CoStar Group, the commercial/residential real estate heavyweight that has come under heavy fire from investors of late, announced in a call with investors Feb. 24 that revenue was up 19% to $3.2 billion in 2025, with CEO Andy Florance fielding questions on how the company would navigate an uncertain future while touting continued investments in residential business.
“CoStar Group is entering a period of significant earnings acceleration,” said Florance. “The heavy lifting of the Homes.com national brand launch is behind us, and the launch of Homes AI marks the beginning of a new era for our business. We intend to deploy this transformative capability across every platform in our portfolio, and I believe it will create lasting competitive distance between us and everyone else in the industry.”
As he has positioned his company against Zillow’s push for “transparency” and ensuring all listings are available publicly (and on Zillow), Florance took a question from an investor asking generally how Homes.com is positioned as it relates to “upheaval…regarding the role of the MLS.”
“I believe that the CEO of the largest brokerage firm made some statements to his staff in an all-hands call, talking about the fact that if his agents did not want to belong to the major association, they wouldn’t have to within two years. I think that reflects dissatisfaction with the industry,” he said.
It was not immediately clear what comments Florance was referring to, though the reference to “the CEO of the largest brokerage firm” would appear to be Compass CEO Robert Reffkin.
A CoStar representative did not immediately respond to a request for clarification, and a representative for Compass did not immediately provide any statement or comment on Florance’s statement.
As far as how these big shifts will play out for his business, Florence was cautiously positive.
“I believe that that instability does create opportunities for a platform that is resonant with the brokerages, the agents and the home seller. It’s difficult to see exactly how that will break, but I believe that would break in our favor,” he said.
Taking care of business
In comments likely targeting Zillow and Realtor.com, Florance opined that competing U.S. real estate portals suffer from a lack of profitability and low growth not because there’s MLS in the U.S., but because they have chosen an inferior business model.
“In contrast to Homes.com, our U.S. competitors’ primary business model is to sell lower-value buyer agency leads to a much smaller audience, rather than marketing the valuable homes,” he said. “Selling buyer agency leads became their primary business model when their iBuying business models failed spectacularly.
“Our ‘Your Listing, Your Lead’ principle and our ‘market the home and win more listings’ model is now clearly resonating with agents.”
Regarding future acquisitions, Florance deferred, saying that CoStar has “a lot on our plate right now, while recognizing that there are “dozens, if not 100 opportunities out there.”
Florance also addressed CoStar’s strategy for marketing.
“In terms of marketing spend, we’re shifting from top of funnel brand awareness to much more specific product feature marketing,” he said. “Over the next one or two weeks, you’ll see all that shifting to product functionality. The product functionality is so remarkable and so compelling that we want to basically simplify the marketing and highlight what it actually does.
“We are shifting some of our marketing budget closer to lower funnel, things like SEM, just because at this point, with the number of clients we’ve got, we want to deliver lead results, and you’re seeing that with 187% year-over-year lead growth with Homes.com members. The biggest impact here is engagement.”
Regarding Homes AI, Florance explained that there has already been a groundswell of agents mentioning that the new technology could render MLSs less important.
“We’ve reached out to 18,000 of our clients over the last week or so with Homes AI, and we use artificial intelligence to sort of map what the conversations are and what we’re hearing,” he said. “I think an odd element of this is that it is extracting agents from relying on the MLS as their primary information tool. We’re getting a lot of folks saying, ‘Gosh, this is a lot easier to use than the MLS.’”
Compass is scheduled to report its earnings tomorrow after market close.
