CoStar continued its battle against activist investors this week when it defended its reporting of the performance metrics of Homes.com and other companies it owns, and it questioned the motives of one of the hedge funds leading a campaign to get CoStar to drop the portal.

CoStar also said that it had hired Clare Locke, LLP, a law firm that specializes in defamation cases.

The response came a day after D.E. Shaw, one of the hedge funds leading a campaign to move CoStar away from its quest to build a fourth major real estate search portal, sent an open letter to CoStar’s board of directors. D.E. Shaw wrote that CoStar had shifted its reporting tactics during its latest quarterly earnings report.

The change, two managing directors from D.E. Shaw wrote, “provides investors with less visibility into its underlying operating business and, in our view, represents a troubling step backward for transparency and accountability,” D.E. Shaw wrote in its letter.

“The segment reorganization appears designed to obscure the results of CoStar’s persistently underperforming Homes.com business — just six weeks after management made new performance commitments to shareholders for that same business,” the letter continued.

Specifically, D.E. Shaw said that CoStar created a new segment that compiled the performance of various businesses, including Homes.com and Apartments.com. It also said CoStar didn’t provide investors with net new bookings on Homes.com, and that the change resulted in a drop in CoStar’s stock the next day. 

“When disclosure is curtailed at a moment when accountability is most needed, investors cannot help but ask: What is CoStar trying to hide?” the investors wrote.

The investment firm William Blair also pointed out in a recent analysis that it believed CoStar had changed its reporting structure and therefore made things less transparent.

“The company did not provide much underlying detail on bookings, and also re-segmented the business in a way that will make it much more difficult to parse out the performance between Apartments.com and Homes.com,” the William Blair analysts wrote. 

Still, the analysts said, “we would remain buyers” of CoStar stock.

CoStar responds

CoStar has fiercely defended its past investment in Homes.com, saying that it was the winning business model for residential real estate and that it followed past investment cycles that led to strong revenue growth for the company.

In a response on Wednesday, CoStar suggested that D.E. Shaw may have ulterior motives behind its campaign to get the company to stop its attempt to create a top four major real estate search portal.

CoStar said in its response that D.E. Shaw might own as little as 0.22 percent of CoStar’s common stock and nearly four times as much in unspecified competitors.

“CoStar Group stockholders should ask if D. E. Shaw’s real agenda is to unlock value through its investment in CoStar Group or in our competitors at the expense of CoStar Group stockholders,” CoStar wrote.

D.E. Shaw owns shares in Zillow Group, Rocket Companies and News Corp, though the share in each appears to be smaller than the firm’s holdings in CoStar. CoStar didn’t immediately respond to a request for clarification.

CoStar also said that it had never reported Homes.com’s results as its own segment.

“CoStar Group changed our reporting segments from geography-based to product portfolio-based to align with how we run our business,” the company wrote, adding that the change resulted in more transparency.

“Investors should expect similar Homes.com disclosures on our earnings calls that CoStar Group has always provided to stockholders,” the company wrote.

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CoStar has created the winning formula for dominating the residential real estate market by attracting renters to its platforms, maintaining a robust list of for-sale listings and offering buyer leads to listing agents — in contrast to its top competitors in the space.

That’s according to CoStar CEO Andy Florance, whose company owns Homes.com and who is defending the portal amid questions from investors over whether there is space for a fourth major real estate portal in the U.S.

Florance addressed investors on a call late Tuesday, shortly after the company shared an earnings report. It was Florance’s latest chance to address questions from investors and to make the case that Homes.com was on a strong path forward.

“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,” Florance said. “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.”

“Selling buyer agency leads became their primary business model when their … iBuying business models failed spectacularly,” he said.

The comments echo Florance’s previous defense of his strategy against recent attacks from prominent investors, and in his call Tuesday, he continued to position his platform as a worthy competitor.

CoStar has vowed to cut spending on Homes.com by over $300 million this year, a more than 35 percent drop compared to its spending on the brand in 2025. It will keep cutting through 2029 by $100 million per year.

CoStar has suggested that it is exiting a period in which it was investing heavily into Homes.com to create a brand that will last and generate profit in the future.

CoStar reported attracting 108 million average monthly unique visitors to the 17 brands within its Homes.com Network in 2025. It didn’t immediately report a figure for the fourth quarter, though past reports indicate that traffic was down compared to a year earlier.

Based on previously reported numbers, it appears the network generated about 102 million average monthly unique visitors in the fourth quarter. That would be down about 7.3 percent compared to the fourth quarter of 2024, when the company reported attracting 110 million average monthly unique visitors.

CoStar didn’t immediately respond to a request for comment about traffic in the fourth quarter. 

Across its residential real estate portfolio, which includes the Homes.com portal and the company’s rental segments, CoStar reported earning $1.46 billion in all of 2025, up nearly 20 percent from a year earlier.

The company reported having 31,000 agent subscribers, with 76 percent of those on annual contracts. CoStar reported having 26,000 members in the third quarter, indicating it grew subscriber count by 19 percent to end the year.

“Our ‘Your Listing, Your Lead’ principle and our ‘market the home and win more listings’ model is now clearly resonating with agents,” Florance told investors on the call. 

“Homes.com is the only real estate portal in the United States whose core business model is to use the power of the internet to help real estate agents market their listings to potential homebuyers,” he added.

In Florance’s comments and in materials released to investors late Tuesday, CoStar made the case that Homes.com is following a similar trajectory to Apartments.com, and that the total addressable market for residential real estate is magnitudes larger than rentals.

“Apartment real estate in the U.S. is worth $6 trillion while single-family homes and condos are worth almost 10 times as much at $56 trillion,” Florance said. “In that context, it’s a very credible belief that Homes.com can generate $5 billion in revenue within the next decade or so.”

“Apartments.com needs Homes.com in order to bring those considering buying into the top of the rental funnel on one of our platforms,” Florance said.

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CoStar laid off members of the Homes.com team this week as the company began implementing a series of cost cuts against the backdrop of investor pressure.

In total, the company cut about 200 roles from a workforce of over 8,000, according to a source with knowledge of the situation. CoStar did not say whether the cuts were concentrated in specific teams, whether it had shifted away from using writers to generate content to enrich listings or whether it had shifted sales roles from Homes.com to other segments of the company.

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Instead, it confirmed in a statement that it had made layoffs and said that it was leaning into artificial intelligence going forward.

“To align our organization with these strategic objectives and position the company for continued success, we have made the difficult decision to eliminate certain roles within the organization,” a CoStar Group spokesperson said in a statement. “This was not a decision taken lightly, and we are deeply appreciative of the contributions that each affected team member has made during this transformative period.”

The cuts come at a time when CoStar has promised to cut $300 million in spending on Homes.com this year, a total that amounts to over 35 percent compared to its spending last year. The company said it would cut over $100 million each year through 2030, when it believes Homes.com will reach profitability.

The layoffs were announced a day after CoStar unveiled Homes AI, an artificial intelligence search assistant.

The cutback follows mounting pressure from investors who questioned CoStar’s aggressive move into the residential space after dominating the commercial real estate space.

CoStar has suggested the impending cost cuts mark the end of an investment period and the beginning of a new era where Homes.com’s value proposition will be proven in the marketplace.

“Over the past two years, we have experienced a period of rapid growth following the initial investment phase and the successful launch of Homes.com,” the company spokesperson said. “This momentum has enabled us to reach important milestones and expand our services to better meet the needs of our customers.”

CoStar also cited AI last year when it eliminated some roles while planning to hire for others, including increasing its sales force at Homes.com, according to local news reports.

The ongoing changes come as CoStar is defending itself from activist investors who have criticized the company’s heavy spending on Homes.com in recent years.

D.E. Shaw and Third Point each said that the focus on attempting to build a portal that can compete for consumer awareness with Zillow, Redfin and Realtor.com was misguided. D.E. Shaw said it was time for the company to abandon the effort, saying Homes.com was dragging down the performance of CoStar’s primarily commercial real estate brands.

CoStar is set to announce its fourth quarter earnings next week.

Update: This post was updated after publication with numbers on the job cuts. 

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