CoStar beats revenue forecast amid ‘drumbeat of negative coverage’
In its 60th consecutive quarter of double-digit revenue growth, CoStar reported a 23% jump in revenue in Q1, bolstering projections for the rest of the year.
Though a better-than-expected earnings report has CoStar heightening its expectations for the rest of 2026, investors appear to be looking for even more from the company.
First-quarter revenue was up 23% year-over-year and adjusted EBITDA doubled over the same period, partially due to a 20% boost in new bookings. It was CoStar's 60th consecutive quarter of double-digit revenue growth.
Investors looking for more
During an April 28 earnings call, investor questions tended to center around new bookings, with many wanting to know more about growth expectations given the company's huge investments in marketing and its sales force ramp-up.
Founder and CEO Andy Florance acknowledged that CoStar's squabbles with key investors over Homes.com spending did slow some momentum.
"The activist campaign over the last year did weigh heavily on Homes.com, sales and potential partnerships. Real estate leaders were reading a steady drumbeat of negative coverage," Florance told investors during the call.
"Nonetheless," he said, "we made durable progress through it. With that distraction now behind us, we can now apply even more focused energy to accelerating Homes.com revenue and the revenue of every other business in the portfolio."
Florance expects that the company's new sales team additions will continue making strides in productivity as they gain more experience.
Still bullish on Homes.com
CoStar's February rollout of its conversational Homes AI tool is making a big difference, Florance told investors, noting that the amount of time spent on the Homes.com website averaged 18 minutes for AI users, who ran four times as many searches and submitted seven times as many leads compared to users who weren't using the tool.
"This is precisely the dynamic that precedes a meaningful consumer share shift and is exactly the proof point we expected our AI investment to produce," Florance said.
Florance also touted the number of Homes.com agent subscribers, which now exceeds 35,000, and said he believes Homes.com will have the largest subscriber base among the major home search portals within the next two to three years.
"This is the fastest organic revenue build we've ever achieved for a new product — and we hit these revenue levels faster than your U.S. competitors did at their start," he said.
Key numbers
Revenue: $897 million in Q1, up 23% year-over-year.
Cash and cash equivalents: $1.22 billion at the end of March 2026, down from $1.63 billion at the end of 2025.
Gross profit: $701 million in Q1, up from $579 million a year ago.
Net income: $3 million in Q1, compared to a loss of $15 million a year earlier. Adjusted net income rose to $94 million in Q1, up 49% year-over-year.
Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization): $132 million in Q1, up 100% year-over-year.
Website traffic: CoStar Group sites reached 131 million average monthly unique visitors in Q1, down from 139 million in Q4 of 2025.
Q2 outlook: CoStar expects revenue for Q2 of 2026 to be between $922 million and $932 million. Adjusted EBITDA is expected to be between $160 million and $180 million.
Chief Financial Officer Christian Lown said the company is increasing its adjusted EBITDA guidance for the full year to a range of $780 million to $820 million, up $30 million at the midpoint of the range from its previous guidance.
Notable moves
Even amidst the company's overall growth, CoStar did experience some workforce reductions in Q1. While CoStar did not publicly disclose the number of employees it laid off, the company did note that the cuts were a part of an effort to reduce costs while pushing deeper into artificial intelligence products.
Shortly after the year began, CoStar also revealed a shift in Homes.com spending, vowing to cut spending by $300 million this year following a large marketing push that began in 2024.
And in March, CoStar announced amid the intensifying debate over pre-marketing its own deal allowing eXp to display its "Coming Soon" listings on Homes.com.
"Consumers want greater transparency into what's coming to market, and agents want better ways to build interest before a listing officially launches," Florance said at the time.