CoStar's Core Network Runs at 47% Margins. Is Homes.com Still Driving the Discount?

CoStar Group (CSGP 11.98%), which runs one of the leading data and marketplace platforms for commercial real estate (CRE), has seen its stock cut nearly in half during the past six months. Investors are focused on the company’s residential mess, but its commercial core remains intact.

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NASDAQ: CSGP

CoStar Group

Today’s Change

(-11.98%) $-5.89

Current Price

$43.26

Key Data Points

Market Cap

$21B

Day’s Range

$43.18 - $47.10

52wk Range

$43.18 - $97.43

Volume

368K

Avg Vol

5.9M

Gross Margin

76.36%

Some of the best businesses you will find are built on self-reinforcing networks. Visa (V +1.45%) and Mastercard (MA +1.81%) are obvious examples of network effects in action. Merchants need cardholders, cardholders need merchants, and once the network reaches critical mass, few leave. CoStar has quietly built the same dynamic for property data, connecting 8.5 million properties with more than 230,000 professionals who depend on that data to close deals. More data brings in more users. More users create richer data.

A 38-year head start

CoStar’s moat is built around nearly four decades of data collection valued at more than $5 billion. More than 1,500 researchers verify property details, supporting the platform that has become the industry’s default. A broker who cancels CoStar is effectively choosing to operate without the baseline that much of the industry relies on.

The renewal rates prove it. CoStar has a 93% quarterly renewal rate, and its Apartments.com multifamily marketplace renews monthly at 99%. “Sticky” is an understatement.

Image source: Getty Images.

Those renewal rates show up in the segment’s margins. The information and marketplace segment generated a 47% profit margin in the 2025 third quarter, up 400 basis points year over year, boosted by a healthy market. In 2025, CRE transaction volume grew by 23%, thanks in part to demand for data centers.

A proven business at a rare price

The gap between CoStar’s underlying strength and its stock price is largely driven by its investment in Homes.com and recent activist shareholder pressure. The company has poured $850 million into the residential portal in 2025, resulting in a net operating loss for the year through Q3. That spending is a direct challenge to Zillow (Z +1.49%), the entrenched residential leader, whose network of agents and homebuyers has proven difficult to displace.

Homes.com has generated little revenue against a total investment of nearly $3 billion by CoStar, and management doesn’t expect breakeven until 2030. In response to activist demands, management has agreed to reduce investment in Homes.com by more than $300 million this year.

This reduction pushes adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) projections for the year to about $770 million, up more than 80% from 2025. In addition, the board authorized a $1.5 billion buyback, and the company holds $942 million in net cash.

The stock currently trades at about 23 times the company’s 2026 EBITDA forecast, which is attractive relative to CoStar’s historical range. Fourth-quarter earnings on Feb. 24 should provide an update on the cost cuts and widening margins.