CoStar Group Q3 2026 Earnings: Adjusted EBITDA Doubles on Residential Turnaround

CoStar Group (NASDAQ: CSGP) reported Q3 2026 revenue of $952 million, up 14% from $834 million, while diluted EPS improved to $0.18 from a loss of $0.07 a year earlier. Net income swung to $74 million from a $31 million loss, and adjusted EBITDA doubled to $229 million as operating expenses declined despite higher revenue. The results cover the quarter ended September 30, 2026, and were released on October 27.

Core Financial Results

Revenue increased by $118 million year over year, while gross profit rose by $79 million. Gross margin nevertheless narrowed because cost of revenue increased faster than sales.

The more significant change occurred below gross profit: operating expenses declined to $657 million from $713 million, producing an operating profit compared with a loss in the prior-year quarter. Adjusted results showed a similar improvement, with adjusted net income and adjusted EBITDA rising substantially.

Adjusted net income, adjusted EPS and adjusted EBITDA are non-GAAP measures. The company reported net new bookings of $37 million, although it cautions that this operating metric is not directly comparable to revenue.

Residential Growth Drove the Profitability Turnaround

Residential Real Estate generated $87 million of CoStar’s $118 million year-over-year revenue increase, accounting for about 74% of the consolidated gain. Commercial Real Estate continued growing, but Other Commercial Real Estate revenue declined.

Residential also accounted for the consolidated adjusted EBITDA increase. Residential adjusted EBITDA improved to positive $49 million from a $69 million loss, a $118 million swing. Commercial Real Estate adjusted EBITDA slipped to $180 million from $183 million, meaning the residential improvement more than accounted for the companywide increase from $114 million to $229 million.

On a GAAP EBITDA basis, Residential Real Estate moved to positive $16 million from a $101 million loss. Commercial Real Estate EBITDA increased to $163 million from $114 million.

Margins, Cash Flow, and the Balance Sheet

Cost of revenue rose 23% to $211 million, outpacing the 14% increase in revenue and reducing gross margin. The increase partly reflected amortization of acquired intangible assets within cost of revenue, which rose to $29 million from $19 million.

Operating leverage improved because selling and marketing expense declined to $366 million from $418 million, while general and administrative expense fell to $138 million from $157 million. These reductions more than offset increases in software development and customer-base amortization, allowing total operating expenses to fall by $56 million.

Cash flow information was provided on a nine-month rather than quarterly basis. Operating cash flow for the nine months ended September 30 increased to $455 million from $268 million. However, cash and cash equivalents fell to $500 million from $1.63 billion at the end of 2025, reflecting $981 million of investing outflows and $706 million of financing outflows. These included $789 million for acquisitions and $668 million of stock repurchases. Long-term debt was broadly unchanged at $994 million.

Management’s Cost-Savings Plan

Management said total anticipated cost savings for 2026 had increased to approximately $150 million compared with its original guidance. Its continuing expense review identified at least another $200 million of potential savings that management expects to realize over the next 12 to 18 months without sacrificing revenue growth.

The company linked those additional efficiencies to its 2028 adjusted EBITDA target of $1.25 billion. Management also highlighted its use of AI and proprietary real estate data, along with the acquisition of Zonda and the agreement to acquire Vexcel, as part of its strategy to expand its datasets and scale.

Updated Guidance

CoStar raised its full-year 2026 revenue, adjusted EBITDA and adjusted EPS guidance. The adjusted EBITDA midpoint increased by $30 million from the July outlook and by a cumulative $60 million from the February outlook.

The adjusted EPS ranges assume a 26% non-GAAP tax rate. At the midpoint, fourth-quarter adjusted EBITDA guidance implies a further margin increase from the 24.1% reported in Q3.

Recent Insider Transactions

The latest reported open-market transactions included one CEO purchase and two sales by other insiders. The CEO purchase was larger in value than the two sales combined, but individual transactions do not by themselves establish insiders’ views of the company’s outlook.

Seven directors also received stock awards on June 23, 2026, recorded at a transaction price and value of zero. The six-month insider data showed 212,564 shares acquired across nine transactions and 8,288 shares sold across two transactions, for net acquisitions of 204,276 shares.

Risks Investors Need to Watch

• Gross margin pressure: Cost of revenue grew faster than sales in Q3, reducing gross margin by about 1.5 percentage points. Continued pressure could offset some operating-expense savings.
• Uneven segment profitability: Commercial Real Estate revenue increased, but its adjusted EBITDA declined slightly. The consolidated profit improvement was concentrated in the Residential Real Estate turnaround.
• Lower cash balance: Cash declined substantially during the first nine months as CoStar funded acquisitions, capital expenditures and share repurchases, while long-term debt remained near $1 billion.
• Cost-savings execution: The 2028 adjusted EBITDA target is tied partly to realizing at least $200 million of additional potential savings over the next 12 to 18 months. The timing and full achievement of those efficiencies remain important variables.

Summary

CoStar’s Q3 2026 results combined double-digit revenue growth with a much larger improvement in profitability. The decisive factor was Residential Real Estate, which delivered most of the incremental revenue and moved from a substantial adjusted EBITDA loss to a profit, while lower operating expenses supported companywide margin expansion. The next points to monitor are whether residential profitability holds, commercial adjusted EBITDA resumes growth, gross margin stabilizes and management delivers the additional cost savings embedded in its longer-term targets.