CSGP Real Estate Data · Marketplaces · Subscriptions · Residential pivot · Thesis updated August 4, 2026

The residential pivot hits profitability

CoStar is a real estate data and marketplace company with a highly visible subscription model.
The residential segment hit profitability in Q2 2026, generating $12 million in adjusted EBITDA.
Homes.com remains the growth engine, reaching an annualized revenue run rate of $116 million.
The company is buying Zonda for $800 million to expand its data capabilities.
Commercial real estate remains the profit base, producing steady growth despite a soft transaction market.

01 Running thesis

The residential bet is paying off

CoStar spent heavily to build Homes.com into a major U.S. residential real estate portal. That spending hurt reported profits for years, which explains the low performance scores. The Q2 2026 results showed the strategy is working.

In the second quarter, Residential Real Estate revenue grew 33% year over year to $444 million. More importantly, the segment achieved a positive adjusted EBITDA of $12 million. This is the clearest proof yet that the heavy investment phase is turning into operating leverage.

Homes.com continues to gain traction with agents. The platform reached an annualized revenue run rate of $116 million by the end of Q2, up 78% year over year. The company is optimizing its sales force to push higher margin depth advertising.

The bear case remains tied to competition and integration. CoStar may have to spend more on marketing if rivals push back. The pending $800 million Zonda acquisition and the recent Domain deal add integration risks. The core commercial real estate business also faces cyclical pressure.

Jul 2026▲Q2 2026 results confirmed the residential bet is working. The segment reached profitability, Homes.com hit a $116 million run rate, and CoStar announced an $800 million deal for Zonda.

Apr 2026▲Q1 2026 strengthened the thesis. Residential losses narrowed sharply, management guided for segment profitability in Q2 2026, and selling and marketing fell to 47% of revenue.

Apr 2026▲Management gave stronger Homes.com proof points on the earnings call. The company reported 35,175 agent subscribers, a $106 million March annual revenue run rate, and an 11x average agent return.

Feb 2026▲The 2025 Form 10-K reset reporting into Commercial Real Estate and Residential Real Estate. It also showed selling and marketing falling to 48% of revenue for the year, which supported the margin recovery case.

Oct 2025▲The Domain acquisition closed, moving the issue from deal risk to integration risk. Selling and marketing also kept falling as a share of revenue through the first nine months of 2025.

Jul 2025→CoStar signed a binding agreement to buy the rest of Domain. The deal created a clearer international residential plan, but also added execution risk and a large capital commitment.

May 2025→Q1 2025 showed the first signs that Homes.com marketing spend had peaked as a share of revenue. That improvement was balanced by the new Domain proposal and higher acquisition related costs.

Feb 2025▼The 2024 Form 10-K confirmed how expensive the residential push had become. Selling and marketing reached 50% of revenue and operating income fell sharply as Homes.com was being launched.

02 Business model

Data subscriptions with portal upside

CoStar sells real estate information, software, and marketplace access. Its strongest model is subscription revenue, where customers pay repeatedly for data, listings, analytics, or advertising access. In Q1 2026, subscription contracts were about 90% of total revenue, down from 96% in the prior year.

That lower subscription mix reflects the growing role of transaction based services from Domain and Matterport. The company is becoming slightly less reliant on pure subscriptions, adding complexity to the model.

The moat is the database. CoStar built commercial property records over decades and supports them with a massive research team. That makes its commercial products extremely hard to copy. The open question is whether the Zonda acquisition and Homes.com growth can build a similar moat in residential data.

03 Product portfolio

Many portals, one data backbone

Cash cow

CoStar

The core commercial real estate intelligence platform. Brokers, owners, and lenders use it for property data, analytics, and market research.

Steady

LoopNet

A marketplace for commercial property sales and leases. It turns CoStar's data into a listing and advertising product.

Cash cow

Apartments.com

A massive apartment marketing network. Property managers pay to reach renters across the Apartments.com family of sites.

Growth engine

Homes.com

The main residential growth bet in the U.S. It sells agent memberships built around the idea that the listing agent should get the lead.

Option

Matterport

A 3D digital twin platform for properties. It adds subscription revenue, capture services, and hardware.

Growth engine

Domain and OnTheMarket

Residential portals in Australia and the U.K. CoStar uses them as a base for international growth.

Option

Ten-X

An online auction platform for commercial real estate. It acts as a transactional business sensitive to market cycles.

04 Business segments

Two halves of the company

Commercial Real Estate52%modest

Residential Real Estate48%growing fast

Segment mix uses Q2 2026 revenue. Commercial Real Estate generated $481 million and Residential Real Estate generated $444 million. Residential is growing much faster and recently hit profitability.

05 Risk factors

What could break the thesis

Integration risks multiply

High impact · Medium odds

CoStar is digesting Matterport, Domain, and the pending $800 million Zonda deal. If management is distracted or fails to realize synergies, growth could stall.

We watchUpdates on the Zonda acquisition close, integration costs, and Domain profitability.

Residential competition forces more spending

High impact · Medium odds

The residential segment just hit profitability. If larger portals push back with aggressive marketing, CoStar might have to reaccelerate spending, crushing margins.

We watchSelling and marketing expense as a percentage of revenue each quarter.

Commercial real estate weakens

Medium impact · Medium odds

The commercial segment is still the profit base. Ten-X already acted as a drag in Q2 2026. If property markets stay soft, the core business could slow further.

We watchCommercial Real Estate revenue growth and renewal rates.

Legal and regulatory costs

Medium impact · Low odds

CoStar faces ongoing antitrust litigation tied to STR hotel benchmarking products. Legal costs and management distraction can hurt reported results even if they win.

We watchUpdates on STR antitrust litigation in the quarterly filings.

06 Quick answers

In one breath

What does CoStar Group do?

CoStar sells real estate data, software, and online marketplace access. Its brands cover commercial property, apartments, homes, land, business sales, auctions, and 3D property scans.

Why is Homes.com so important to CoStar stock?

Homes.com is the biggest growth bet. In Q2 2026, the residential segment reached profitability, validating the massive investment. If Homes.com keeps growing, it creates a massive new high margin subscription business.

Is CoStar mainly a subscription company?

Yes, but less than before. In Q1 2026, subscription contracts were about 90% of total revenue, down from 96% a year earlier. Acquisitions like Domain and Matterport add more transaction based revenue.