CSGP Real Estate Data · Marketplaces · Subscriptions · Residential pivot · Thesis updated July 12, 2026

Homes.com is starting to pay back

CoStar is a real estate data and marketplace company with a mostly subscription-based model.
In Q1 2026, subscription revenue was about 90% of total revenue, down from 96% a year earlier.
Residential Real Estate revenue grew 32% year over year in Q1 2026, and management expects that segment to reach profitability in Q2 2026.
Homes.com is the key swing factor, with a March annual revenue run rate of $106 million and 35,175 agent subscribers.
The main debate is whether marketing spend can keep falling while CoStar fights larger residential competitors.

01 Running thesis

The residential bet is working, so far

CoStar has spent heavily to build Homes.com into a serious U.S. residential real estate portal. That spending hurt reported profits, which is why Finn's performance score remains weak. The latest quarter made the bet look more credible.

In Q1 2026, Residential Real Estate revenue rose 32% year over year. Its adjusted EBITDA loss improved by $56 million to a loss of $29 million, and management said the segment should reach profitability in Q2 2026. That is the clearest proof yet that the heavy Homes.com investment phase may be turning into operating leverage, which means revenue is growing faster than expenses.

Homes.com also gave investors a cleaner proof point. Management said the site had 35,175 agent subscribers, added more than 4,300 members in Q1, and reached a March annual revenue run rate of $106 million. CoStar also said the average subscriber earned $36,400 more in first-year commissions against a $3,400 annual subscription cost, or an 11x return.

The bear case is still real. CoStar may have to spend more on ads if Zillow, Realtor.com, or other rivals push back. Matterport and Domain add new lower-margin or more transaction-based revenue. The core commercial real estate business also has to keep growing through a softer property market.

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.

Oct 2024▼Q3 2024 showed strong revenue growth but major margin pressure from Homes.com advertising. Slower net new bookings and a slightly lower renewal rate raised questions about the commercial core.

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 again and again 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 period.

That lower subscription mix is not automatically bad. It reflects the growing role of Domain, which sells premium listings for individual properties, and Matterport, which sells 3D property technology, services, and hardware. It does mean the company is becoming a little less clean as a pure subscription story.

The moat is the database. CoStar has built commercial property records over decades and supports them with a large research team. That makes its commercial products hard to copy. The open question is whether the same advantage can carry over to residential portals, where brand, traffic, agent budgets, and search habits matter a lot.

03 Product portfolio

Many portals, one data backbone

Cash cow

CoStar

The core commercial real estate intelligence platform. Brokers, owners, lenders, and investors 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 large 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 from their own listing.

Option

Matterport

A 3D digital twin platform for properties. It adds subscription revenue, capture services, and hardware, but its hardware and services mix could weigh on margins.

Growth engine

Domain and OnTheMarket

Residential portals in Australia and the U.K. CoStar can add Homes.com-style features and use them as a base for international growth.

Option

Ten-X and other marketplaces

Ten-X runs online commercial real estate auctions. Other products include BizBuySell, Land.com, lease management tools, and specialty marketplaces.

04 Business segments

Two halves of the company

Commercial Real Estate53%modest

Residential Real Estate47%growing fast

Segment mix uses Q1 2026 revenue: Commercial Real Estate generated $472 million and Residential Real Estate generated $425 million. Residential is growing faster, but it was still slightly loss-making on adjusted EBITDA in Q1.

05 Risk factors

What could break the thesis

Homes.com growth slows after price hikes

High impact · Medium odds

Homes.com needs more members and higher average revenue per user to justify years of spending. Management has pointed to an 11x agent return as support for price increases. If agents do not accept higher prices, the path to residential profits gets harder.

We watchHomes.com member additions, agent subscriber count, and ARPU after the May 1 price changes.

Marketing spend rises again

High impact · Medium odds

Selling and marketing expense fell to 47% of revenue in Q1 2026 from 50% a year earlier. That decline is central to the margin recovery story. Stronger competition could force CoStar to spend more to keep traffic and brand awareness high.

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

Matterport and Domain dilute margins

Medium impact · Medium odds

Matterport includes hardware and services, and Domain includes more transaction-based listing revenue. These are not as simple as CoStar's classic subscription products. If their gross margins are lower than expected, consolidated profit growth may lag revenue growth.

We watchGross margin trends and management comments on Matterport hardware, Matterport services, and Domain profitability.

Commercial real estate weakens

Medium impact · Medium odds

The commercial segment is still the profit base. In Q1 2026, it produced $161 million of segment adjusted EBITDA on $472 million of revenue. If brokers, owners, or lenders cut spending in a weak property market, residential would need to carry more of the company.

We watchCommercial Real Estate revenue growth, renewal rates, and net new subscription bookings.

Legal and regulatory costs drag on results

Medium impact · Low odds

CoStar has disclosed ongoing antitrust litigation tied to STR hotel benchmarking products. The company also faces normal integration risk after large acquisitions. Even if CoStar wins, legal costs and management distraction can hurt reported results.

We watchUpdates on STR antitrust litigation, acquisition-related costs, and new risk factor language.

Matterport supplier problems hit hardware

Low impact · Medium odds

Matterport depends on third-party suppliers for hardware. If suppliers cannot deliver on time or at the right cost, Matterport's product sales and customer experience could suffer. This is a smaller risk than Homes.com execution, but it is specific and watchable.

We watchMatterport hardware availability, hardware gross margin, and any supplier warnings in 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 and the main reason margins were pressured. If it reaches profitability and keeps adding agent subscribers, it could turn a costly investment into a new high-value subscription business.

Is CoStar mainly a subscription company?

Yes, but a little less than before. In Q1 2026, subscription contracts were about 90% of total revenue, down from 96% a year earlier because Domain and Matterport added more transaction-based products and services.

What is the biggest risk for CoStar?

The biggest risk is that residential competition forces CoStar to spend heavily again before Homes.com proves durable profits. Investors should watch residential adjusted EBITDA, Homes.com member growth, and selling and marketing expense as a share of revenue.