Story
CoStar Shares Fall as Declining Bookings, Guidance Cut Overshadow Profitability Milestone
Summary
CoStar Group reported its first-ever profitable quarter for its Homes.com unit, but a sharp 26% drop in net new bookings and a lowered full-year revenue forecast sent shares tumbling.
Shares of CoStar Group (NASDAQ: CSGP) fell more than 4% in trading Wednesday, as investors focused on a significant decline in forward-looking sales metrics and a reduced annual forecast, overshadowing a historic profitability milestone for the company's residential segment.
A Landmark Quarter for Homes.com
CoStar's residential division, centered on its Homes.com portal, achieved its first profitable quarter since launching in early 2024. The segment reported a $12 million adjusted EBITDA for the second quarter of 2026.
The milestone was supported by strong growth metrics, according to the company's earnings release. Segment revenue grew 66% year-over-year to $28.5 million, while the number of agent subscribers increased 107% to more than 36,000.
Forward-Looking Metrics Disappoint
Despite the residential unit's achievement, the market reacted negatively to other key indicators that suggest a weaker growth outlook. The company's overall net new bookings, a crucial measure of future revenue, fell 26% year-over-year to $69 million.
AdCoStar also revised its financial outlook downward, cutting its full-year 2026 revenue guidance to a range of $3.715 billion to $3.755 billion, approximately $50 million below prior consensus estimates. In a move signaling a pullback from aggressive growth, the company slashed its inside sales force for Homes.com from 660 representatives to roughly 400.
Wall Street Reacts
The weaker outlook prompted several Wall Street analysts to reassess their positions on the stock. Citing the results, KBW downgraded CoStar to Market Perform and lowered its price target from $41 to $29. William Blair also withdrew its Outperform rating.
This shift in strategy toward profitability over expansion appears to be a response to external pressures. The company has repurchased $587 million in shares year-to-date, part of a plan targeting $700 million for the full year, reinforcing a focus on capital discipline that has been sought by activist investors.
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