CoStar Raises EBITDA Guidance Despite Sliding Net New Bookings

What happened

CoStar raised its full-year adjusted EBITDA guidance to $830 million, above the prior $740–800 million range, signaling better cost control. However, third-quarter net new bookings fell to $37 million, indicating weakening demand for its subscription products. The divergence suggests that profitability gains may be driven by spending cuts rather than top-line momentum. This development challenges the core assumption that Homes.com can scale monetization while the company moderates investment. Investors should scrutinize whether the bookings decline is a temporary blip or the start of a broader slowdown.

Implication

The raised guidance confirms that cost discipline is taking hold, but the drop in net new bookings indicates that demand for CoStar's products is softening. The company may be sacrificing future growth to hit near-term profitability targets, a trade-off that could hurt long-term value. Given the stock's still-elevated valuation at approximately 48x EV/EBITDA, any sustained slowdown in bookings could trigger a significant de-rating. Investors should watch upcoming quarters for stabilization in bookings and revenue growth before adding positions. Until then, maintaining a wait-and-see approach with a bias toward trimming is prudent.

Thesis delta

The original WAIT thesis relied on Homes.com spend moderation and narrowing losses; the raised EBITDA guidance supports that path. However, the sharp decline in net new bookings introduces a new risk that revenue growth may falter as investment is cut. This shifts the balance toward caution, increasing the probability of the bear scenario where paid demand remains necessary and growth stalls.