CoStar (CSGP) Q2 2025: Acquisition-Fueled Growth Comes at a Cost

In the world of real estate, data is king. CoStar Group (CSGP) has built an empire on this principle, providing comprehensive information, analytics, and online marketplaces for commercial and residential properties. With well-known brands like Apartments.com, LoopNet, and Ten-X, the company is a dominant force. To understand its current financial health and strategic direction, let's delve into its latest Q2 2025 financial results, as detailed in its recent quarterly filing with the SEC.

Growth Fueled by Acquisition

CoStar's top-line numbers show a company in aggressive growth mode. For the second quarter of 2025, revenue hit $781.3 million, a solid 15% jump from the same period last year. This growth wasn't uniform across the board; it was significantly supercharged by recent strategic acquisitions.

• Multifamily (which includes the Apartments.com network) remains the largest revenue source, growing 11% to $292.3 million.
• The CoStar suite of services, the company's original information product, posted a healthy 7% increase to $270.9 million.
• The most dramatic growth came from the "Other Revenues" category, which surged 139% to $74.7 million. The filing attributes this primarily to the acquisition of Matterport, a company specializing in creating 3D "digital twins" of properties.
• Information Services also saw a strong 18% rise to $39.3 million, boosted by the acquisition of Visual Lease, a lease management software platform.

This strategy is clear: CoStar is buying technology and market share to embed itself deeper into the real estate transaction lifecycle, from initial search to lease management and property visualization.

To see how this revenue breaks down against the company's costs, this flow diagram illustrates the journey from revenue to net income for the quarter.

The Price of Expansion

While revenue is climbing, so are the costs associated with this expansion. Total operating expenses rose 15% to $640.7 million, keeping pace with revenue growth. The largest component of this is Selling and Marketing, which stood at $394.9 million for the quarter.

This spending, largely driven by integrating new businesses and investing in marketing, resulted in an operating loss of $27.2 million. This is a wider loss than the $16.1 million reported in Q2 2024, indicating that the costs of its growth strategy are currently outpacing the immediate profits from it.

So, how did the company turn an operating loss into a net profit? The answer lies below the operating line. CoStar earned $32.5 million in net interest income—essentially, earnings from its large cash reserves. It also recognized $16.3 million in "Other income," which the filing notes includes unrealized gains related to another potential major acquisition in Australia. These non-operating gains were enough to push the company into the black, recording a net income of $6.2 million for the quarter.

Navigating the Path to Profitability

CoStar's Q2 2025 report paints a picture of a company making bold, transformative bets. The acquisitions of Matterport and Visual Lease are not just add-ons; they represent a strategic push to integrate cutting-edge technology and expand its service offerings.

However, this aggressive growth comes at a cost, as reflected in the widening operating loss. While interest income is currently providing a cushion, the long-term success of this strategy hinges on CoStar's ability to successfully integrate these new companies, control spending, and ultimately convert its expanded market leadership into sustainable operating profits. The central challenge moving forward will be to prove that the high price of expansion today will lead to even greater profitability tomorrow.