Breaking Down CoStar Group, Inc. (CSGP) Financial Health: Key Insights for Investors

You're looking at CoStar Group, Inc. (CSGP) and seeing a classic growth-at-all-costs narrative, so let's cut straight to the numbers: the company is defintely executing on its top line, but the cost of its residential market land-grab is showing up on the bottom line. For the third quarter of 2025, CoStar Group delivered robust revenue of $834 million, marking a strong 20% year-over-year increase, and they've raised their full-year 2025 revenue outlook to a range of $3.23 billion to $3.24 billion, which is about 18% annual growth at the midpoint. Here's the quick math: that growth is driven by massive momentum in their Homes.com segment, which saw net new bookings soar 92% year-over-year to $84 million, plus their commercial business maintained a stellar 47% profit margin; but still, the GAAP net loss for Q3 hit $31 million as they pour cash into marketing and integrating acquisitions like Matterport, though their Non-GAAP net income (earnings before certain non-cash expenses like amortization) was a positive $97 million. This tension-high revenue growth against a GAAP net loss-is the core risk you need to understand, especially since the stock trades at a premium 9.2x price-to-sales multiple, suggesting investors are pricing in a lot of future profitability that hasn't fully materialized yet.

Revenue Analysis

You're looking at CoStar Group, Inc. (CSGP) because you see a dominant player in real estate data, and you're right. The core takeaway from the 2025 fiscal year is consistent, double-digit growth, driven by its commercial and residential marketplace expansion. The company is defintely on a long-term growth trajectory, achieving its 58th consecutive quarter of double-digit revenue growth in Q3 2025.

For the full year 2025, CoStar Group, Inc. has raised its revenue guidance to a range of $3.23 billion to $3.24 billion, which represents approximately an 18% year-over-year increase at the midpoint. This is a strong signal, especially when you consider that the third quarter of 2025 already delivered actual revenue of $834 million, a solid 20% increase over the same period in 2024.

Here's the quick math on where that money comes from:

• Commercial Information & Marketplaces: This includes the flagship CoStar and LoopNet platforms. These are the cash cows, delivering a strong 43% profit margin in both Q1 and Q2 of 2025. Bookings here are surging; LoopNet saw an impressive 200% increase in annualized net new bookings year-over-year in Q1 2025.
• Apartments.com: This segment remains a reliable growth engine. Revenue for Apartments.com grew 11% year-over-year in Q2 2025, reaching $292 million for the quarter.
• Homes.com: This is the major investment area. The sales force is scaling rapidly, with plans to grow to about 750 representatives by the end of 2025 to capture additional residential market share.

The company is buying growth, too. The acquisition of Matterport, a 3D digital twin technology provider, is a clear change in the revenue mix. Matterport contributed $44 million in revenue in Q2 2025 and was expected to add about $40 million in Q3 2025. What this estimate hides is the initial cost: the Matterport deal caused a negative impact of $31 million on net loss in Q1 2025 as they integrate the business and discontinue certain non-core revenue streams. Still, the strategic move is to leverage this technology across all CoStar Group, Inc. platforms. The company is positioning itself to be more than just a data provider; it's building a comprehensive digital ecosystem, which you can read more about in Breaking Down CoStar Group, Inc. (CSGP) Financial Health: Key Insights for Investors.

To be fair, the residential push with Homes.com is expensive right now, but the commercial side is rock-solid. Here is a snapshot of the quarterly performance for 2025:

The acceleration in the year-over-year (YoY) growth rate-from 12% in Q1 to a projected 25% in Q4-shows the sales and marketing investments, particularly in Homes.com, are finally starting to gain significant traction. This is a classic growth-stock pattern: spend big to capture a market, and watch the top-line revenue climb.

Profitability Metrics

You need to know if CoStar Group, Inc. (CSGP) can turn its impressive revenue growth into sustainable profit. The short answer is yes, but the current financial picture, as of the third quarter of 2025 (Q3 2025), is a tale of two distinct businesses: a highly profitable core data service and a massive, deliberate investment in new residential marketplaces like Homes.com.

The company's profitability is characterized by exceptionally high gross margins but a near-zero or negative net profit margin due to aggressive spending. For the trailing twelve months (TTM) ended September 30, 2025, CoStar Group's net profit margin was just 0.7%. This is a sharp decline from the 6.6% seen a year prior, but it's a strategic choice, not a sign of fundamental business weakness.

• Gross Margin: 79.15% (TTM Q3 2025)
• Operating Margin: -6.1% (Q3 2025)
• Net Profit Margin: 0.7% (TTM Q3 2025)

Gross Profit: A Fortress of Efficiency

CoStar Group's gross profit margin remains a major strength, reflecting the low marginal cost of delivering its core subscription-based data and analytics. For the TTM ended Q3 2025, the gross margin was approximately 79.15% (based on TTM Gross Profit of $2.422 billion on TTM Revenue of $3.06 billion). This is a best-in-class performance.

When you compare this to the Software as a Service (SaaS) industry average, which typically aims for a gross margin of 70% to 80%, CoStar Group is right at the top end. This high margin proves the core business model is incredibly scalable. Honestly, that's where the value is locked up.

Operating and Net Profit Margins: The Cost of Growth

The story changes dramatically when you look at operating and net profits. In Q3 2025, CoStar Group reported a GAAP operating margin of -6.1% and a net loss of $31 million on $833.6 million in revenue. This loss is directly attributable to the company's massive investment in the Homes.com platform to challenge Zillow and Realtor.com. Operating expenses in Q3 2025 swelled to $712.5 million, an increase of 34.9% year-over-year.

Here's the quick math: Gross Profit of $661.4 million minus Operating Expenses of $712.5 million equals an Operating Loss of $51.1 million for the quarter. This aggressive spending, particularly in sales and marketing, is why the consolidated net margin is so low. For context, the broader technology sector reports an average operating margin of -5.76%, dragged down by similar heavy spending on growth initiatives, so CSGP's Q3 performance isn't an outlier among hyper-growth tech companies.

To be fair, the company's established Commercial Information and Marketplace brands (CoStar and LoopNet) still maintain a robust profit margin of 47% in Q3 2025, showing the underlying business strength is intact.

Profitability Trends and Operational Efficiency

The trend is clear: CoStar Group is sacrificing near-term GAAP (Generally Accepted Accounting Principles) profitability for long-term market share. The TTM gross profit grew by 14.64% year-over-year as of Q3 2025, which is a strong indicator of operational efficiency in generating revenue from core services.

However, the net profit margin narrowing to 0.7% from 6.6% a year ago highlights the full impact of the new investment strategy. Analysts expect this to be a temporary headwind, projecting a dramatic rebound in earnings growth over the next three years as the Homes.com investments mature and generate revenue leverage. The non-GAAP net income, which excludes certain non-cash items, was a positive $97 million in Q3 2025, which translates to a non-GAAP net margin of approximately 11.6%. That's the number management wants you to focus on.

For more detailed analysis, including valuation and strategy, check out Breaking Down CoStar Group, Inc. (CSGP) Financial Health: Key Insights for Investors.

Debt vs. Equity Structure

You want to know how CoStar Group, Inc. (CSGP) is funding its aggressive growth, and the short answer is: mostly with its own cash and equity, not debt. The company's balance sheet is defintely a source of strength, showing a very conservative approach to leverage that sets it apart from many peers in the broader real estate sector.

As of the second quarter of 2025, CoStar Group, Inc. (CSGP) maintained a low debt-to-equity (D/E) ratio of just 0.13. This is a critical figure, as it tells you the company has only $0.13 in debt for every dollar of shareholder equity, indicating minimal reliance on external borrowing to finance its assets and operations.

Here's the quick math on their core leverage, based on the June 2025 balance sheet data:

• Total Long-Term Debt and Capital Lease Obligations stood at approximately $1.129 billion.
• Short-Term Debt was a modest $26 million.
• Total Stockholders' Equity was substantial at $8.601 billion.

This low leverage is a deliberate strategy. In fact, CoStar Group, Inc. (CSGP) is in a rare net cash position, holding about $3.94 billion in cash and equivalents against about $992.5 million in total debt as of June 2025, leaving them with a $2.94 billion net cash balance. That's a huge cushion.

To put that 0.13 D/E ratio into context, consider the industry benchmark. The average debt-to-equity ratio for the 'Real Estate Services' industry, a reasonable proxy for the sector CoStar Group, Inc. (CSGP) operates within, is around 0.88 as of November 2025. CoStar Group, Inc. (CSGP) runs with about one-seventh the leverage of its peer group, highlighting its stability and capacity for opportunistic, cash-funded acquisitions.

This prudent financial management is affirmed by the credit markets. Moody's, a leading credit rating agency, affirmed CoStar Group, Inc. (CSGP)'s senior unsecured rating at Baa3 with a stable outlook in May 2024. A Baa3 rating is considered investment-grade, which means the company's debt is viewed as having moderate credit risk-a strong signal of financial health and a prudent financial policy.

The company's financing mix clearly favors equity and cash over debt, especially for its large growth initiatives. They are using their cash reserves and stock for major acquisitions, like the Domain Group purchase, and for capital return to shareholders, having authorized a $500 million share repurchase program in February 2025 and actively repurchasing shares throughout the year. This shows a preference for non-dilutive, cash-based growth where possible, while maintaining an investment-grade rating for flexibility.

For a deeper dive into the company's full financial picture, including its valuation and strategic moves, you should check out the full post: Breaking Down CoStar Group, Inc. (CSGP) Financial Health: Key Insights for Investors.

Liquidity and Solvency

You need to know if CoStar Group, Inc. (CSGP) can cover its short-term bills, and the answer is a resounding yes. Their liquidity position is exceptionally strong, driven by a highly cash-generative business model, even as they spend billions on strategic acquisitions.

Assessing CoStar Group, Inc. (CSGP)'s Liquidity

The core of CoStar Group, Inc.'s financial strength lies in its ability to generate cash and its minimal reliance on debt. As of late 2025, the company's liquidity ratios are far above the healthy benchmark of 1.0, signaling no near-term solvency risk. The current ratio, which measures current assets against current liabilities, sits at a robust 3.12.

Even more telling is the quick ratio (or acid-test ratio), which excludes less-liquid assets like inventory. CoStar Group, Inc.'s quick ratio is an unusually high 5.83. This means the company could cover its immediate liabilities almost six times over with just its most liquid assets, like cash and accounts receivable. That's a huge buffer. This kind of liquidity is defintely a major strength.

• Current Ratio: 3.12 (Strong short-term coverage).
• Quick Ratio: 5.83 (Exceptional ability to meet immediate obligations).

Working Capital and Cash Flow Trends

The working capital trend for CoStar Group, Inc. is defined by a massive cash hoard and high operational efficiency. As of the second quarter of 2025, the company held approximately $3.63 billion in cash and cash equivalents. This substantial cash balance is the primary driver of the sky-high liquidity ratios and provides immense financial flexibility for growth initiatives.

The cash flow statement for the third quarter of 2025 shows a clear picture of a growth-focused company, which you can read more about in their Mission Statement, Vision, & Core Values of CoStar Group, Inc. (CSGP). Here's the quick math on cash flow for Q3 2025:

Net Cash from Operating Activities (CFO) was a solid $68 million in Q3 2025, which proves the core business is highly profitable and self-sustaining. However, the trailing twelve months (TTM) cash flow from investing activities (CFI) was a staggering negative $5.635 billion. This negative number is not a red flag; it is the direct result of CoStar Group, Inc.'s aggressive acquisition strategy, which is a strategic use of its enormous cash reserves.

Liquidity Strengths and Investor Action

The primary liquidity strength is simple: CoStar Group, Inc. is sitting on a mountain of cash and operating cash flow is strong. The high current and quick ratios mean they have zero issue covering short-term obligations, even after accounting for the substantial cash used for acquisitions. The debt-to-equity ratio is also very low at just 0.12, further underscoring their financial stability. The company is effectively funding a massive growth push-integrating companies like Domain and Matterport-without stressing its day-to-day operations.

For you as an investor, this means the company has the financial firepower to execute its long-term strategy, weather any economic downturns, and continue its aggressive expansion without needing to raise significant new capital in the near-term. This financial strength translates directly into lower risk for the business model. Your next step: Analyze how the recent acquisitions funded by this cash are expected to impact future revenue and operating cash flow growth for the full 2026 fiscal year.

Valuation Analysis

You're looking at CoStar Group, Inc. (CSGP) and asking the core question: is it overvalued or undervalued? The quick answer is that traditional metrics suggest a significant premium, but the market is pricing in aggressive future growth, leading analysts to still call it a "Moderate Buy."

As of November 2025, CoStar Group, Inc. (CSGP) is trading around $66.02 a share. This price sits near the bottom of its 52-week range, which stretched from a low of $63.82 to a high of $97.43. The stock has seen a rough patch, delivering a negative return of about -14.26% over the past year. This drop is what sparks the valuation debate, but you have to look past the sticker price to the fundamentals.

The valuation multiples are where things get intense. CoStar Group, Inc. (CSGP) operates less like a traditional real estate company and more like a high-growth software and data platform, and its ratios reflect that. The trailing Price-to-Earnings (P/E) ratio is a staggering 1,337.60. Honestly, that number is almost meaningless because it's based on the last twelve months of relatively low earnings. But, look at the forward P/E, which is based on future earnings estimates, and it drops sharply to a still-high 54.34. That's the market telling you they defintely expect massive earnings growth next year.

Here's a snapshot of the key ratios as of November 2025:

The Enterprise Value-to-EBITDA (EV/EBITDA) ratio is also through the roof at 170.43, which tells you investors are paying a huge premium for the company's operating cash flow (EBITDA). The Price-to-Book (P/B) ratio of 3.25 is more grounded, a common sign for a company whose value is tied more to its intangible data assets and brand, not just its physical property or book value.

One simple action item: Don't expect a dividend here. CoStar Group, Inc. (CSGP) has a dividend yield of 0.00% because it's a growth stock. All available capital is being reinvested into its residential platform, Homes.com, and other expansion efforts. You're buying growth, not income.

What this estimate hides is the potential of their residential push. The analyst community, however, remains bullish. The consensus rating from 19 analysts is a "Moderate Buy," with an average 12-month price target of $94.15. That target suggests a substantial upside from the current price, meaning the Street believes the stock is currently undervalued based on its future potential. They see the premium ratios as justified by the long-term revenue growth story.

• Consensus: Moderate Buy.
• Average Target: $94.15.
• Upside is priced on growth, not current earnings.

If you want to dig deeper into who is buying and why, you can check out Exploring CoStar Group, Inc. (CSGP) Investor Profile: Who's Buying and Why?

Risk Factors

You're looking at CoStar Group, Inc. (CSGP) and seeing impressive top-line growth, but the real story is the near-term profitability sacrifice. The core risk is an earnings-revenue disconnect, driven by massive strategic investments. For Q3 2025, the company reported a GAAP net loss of $31 million, a sharp reversal from the prior year, despite revenue surging to $833.6 million. That's the tension you need to manage: growth at the expense of current earnings.

Operational and Financial Risks: The Cost of Conquest

The biggest internal risk is the aggressive investment in the residential segment, primarily Homes.com, which is compressing margins. This is a deliberate, costly strategy to challenge Zillow and capture a new market. Here's the quick math: Q3 2025 saw the operating margin contract to a negative -6.1%, down from a positive 3.4% in Q3 2024, as costs rose faster than revenue. The risk is defintely that these operating costs, tied to sales force expansion and product development, outstrip the revenue gains if Homes.com adoption lags. Plus, integrating major acquisitions like Domain and Matterport requires significant resources, and Matterport is specifically noted for its lack of profitability and slower growth, adding further strain.

• Margin Compression: Operating margin hit -6.1% in Q3 2025.
• Integration Strain: Resources diverted for Domain and Matterport integration.
• Sales Force Productivity: Rapid expansion of the Homes.com sales team challenges training and efficiency.

External and Market Risks: Competition and Cyclicality

CoStar Group operates in a highly competitive and cyclical industry, and that presents two clear external threats. First, the competition with Zillow is intense, with ongoing lawsuits and direct market battles in both the residential and rental segments, specifically Apartments.com versus Zillow Rentals. Second, while the commercial real estate market is showing signs of stabilization, with an upgraded U.S. office market outlook forecasting 10 million square feet of positive absorption, CoStar Group's core data business remains tied to the real estate cycle. A significant downturn in commercial transaction activity could cripple the data subscription model. Also, the stock's high valuation is a risk in itself; the price-to-sales ratio sits at around 9.2x to 9.6x, which is far above the industry average, meaning there is very little margin for error in execution.

Mitigation Strategies and Financial Buffer

Management is mitigating these risks through aggressive, long-term strategic actions and a strong balance sheet. The investment in Homes.com and AI technologies, such as AI Smart Search, is the primary strategy to secure future market share, betting that short-term losses will yield high-margin growth later. They are also expanding internationally, integrating Domain and OnTheMarket to cross-sell products like LoopNet in new regions. Financially, the company has a substantial buffer: as of September 30, 2025, CoStar Group held a cash balance of $2 billion and a strong current ratio of 5.83, providing the capital needed to fund these high-cost growth initiatives without undue financial stress. This financial strength is the company's insurance policy for its growth bet. You can read more about the company's long-term goals here: Mission Statement, Vision, & Core Values of CoStar Group, Inc. (CSGP).

Here is a summary of the full-year 2025 guidance, showing the expected trade-off between growth and profitability:

Your next step is to monitor Q4 2025 results for any sign of margin stabilization or a clear path to monetization for Homes.com.

Growth Opportunities

You're looking at CoStar Group, Inc. (CSGP) and seeing a company that's been a commercial real estate (CRE) data powerhouse for decades, but the real story for 2025 is their aggressive move into the residential and international markets. They are defintely not sitting still, using acquisitions and a massive sales push to drive growth.

The company is projecting full-year 2025 revenue in the range of $3.23 billion to $3.24 billion, which signals continued double-digit growth, a streak they've maintained for 58 consecutive quarters. That top-line momentum is fueled by three core drivers: their residential platform, strategic acquisitions, and the integration of next-generation technology like 3D digital twins (Matterport) and artificial intelligence (AI).

Here's a quick look at the updated 2025 financial picture, which reflects strong Q3 2025 performance where revenue hit $833.6 million, a 20.4% jump year-over-year:

What this guidance hides is the heavy investment in the residential segment, which is why Adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) is still relatively modest at the midpoint of $420 million. They are spending to win market share, plain and simple.

Key Growth Drivers and Market Expansion

The biggest near-term opportunity is Homes.com. CoStar Group is pouring capital into this platform to challenge the residential market leader, and it's working. They've grown their Member agents to over 26,000, which is up nearly 150% from last year, and the site now pulls in 115 million average monthly unique visitors, making it the second-largest real estate network in the US.

This residential push is backed by a massive salesforce expansion; they planned to grow the dedicated Homes.com sales team to 500 representatives by the end of June 2025. Plus, the core commercial businesses, CoStar and LoopNet, are still seeing strong demand, with LoopNet net new bookings soaring by 200% year-over-year in Q1 2025.

• Homes.com Expansion: Scaling salesforce and user traffic to capture a significant share of the residential market.
• Acquisitions and International Reach: The August 2025 acquisition of Domain Group for $1.92 billion gives them a major foothold in the Australian property listing market, which is a clear international growth lever.
• Matterport Integration: The February 2025 acquisition of Matterport for $1.6 billion integrates 3D digital twin technology and AI into their platforms, fundamentally changing how properties are viewed and analyzed.

This is all about digitizing the world's property assets, which is a $327 trillion asset class. You can read more about their core philosophy here: Mission Statement, Vision, & Core Values of CoStar Group, Inc. (CSGP).

Competitive Edge and Actionable Insights

CoStar Group's competitive advantage is its data moat and its sticky subscription revenue model. Over 80% of the company's revenue is subscription-based, providing a resilient and predictable financial foundation. Their market dominance in commercial real estate information gives them the capital and infrastructure to fund the aggressive, high-risk, high-reward residential expansion. They are leveraging AI across all business units, not just for new features like the AI-driven Smart Search on Homes.com, but also to improve internal operational efficiency.

The near-term risk is that the high operating costs associated with the Homes.com build-out continue to outpace revenue gains in that segment, which is why the company reported a net loss of $30.9 million in Q3 2025 despite the strong revenue growth. This is a classic growth-stock trade-off: sacrifice current profitability for future market dominance.

Action: Monitor Homes.com's net new bookings and member agent growth in Q4 2025. If the membership growth rate of nearly 150% (seen in Q3 2025) starts to slow, it's a signal that the investment is losing its immediate impact, and you should reassess the long-term margin trajectory.