CoStar shares drop 10% after hours despite Q3 profit beat

CoStar Group Inc. (CSGP) said on Oct. 27 that third-quarter revenue rose 14% from a year earlier to $952 million, and adjusted earnings per share reached 38 cents. The company also agreed to buy aerial imagery provider Vexcel for $730 million in cash.

Shares fell 10.0% in after-hours trading as of 5:12 p.m. ET, from a regular-session close of $31.98.

Adjusted EPS topped the 34 cents consensus estimate compiled by Finnhub, while revenue was below the $965.11 million estimate from the same source.

The company provides online real estate marketplaces, information, analytics and 3D digital twin technology, and was founded in 1986, according to the release.

Here's how the company did:

• Revenue: $952 million vs. $834 million a year earlier, below the $965.11 million consensus estimate compiled by Finnhub
• Adjusted EPS: 38 cents vs. 23 cents a year earlier, topping the 34 cents consensus estimate compiled by Finnhub
• Net income: $74 million vs. a loss of $31 million a year earlier
• Adjusted EBITDA: $229 million vs. $114 million a year earlier

Net new bookings were $37 million for the quarter, the company said.

Commercial Real Estate adjusted EBITDA was $180 million, against $183 million a year earlier. Residential Real Estate adjusted EBITDA was $49 million, compared with a loss of $69 million a year earlier.

“CoStar Group generated outstanding profitability growth in the third quarter, delivering on our commitment to expand margins as we exit a period of investment,” said Andy Florance, Founder and Chief Executive Officer of CoStar Group.

According to its SEC filings, net income swung from a loss of $30.9 million in the third quarter of 2025 to a profit of $46.5 million in the fourth quarter of 2025.

2026 guidance

The company said in a filing it is raising its 2026 adjusted EBITDA guidance to $820 million to $840 million, an increase of $30 million at the midpoint from its guidance in July 2026.

It also raised 2026 revenue guidance to $3.75 billion to $3.77 billion and full-year adjusted EPS guidance to $1.38 to $1.41.

For the fourth quarter, the company expects adjusted EBITDA of $275 million to $295 million, revenue of $976 million to $996 million, and adjusted EPS of 46 cents to 50 cents.

Vexcel acquisition

The company said in a filing that its subsidiaries CoStar Realty Information, Inc. and Velocity Merger Sub, Inc. signed a merger agreement with Vexcel Group, Inc. and Fortis Advisors LLC, as stockholder representative, to acquire Vexcel for $730 million in cash.

The price is subject to customary working capital and other post-closing adjustments. The deal is not subject to approval by CoStar stockholders or to a financing condition.

Closing depends on the expiration or termination of Hart-Scott-Rodino waiting periods and certain foreign regulatory approvals. Either party may terminate if the deal is not completed by July 27, 2027, subject to extension in certain circumstances.

In a press release, Vexcel said it generated revenue of more than $140 million in the last twelve months, up over 30% in the previous twelve months, on recurring multi-year data contracts, with an Adjusted EBITDA margin of approximately 20%.

CoStar expects to fund the acquisition from cash on hand and its existing revolving credit facility, and expects it to close in the first quarter of 2027. The company expects the deal to be accretive to Adjusted EPS in the first full year of ownership.

“For decades, Vexcel has invested in creating highly accurate geospatial data that customers rely on every day,” said Erik Jorgensen, Chief Executive Officer of Vexcel. “By joining CoStar Group, we gain the scale, technology, and resources to broaden our reach, accelerate innovation, and deliver even greater value to customers worldwide.”

Goldman Sachs served as exclusive financial advisor to CoStar Group, and Latham & Watkins as legal advisor. William Blair served as exclusive financial advisor to Vexcel, and Snell & Wilmer as legal advisor.