CoStar Group (CSGP) Financials

CoStar Group (NASDAQ: CSGP) has demonstrated a generally solid financial performance over the past four years through mid-2025, with some fluctuations in earnings and investment activities.

Key positive trends and strengths:

• Revenue has shown steady growth, increasing from approximately $556.9 million in Q3 2022 to $781.3 million in Q2 2025, indicating a strong top-line expansion.
• Gross profit has consistently increased, supported by controlled operating costs of revenue, resulting in gross profits rising from about $448.6 million (Q3 2022) to $613.5 million (Q2 2025).
• Despite some quarters of net loss, CoStar reported positive consolidated net income in recent quarters, with $6.2 million in Q2 2025, recovering from a net loss in Q1 2025 and showing signs of improving profitability.
• Operating cash flow remains strong, with net cash from continuing operating activities of $146.5 million in Q2 2025, up considerably from $53.2 million in Q1 2025, indicating good underlying cash generation.
• The company maintains a robust cash and equivalents position, holding over $3.6 billion as of Q2 2025, providing ample liquidity.
• Long-term debt levels have remained relatively stable around $990 million, suggesting manageable leverage relative to asset growth.
• Amortization and depreciation expenses are significant but stable, reflecting ongoing investment in intangible assets and property/equipment, supporting long-term growth potential.
• Gross profit margins remain healthy, supported by disciplined selling, general & administrative expenses, which were about $122.2 million in Q2 2025 compared to revenues of $781.3 million.

Neutral observations:

• The total assets grew from about $8.2 billion in Q3 2022 to $10.5 billion by Q2 2025, mostly driven by goodwill and other noncurrent operating assets, indicating acquisitions and investments, but the exact impact on future earnings is uncertain.
• Outstanding shares have been fairly steady between 400 million to 425 million diluted shares over the past years, suggesting no significant dilution.

Potential concerns and negative factors:

• Net income volatility with a loss of $14.8 million in Q1 2025 and low net income margins are concerns; the company posted only $0.01 diluted EPS in Q2 2025, down from $0.23 in Q4 2023.
• Large investing cash outflows, notably acquisitions of up to $750 million in Q1 2025 and heavy purchases of property, plant & equipment, which negatively impact free cash flow in the short term.
• Marketing expenses are very high, reaching $394.9 million in Q2 2025, over 50% of revenue, impacting operating income consistently.
• Current and noncurrent liabilities have been increasing, including accrued expenses and employee benefit liabilities, which could pressure cash flows if not managed effectively.
• Negative operating income in certain recent quarters (e.g., -$27.2 million in Q2 2025) indicates continuing operational challenges despite revenue growth.

Summary: CoStar Group has shown strong revenue growth and solid cash-generating abilities in recent years with sizeable liquidity and stable leverage. However, the company faces profitability challenges reflected by recent net losses, significant investment cash outflows, and elevated operating expenses, especially in marketing. Investors should monitor CoStar's path to consistent profitability and efficient capital allocation, considering its considerable investments and expense structure.