CoStar improves profitability but fails to wow investors 

Investors appeared to be disappointed by CoStar's second quarter earnings report despite the improved profitability it reflected, with the company's stock price tumbling in after-hours trading.

CoStar marked its 61st consecutive quarter of double-digit year-over-year revenue growth, with $925 million in Q2 revenue — up 18% compared to a year ago but still below investor expectations of $929 million. Net income also improved significantly, up from $6 million a year ago to $55 million in Q2.

The company expects to deliver the highest full-year adjusted EBITDA in its history in 2026, according to Founder and CEO Andy Florance. Even so, the company's share price dropped more than 12% after the earnings report was released on July 28. CoStar stock was trading in the $26 range at the end of the day, touching 52-week lows.

What CoStar had to say

Worries over Homes.com, Apartments.com: During Tuesday's earnings call, investors appeared concerned about the profitability of Homes.com and challenges in the rentals space for Apartments.com. The company's recent adjustments to its Homes.com sales team — a reduction of the inside team from 660 at the end of 2025 to about 400 today and an expansion of its out-in-the-field team to 50 — similarly prompted several investor questions.

Florance said the company is retaining its most talented inside sales team members while building field teams, which he said CoStar has "always believed" would "be the most productive." However, "it takes years to build a good one," he added, "so we initially built an inside team for speed to market." 

'A lot of opportunity' in AI: CoStar remains bullish on artificial intelligence, noting that the cost savings from new tech outweighs what it costs to use it.

"I'd also highlight we really haven't taken into account a lot of cost savings that we know are going to accrue to us across all of our business as we drive more AI within the business," said outgoing Chief Financial Officer Christian Lown. "I see a lot of opportunity across all of our businesses, research included, to drive down costs with AI."

Key numbers

Revenue: $925 million in Q2, up 18% year-over-year.

Cash and cash equivalents: $1.27 billion at the end of June, down from $1.63 billion at the end of 2025.

Gross profit: $728 million in Q2, up from $613 million a year ago.

Net income: $55 million in Q2 compared to a gain of $6 million a year earlier. Adjusted net income rose to $128 million, up 73% year-over-year.

Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization): $184 million in Q2, up 116% year-over-year.

Website traffic: CoStar Group sites attracted 118 million average monthly unique visitors in Q2, down from 131 million in Q1 and 139 million in Q4 of 2025.

Q2 outlook: CoStar expects Q3 revenue to be between $935 million and $945 million. Adjusted EBITDA is expected to be between $190 million and $210 million.

Notable moves

In mid-Q2, CoStar announced its intent to acquire leading home building data provider Zonda. Florance said he expects the $800 million cash deal to be completed before the end of the year.

Looking ahead, Robin Rossman, who has served as CoStar's managing director in Europe, is preparing to take over the CFO role when Lown leaves his post at the end of the month.

Meanwhile, the company is preparing to offer a Homes.com Platinum marketing tier, which Florance said will give listings enhanced placement, improved search results and stronger social marketing. This format has already been successful on Apartments.com, said Florance, who believes it will be a key revenue source after it rolls out later this year.