CoStar Group (CSGP) Q1 2025: Homes.com Sales Force Expands 600%, Accelerating Residential Portal Momentum
CoStar’s Q1 2025 marks a pivotal inflection as the company’s residential strategy gains traction, with a 600% sales force expansion at Homes.com and deep integration of Matterport technology. Commercial marketplace resilience, cost discipline, and aggressive capital reallocation underpin a multi-segment growth thesis, while management signals accelerating tailwinds in both multifamily and residential as the year unfolds.
Summary
- Residential Portal Momentum: Homes.com sales force grew 600% in four months, driving improved agent engagement and revenue trajectory.
- Commercial Marketplace Resilience: CoStar and Apartments.com segments sustain high renewal rates and margin leadership despite CRE headwinds.
- Strategic Capital Reallocation: Cost discipline and targeted investments signal a shift toward scalable, high-margin digital marketing models.
Performance Analysis
CoStar Group delivered its 56th consecutive quarter of double-digit revenue growth, with Q1 revenue at $732 million, up 12% year-over-year, and adjusted EBITDA of $66 million, propelled by both commercial and residential segments. Commercial information and marketplace businesses, including CoStar, Apartments.com, and LoopNet, achieved a robust 43% profit margin, reflecting continued operational leverage and disciplined expense management. The company’s net new bookings reached $56 million, up 6% sequentially, with notable momentum in international markets and product verticals such as CoStar for Lenders and STR.
Residential revenue, while still a smaller contributor, is now positioned for acceleration as Homes.com’s unaided brand awareness climbed ninefold to 36% and the dedicated sales team scaled from 50 reps to 314 in production. Matterport contributed $15.9 million in its first stub period and is expected to become a key cross-segment technology lever. Cost actions, including a 423-person headcount reduction and $50 million in annualized savings, were focused on rebalancing Homes.com spend toward sales productivity and away from broad-based marketing, setting the stage for margin improvement as revenue ramps.
- Commercial Margin Leadership: 43% profit margin in commercial and marketplace businesses, excluding newer investments, highlights embedded efficiency.
- Sales Force Expansion: Homes.com sales team grew 600% in four months, with further hiring planned, supporting rapid revenue scaling.
- Bookings Acceleration: Net new bookings up 6% sequentially and 14% YoY in commercial, signaling improving demand across product lines.
CoStar’s multi-segment model—data subscription, digital advertising, and transaction enablement—showed resilience, with subscription revenue on annual contracts representing 80% of total, and renewal rates at 89% overall and 94% for long-tenured customers.
Executive Commentary
"With improving NPS scores, our projected cancellations for May are falling approximately 70%. At the same time, our gross sales are climbing as we bring on more salespeople and they gain experience. I believe that by year end, our Homes.com sales team will be our largest and will be turning in the most net new revenue of any product or in CoStar Group with a regular 1 million net new months for Homes.com."
Andy Florence, CEO and Founder
"Matterport contributed an adjusted EBITDA loss of $2.7 million for the first quarter stub period. Our commercial information and marketplace bands delivered healthy 43% profit margins in the first quarter. This measure does not include our investments in homes.com, on the market, and Matterport."
Chris Lown, CFO
Strategic Positioning
1. Residential Portal Disruption
Homes.com is executing a direct challenge to incumbent lead diversion models by focusing on property marketing rather than agent lead generation. The company’s rapid sales force build-out, improved NPS (now 43, up 85 points in a year), and sharp drop in early cancellations signal product-market fit is emerging. Agent ROI is now demonstrable, with members winning 61% more listings and a 56% demo-to-close rate in April. The launch of Boost, a flexible listing marketing product, and upcoming offerings for home builders (targeting 20% of new home sales) broaden the addressable market.
2. Commercial Data and Marketplace Expansion
CoStar’s core commercial data subscription and marketplace businesses continue to gain share, even in a challenging CRE environment. Product enhancements like CoStar for Lenders (now $80 million run rate, up 116% YoY in bookings), STR’s integration, and asset-based pricing in LoopNet are expanding the value proposition and monetization. The company is signaling readiness to be more aggressive on pricing as CRE market conditions improve.
3. Technology Integration and Globalization
The Matterport acquisition brings digital twin technology to all CoStar platforms, supporting deeper engagement and differentiated product features across residential and commercial. Early plans include scaling the Matterport sales force and embedding its technology natively into products, with a goal to reach a trillion square feet of digitized space. International growth is accelerating, with three consecutive quarters of record net new bookings and the Domain Holdings (Australia) bid offering a strategic entry into another large portal market.
4. Cost Discipline and Capital Allocation
Management executed $50 million in annualized savings, primarily from Homes.com, and reallocated resources to sales force expansion. A new board-level Capital Allocation Committee is tasked with optimizing resource deployment and operating performance, reinforcing the company’s commitment to long-term margin expansion and shareholder returns.
Key Considerations
CoStar’s Q1 2025 demonstrates a decisive pivot toward residential portal scale, ongoing commercial leadership, and disciplined capital deployment, all underpinned by a technology-driven operating model.
Key Considerations:
- Residential Revenue Inflection: Homes.com is positioned for accelerating revenue in H2 2025 as sales productivity rises and early attrition abates.
- Sales Productivity Leverage: Dedicated sales reps are on track for $232,000 in billings per year, with pipeline building as hiring continues.
- Integrated Product Ecosystem: Matterport and lease management integrations enhance cross-segment stickiness and open new monetization vectors.
- CRE Market Turn: Management sees early signs of improvement in CRE fundamentals, with potential for more aggressive pricing and volume gains.
- International Playbook: Domain Holdings and onthemarket.co.uk provide templates for vendor-paid, property-centric models in global markets.
Risks
Execution risk remains high in scaling Homes.com sales and sustaining low attrition as contracts mature, especially as the offering shifts from early adopters to the broader agent base. CRE market recovery is still tentative, and any macro shock could slow pricing and volume gains. Integration of Matterport and potential Domain acquisition bring operational and financial complexity, while competitive responses from entrenched portals may intensify as CoStar’s property-first model gains share.
Forward Outlook
For Q2 2025, CoStar guided to:
- Revenue of $770 to $775 million (14% YoY growth at midpoint)
- Adjusted EBITDA of $50 to $60 million (around 7% margin)
For full-year 2025, management maintained guidance:
- Revenue of $3.115 to $3.155 billion (14-15% growth, with 4-5 points from Matterport)
- Adjusted EBITDA of $355 to $385 million (12% margin, Matterport dilutive by $30 million)
Management highlighted:
- Homes.com revenue acceleration in H2 2025 as net new bookings grow and sales force matures
- Commercial segment margin stability and upside as CRE conditions improve and pricing power returns
Takeaways
CoStar’s multi-pronged strategy is gaining visible traction, with Homes.com emerging as a credible challenger in the residential portal market and commercial businesses maintaining margin leadership. The company’s disciplined capital reallocation and technology integration position it for scalable, high-margin growth as market conditions normalize.
- Residential Scale Inflection: Homes.com’s sales force expansion and improved agent economics are setting up for a step-change in revenue growth and brand relevance.
- Commercial Resilience: Core data and marketplace businesses are holding share and margin, with upside as CRE demand recovers.
- Technology and Global Leverage: Matterport and international portals are strategic levers for differentiated product and TAM expansion.
Conclusion
CoStar’s Q1 2025 marks a turning point, with residential portal ambitions moving from concept to execution, commercial segments sustaining profitability, and technology integration deepening competitive moat. The company’s ability to execute on sales productivity, cost discipline, and global expansion will define its trajectory as market cycles shift.
Industry Read-Through
CoStar’s pivot to a property-first, vendor-paid residential portal model is a direct challenge to incumbent lead-gen platforms, signaling that agent and consumer sentiment is shifting toward transparency and direct marketing. Commercial data and marketplace moats remain durable even in cyclical downturns, but the real estate industry’s digital transformation is accelerating, with digital twin technology (via Matterport) and integrated lease management set to become table stakes. Internationally, the vendor-paid model and tiered advertising strategies are likely to gain share, especially as regulatory and competitive pressures force portals to rethink monetization and customer alignment. Investors in adjacent property tech, digital marketing, and data platforms should watch for similar shifts in capital allocation, product integration, and go-to-market strategies.