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CoStar Group has lowered its full-year revenue forecast as uncertainty in the commercial real estate market continues to weigh on business performance. The company has also shifted its focus towards tighter cost control, reducing its projected expense baseline while maintaining limited operating cost growth. Although second-quarter adjusted earnings exceeded market expectations, revenue fell slightly short of estimates. The company also issued weaker-than-expected guidance for the third quarter, reflecting continued pressure from high borrowing costs, hybrid work trends and heavy investments in its residential marketplace business.
CoStar Group has reduced its annual revenue forecast as prolonged uncertainty in the commercial real estate market continues to affect demand for its core property data and analytics business. The company is also focusing on tighter cost management to navigate the challenging market environment.
The company now expects full-year revenue to be between USD 3.72 billion and USD 3.76 billion, lower than its earlier guidance of USD 3.78 billion to USD 3.82 billion.
Alongside the revised outlook, CoStar said it kept operating cost growth at 2% during the second quarter and lowered its projected expense baseline by around USD 100 million compared with its initial guidance. The move reflects the company's efforts to improve efficiency while continuing investments in key business areas.
CoStar, which owns online real estate platforms Homes.com and Apartments.com, is widely known for its commercial real estate database, market intelligence and subscription-based analytics used by brokers, developers, investors, lenders and other property professionals.
The company indicated that the commercial real estate sector has continued to recover at a slower pace than expected. Demand for its core analytics business has remained under pressure due to the lasting impact of hybrid work patterns after the pandemic and elevated borrowing costs, which have reduced transaction activity across several property segments.
For the third quarter, CoStar expects revenue to range between USD 935 million and USD 945 million, below analysts' average estimate of USD 967.7 million, according to data compiled by LSEG. The company also projected adjusted earnings per share of 31 cents to 34 cents, compared with analysts' expectations of 38 cents per share.
The company's expansion into residential real estate platforms has also remained a key area of focus. Industry analysts have previously noted that CoStar's aggressive investment in this segment, particularly through Homes.com, has required substantial spending and is expected to continue weighing on profit margins over the coming years. The company has been investing heavily in advertising and customer acquisition as it competes with established residential property portals in the United States.
During the second quarter, CoStar reported revenue of USD 925 million, slightly below analysts' estimates of USD 928.75 million. However, adjusted earnings came in at 32 cents per share, exceeding market expectations of 29 cents per share.
The company also reported USD 69 million in net new bookings for the quarter ended in late June, representing a 3% increase compared with the previous quarter. The growth in new bookings suggests that while the broader commercial property market remains subdued, demand for some of CoStar's services has continued to improve gradually.
Following the announcement of the revised guidance, CoStar's shares fell 13.3% in extended trading, reflecting investor concerns over weaker revenue expectations and the pace of recovery in the commercial real estate market.
Source Reuters
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