CoStar Group is taking to the skies with its latest acquisition.
But after announcing the purchase of an aerial imaging company along with its third-quarter earnings, the commercial real estate tech giant's stock is hitting some turbulence.
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Arlington, Virginia-based CoStar has reached a $730M all-cash deal to buy Vexcel, which uses manned aircraft and proprietary imaging technology to collect tens of millions of high-resolution aerial photographs a year across 45 countries.
CoStar for years has used fleets of cars to capture photographs of buildings for its vast property database. It plans to complement that with Vexcel's aerial photography and use artificial intelligence to "recognize and extract information and features from them," CEO Andy Florance said Tuesday on CoStar's earnings call.
"It is clearly aligned with our mission of digitizing the world's real estate with an incredible ability to leverage AI to create proprietary real estate data of durable value," Florance added.
Vexcel brought in $140M in revenue over the last 12 months, up 30% year-over-year, with a six-person sales team, Florance said. He said CoStar can supercharge that growth by expanding Vexcel's sales workforce with CoStar's own 2,000-person sales team.
Erik Jorgensen is expected to continue as CEO of Vexcel, which will keep operating its data program and serve its customers under its own brand, CoStar's press release says. The deal is slated to close early next year.
"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," Jorgensen said in the release.
The deal continues CoStar's decades-long strategy of growing through acquisitions. In August, it closed the previously announced acquisition of housing data provider Zonda for $815M.
The company's biggest acquisition in recent years was the $1.6B deal to acquire 3D imaging company Matterport that closed in February 2025. During a question-and-answer session with analysts, Florance compared the Vexcel acquisition to Matterport for the way it will continue to operate as its own company.
"In terms of exclusivity, I think this works a little bit like Matterport," Florance said. "Matterport continues to grow as a standalone product, but because it's a combined entity with CoStar, the team at Matterport does a great job in making sure their products are responsive to the needs of our product areas, whether it be apartments, LoopNet [or] homes."
Matterport's subscription revenue grew 11% year-over-year in the third quarter, and CoStar expects it to be profitable by the end of next year, Florance said.
CoStar's overall revenue rose 14% year-over-year to $952M, and its net income totaled $74M, according to its earnings statement, released after markets closed Tuesday. The company raised its full-year guidance for revenue and earnings from its second-quarter estimates.
But Wall Street reacted negatively to CoStar's earnings report, with the company's share price plunging by more than 13% Wednesday. Its stock is down 65% over the last year.
Investors appeared to be spooked by CoStar's decline in annualized net new bookings, which totaled $37M last quarter, compared to $84M a year earlier. According to Investing.com, analysts BTIG and Jefferies cut their price targets for CoStar following Tuesday's earnings report.
Florance said net new bookings came in below his expectations due to "economic headwinds and slower-than-expected sales force growth."
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