Revenue Up, Stock Down: The Paradox of CoStar’s Q3 Results

• Expensive revenue: In their latest earnings call, CoStar smashed revenue expectations but still saw its stock price drop.

• Cut-rate forecast: The Federal Reserve cut rates again yesterday but had some chilling things to say about another cut this year.

• Reality check: Saudi Arabia has decided to pivot its wealth fund away from megaprojects like Neom to pursue more practical developments.

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Revenue Up, Stock Down: The Paradox of CoStar’s Q3 Results

CoStar Group’s latest earnings call had all the markings of a company firing on all cylinders but still struggling to convince investors it’s built for the next market cycle. The property data and listings giant reported third-quarter revenue of $834 million, up 20 percent year-over-year, driven by its expanding Homes.com network and steady growth in commercial information services. Yet despite the top-line momentum, the company’s stock fell sharply (around 15 percent at time of publication) after the announcement—a reminder that in a cautious capital market, investors are looking for clarity more than growth.

On paper, CoStar delivered another strong quarter. Non-GAAP net income climbed to $97 million, roughly 10 percent higher than last year, while adjusted EBITDA jumped more than 50 percent. But on a GAAP basis, the company still booked a $31 million loss. That gap (pun intended) comes down to how aggressively CoStar is investing in its residential platform, sales force expansion, and new AI-driven tools like Smart Search. Those expenses are booked immediately under GAAP, even if management argues they’ll drive long-term value. CEO Andy Florance called it “another excellent quarter of double-digit revenue growth,” but Wall Street seemed less interested in the growth rate than in the cost of sustaining it.

Florance struck a confident tone throughout the call, underscoring CoStar’s plan to make Homes.com a real contender in the residential listings space. He said the company added 7,000 new paying agents during the quarter, growing its Homes membership base to more than 26,000—up 150 percent from a year ago. He described the strategy as “building a flywheel” that would accelerate in 2026 and beyond, as CoStar’s advertising products scale and agent engagement deepens. It’s an ambitious vision, especially for a company still better known for commercial property data than for consumer-facing marketplaces.

The other major storyline remains CoStar’s ongoing feud with Zillow. Florance reiterated that “Zillow’s free ride on the agents’ listings and CoStar’s proprietary content is over,” doubling down on his company’s legal and competitive offensive. The public spat has become something of a proxy war between two worldviews: Zillow’s traffic-driven, advertising-first model and CoStar’s premium, data-controlled ecosystem. The battle has been a litigious one as well, CoStar has filed a copyright infringement lawsuit against Zillow for use of images it claims to own the rights to. Zillow retaliated by removing Matterport 3D tours (a company that was aquired by CoStar earlier this year). The worry is that the spat will end up becoming detrimental to the customer experience for both platforms and, in turn, hurt their positions in the market.

So why did shares tumble more than 10 percent despite what looked like a strong report? For one, the GAAP loss spooked some investors who expected a cleaner bottom line this late in the company’s growth phase. There’s also growing skepticism about how long CoStar can keep expanding both its workforce and its marketing spend without margin erosion. The company’s recurring success in commercial data doesn’t fully offset the uncertainty of building a consumer brand from scratch. In the end, CoStar’s story is about patience—Florance is playing a long game in a market that’s increasingly short-term in its thinking. The fundamentals may justify optimism, but the stock’s fall shows that not all investors have the same timeline in mind.

Overheard

The Fed’s Mixed Message on Rate Cuts Sends Markets Back to Neutral

The Federal Reserve delivered another 25-basis-point rate cut this week, bringing its benchmark down to a range between 3.75 and 4 percent. While the move was widely expected, the tone of the accompanying statement cooled expectations for more cuts in the near term. “A further reduction in the policy rate at the December meeting is not a foregone conclusion. Far from it. Policy is not on a preset course,” the Fed said in its official statement. The message was clear—the central bank isn’t committing to a long easing cycle despite lingering concerns about slowing growth and a cooling labor market.

Prediction markets reacted instantly. On Polymarket, the odds of another cut in December dropped below 10 percent within hours of the announcement, a steep fall from over 40 percent earlier in the week. The broader market had been betting on three total cuts in 2025, but that now looks unlikely given the Fed’s cautious stance. The reaction highlights just how sensitive investors have become to every word in the Fed’s language, with traders now pricing in a longer period of steady rates before any significant easing resumes.

For real estate investors, that uncertainty is unwelcome. Lower rates can buoy property values and refinance activity, but mixed signals from the Fed are creating a stop-start environment for dealmaking. Developers counting on cheaper financing to revive stalled projects may have to wait longer than they hoped. The latest cut offers short-term relief, but if the Fed sticks to its data-dependent approach, the next move could just as easily be a pause rather than a promise.

Saudi Arabia’s $925 Billion Real Estate Fund Shifts From Dreams to Deliverables

Saudi Arabia’s $925 billion Public Investment Fund is quietly rethinking its grandest ambitions. After years of pouring money into futuristic megaprojects like Neom, The Line, and Trojena, the fund is reportedly redirecting capital toward industries that generate faster, more reliable returns. According to sources close to the matter, the focus will now tilt toward logistics, mining, and technology—sectors that can boost employment and GDP without the astronomical costs or delays that have plagued the kingdom’s headline projects.

This shift follows mounting evidence that the “build it and they will come” strategy has hit real-world limits. Construction at Neom has already been scaled back by 98.6% from its overly ambitious original plans to become a giant metropolis in an incredibly short timespan. Slowing progress, global construction inflation, and falling oil revenues have forced the PIF to balance its image as a symbol of national ambition with its role as a financial institution responsible for sustainable returns. By shifting emphasis away from massive architectural statements, the fund is acknowledging what many developers already know—vision alone doesn’t pay the bills.

For the global real estate sector, this recalibration signals a turning point. Saudi Arabia’s pivot away from speculative megaprojects and toward industrial and tech infrastructure mirrors a broader shift in emerging markets, where capital is chasing near-term productivity instead of prestige. If Neom was the story of how design can sell a dream, this next chapter may be about how logistics and data will build a future that investors actually believe in.

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