Investors have largely viewed the AI boom through the prism of chipmakers and cloud providers, assuming the biggest rewards would flow to those supplying raw compute power. Goldman Sachs is shifting that lens, arguing that the real value of AI may lie in how companies deploy it to cut labor costs while raising output.
To test this idea, Goldman screened the Russell 1000 for two quantitative signals that suggest a firm stands to gain disproportionately from AI‑driven automation. The first metric is the ratio of labor costs to sales; a high share indicates wages are a sizable expense base, leaving room for savings if tasks can be automated. The second estimates the portion of the wage bill that is susceptible to AI substitution based on the nature of the work. Companies scoring high on both are flagged as AI productivity beneficiaries because they combine a costly labor footprint with a strong chance that AI can take over meaningful parts of that work.
Applying these filters, Goldman’s refreshed AI Productivity Beneficiaries basket placed CoStar Group (CSGP) at the very top of the ranking. The analysis estimates that roughly 37 % of CoStar’s wage bill is exposed to automation opportunities, while labor costs consume about 31 % of its sales. Combined, CoStar receives an aggregate sector ranking of 97 %, signalling that it outperforms nearly all peers in the potential to reap productivity gains from AI.
CoStar Group operates as a global aggregator of real‑estate data, analytics, and digital marketplaces, with brands such as CoStar, LoopNet, Homes.com, Apartments.com, Ten‑X, Land.com, and BizBuySell. Headquartered in Arlington, Virginia, it serves brokers, investors, property managers, and lenders, offering tools for market research, lease execution, and more. With a market capitalization near $12.7 billion, its subscription‑based revenue model creates a recurring‑income engine increasingly augmented by artificial intelligence to improve depth and accessibility.
The stock’s recent trajectory reflects investor skepticism that has weighed on its share price. Over the past 52 weeks CoStar has lost roughly 64 % of its value, and the year‑to‑date decline exceeds 52 %. Much of this sell‑off stems from fears that AI‑powered rivals could erode its data moat, uncertainty around the Homes.com platform, and intensifying competition in online listings. These concerns have prompted a reassessment of growth prospects even as the underlying business continues to deliver solid top‑line expansion.
Despite the pressure, CoStar’s valuation hints at an overreaction. Shares trade at a forward adjusted price‑to‑earnings multiple of about 23.1 ×, below the peer‑group average. This discount suggests investors are pricing in pessimism that may not fully reflect the earnings trajectory or the upside from AI‑driven efficiency gains, offering a potential entry point for value‑oriented investors if fundamentals continue to improve.
CoStar’s second‑quarter fiscal 2026 results showed how the AI narrative is beginning to translate into financial performance. Revenue rose 18.4 % year‑over‑year to $925 million, just shy of the $929.3 million consensus but extending an impressive streak of 61 consecutive quarters of double‑digit top‑line growth. Commercial revenue contributed $481 million (up 7.8 % YoY), while residential revenue surged to $444 million, up 32.5 % YoY.
Profitability also inflected upward. Adjusted EBITDA more than doubled versus the prior year to $184 million, delivering a 20 % margin—a gain of 900 basis points. This jump came while operating‑cost growth rose only 2 % YoY, indicating scale‑driven leverage. Adjusted net income climbed 73 % to $128 million, and adjusted earnings per share rose 88.2 % to $0.32, beating the Wall Street consensus of $0.28.
Recent product launches illustrate how CoStar is putting AI into practice. In Q2 FY2026 it unveiled CoStar Rent Benchmark, a tool built from AI‑abstracted data of roughly four million lease agreements that provides predictive rental‑rate insights. Simultaneously, the Apartments.com AI assistant logged more than 500,000 sessions within weeks of release, with users spending nearly three times longer per interaction and viewing twice as many listings compared with the legacy experience.
Management’s commentary reinforces the optimistic view. CEO Andrew Florance noted that cost savings from AI applications have already begun to exceed the incremental token‑related expenses, implying a net positive contribution to profitability. This early validation addresses a common concern that AI investments could become a margin drag before delivering returns, and it lays the groundwork for scaling the AI footprint across additional product lines and geographic markets.
Looking ahead, CoStar has issued guidance that points to continued acceleration. For Q3 FY2026 it expects revenue between $935 million and $945 million (midpoint ~13 % YoY). Adjusted EBITDA is projected to range from $190 million to $210 million (midpoint margin ≈21 %). Adjusted EPS guidance stands at $0.31 to $0.34. For the full fiscal year, revenue is revised to $3.715 billion‑$3.755 billion, targeting a 15 % YoY increase at the midpoint, while the updated view reflects strategic decisions aimed at sustaining profitable, long‑term expansion.
Analyst sentiment remains broadly favorable, with a consensus rating of “Moderate Buy”. Out of 20 covering analysts, nine rate the stock a “Strong Buy”, one a “Moderate Buy”, nine recommend a “Hold”, and one issues a “Strong Sell”. The average price target of $35.74 suggests about 11 % upside from current levels, while the street‑high target of $52 implies a potential gain of roughly 61.5 %. For investors, the key takeaways are: monitor AI‑driven usage stats (e.g., Apartments.com AI sessions, Rent Benchmark adoption) as leading indicators of margin expansion; watch for revisions to labor‑cost ratios or productivity metrics in future earnings releases to validate Goldman’s productivity thesis; and keep an eye on competitive developments that could challenge CoStar’s data advantage, reassessing the thesis if the moat shows signs of weakening.