18% sell-off hits REA after results amid tech sector fears

REA Group (ASX: REA) delivered a respectable first half FY26 result, but a slight miss across the board and softened full-year listing guidance triggering one of its largest intraday selloffs on record.

The stock opened 17.7% lower to $150.01, the lowest since 1 December 2023. Within four minutes, the stock bounced more than 10% from the open to $172.50.

It's currently down 7.7%, but price action remains extremely volatile amid the fear gripping software and technology stocks. 

The overnight lead in did not help, with the Nasdaq down 1.5% to the lowest since last November. Tech stocks have sold off sharply over the last three sessions after Anthropic launched several new capabilities including its agentic Cowork facility and Claude Opus 4.6, designed to analyse company data and regulatory filings. Software stocks in an iShares ETF have shed almost US$1 trillion in value over the past seven days.

1H26 key numbers 

• Revenue up 5% to $916m vs $927.7m ests (1% miss)
• EBITDA up 6% to $569m vs $570.3m ests (in-line)
• Net profit from core operations up 9% to $341m vs $344.1m ests (1% miss)
• EPS up 9% to $2.58 vs $2.64 ests (2% miss)
• Interim dividend up 13% to $1.24 per share vs $1.29 ests (4% miss)
• Buy yield growth of 14%
• National buy listings declined 6%
• Record Australian audiences of 12.7m people visited each month on average
• Announced on-market buyback of up to $200m

Strong yield growth masks listing weakness

Buy yield growth was up 14%, reflecting continued customer uptake of premium products and the platform's ability to command higher pricing. This was ahead of Morgan's estimates of 12%.

However, this was offset by a 6% decline in national buy listings, which REA attributed to strong prior-year comparables and divergent conditions across capital cities.

The company achieved record Australian audiences, with 12.7 million people visiting on average each month and a peak of 13.2 million in November. Notably, 6.4 million people used realestate.com.au exclusively, underlining the platform's competitive moat and easing the CoStar/Domain fears.

CEO McIntyre highlighted that buyer enquiries surged to a four-year high during the period, while seller leads also reached record levels.

Downgraded listing outlook raises concerns

The company’s FY26 guidance struck a rather cautious tone:

REA now expects national residential buy listings to decline by 1-3%, a downgrade from previous expectations, citing larger-than-anticipated declines in Perth and Brisbane.

January listing volumes were down 8% year-on-year, with Melbourne and Sydney each declining 1%. The company noted that while these key eastern markets are seeing improved supply, limited stock in Perth and Brisbane is causing vendors to delay listings.

REA guided to FY26 residential buy yield growth of 12-14%, though warned this could be affected by geographic mix movements if the weakness in Perth and Brisbane persists.

The company expects positive operating jaws, with Australian jaws anticipated to open modestly. 

India reset and AI acceleration

REA has simplified its India operations with a new business structure, fresh management team and clearer strategic focus. The company reaffirmed India EBITDA losses of $40-45 million for FY26.

Accelerating AI rollout was another key theme, with expanded consumer natural language search functionality, a planned Q3 beta of conversational search through its OpenAI partnership, and deployment of a customer AI engagement program.

Software sector fears shadow result

REA’s result landed amid heightened volatility across global software stocks, which have shed nearly $1 trillion in market value in recent weeks as investors reassess valuations and the durability of growth in high-multiple names. 

Today's selloff brings REA's trailing price-to-earnings down to 32x, the lowest since 2017. An argument could be made that the stock is trading relatively 'cheap' compared to historical valuations, at a time where REA continues to punch out solid year-on-year growth, alongside new capital management plans.

However, at a time where tech fears are running high, valuations can easily disconnect from historicals and fundamentals.