exterior views.
The acquisition of Domain on August 27 for $1.9 billion has rapidly begun contributing to CoStar’s global footprint. Domain’s residential marketplace operates at over 50% direct contribution margin, with its commercial counterpart at 40%. CoStar plans to refocus Domain’s resources, previously diluted across non-core initiatives, towards its highly profitable core and to introduce LoopNet, Homes.com, and CoStar platforms to Australia within 18 months, where it believes no equivalent to CoStar currently exists.
The Gathering Storm: CoStar vs. Zillow in the Courts
In a candid and unusually direct address during the earnings call, CEO Andrew Florance detailed an “unprecedented wave of lawsuits” besieging competitor Zillow, asserting that the market underappreciates the magnitude of risk. Florance outlined a series of federal lawsuits filed against Zillow since June 2025:
- Compass Lawsuit (June 2025): Compass sued Zillow over its policy to ban listings not put on the MLS within 24 hours, which Florance believes was a “ruthless scheme to strangle competition” and pushed Compass into a defensive merger strategy.
- CoStar Lawsuit (July 2025): CoStar Group filed its own lawsuit against Zillow, alleging “brazen theft and monetization of CoStar’s intellectual property,” specifically content stolen from Apartments.com. Florance drew parallels to a 2019 case where Exeligent was ordered to pay $500 million for similar copyright infringement. This lawsuit was reported by Reuters on July 30, 2025, indicating CoStar’s firm legal stance, as stated in their public announcement Reuters.
- Class Action Suit (September 2025): Plaintiffs alleged Zillow deceived buyers into overpaying hidden fees through its “contact agent” button, a practice CoStar labels a “lead diversion racket.”
- FTC and Attorney Generals Lawsuits (September/October 2025): The United States Federal Trade Commission (FTC) filed suit against Zillow Group and Redfin on September 30, 2025, over an “illegal agreement to suppress competition” in multifamily rental advertising, as confirmed by an FTC press release FTC.gov. This was swiftly followed by a lawsuit from a bipartisan coalition of Attorney Generals from Virginia, Arizona, Connecticut, New York, and Washington State.
Florance believes these legal actions, if successful, could severely damage Zillow’s reputation and business model, particularly its lead diversion practices, which he argues are unsustainable in the long term for successful real estate portals. For investors, this escalating legal landscape represents both a potential risk for the broader market and a strategic opportunity for companies like CoStar that are building goodwill through agent alignment.
The Long-Term Investment Horizon: AI, Expansion, and Market Leadership
CoStar Group’s Q3 2025 earnings call paints a picture of a company not just sustaining growth, but aggressively expanding its market reach and embracing transformative technologies. The substantial investment in AI for Homes.com, without increasing overall spend, demonstrates a disciplined approach to innovation that could yield significant competitive advantages. Florance’s historical perspective on how specialized solutions ultimately dominate general-purpose technology plays in real estate suggests a long-term strategy for winning in an AI-driven future.
The company’s goal of achieving over 40% adjusted EBITDA margins for its combined residential businesses, based on precedent models from successful international portals, highlights the significant profit potential as Homes.com and Domain mature. Furthermore, the strong performance of its commercial segments, Matterport integration, and strategic international expansion into Australia and Europe underscore CoStar’s commitment to building a deep moat around its diverse real estate digital ecosystem.
For investors, CoStar Group’s Q3 2025 results reinforce its position as a dominant player in the digital real estate landscape. The combination of consistent double-digit revenue growth, strategic AI integration, successful acquisitions, and a clear, differentiated business model positions CoStar for continued long-term value creation, despite the broader volatility in the commercial real estate sector and the intensifying competitive landscape.
