REA Group Q3 FY25 result – yield resilience aids solid performance amid softer listings outlook

Last week, REA Group delivered a broadly in-line third quarter result, highlighting the resilience of its pricing power and disciplined cost management, even as listing volumes soften into the final quarter.

Revenue for the period rose 12 per cent year-on-year to A$374 million, essentially matching market expectations, while earnings before interest, taxes, depreciation, and amortisation (EBITDA) excluding associates increased 12 per cent to A$199 million, just shy of consensus estimates. Free cash flow was robust at A$132 million, marking a 19 per cent year-on-year increase.

Listings activity in Q3 was flat nationally, with Sydney performing ahead at +4 per cent, offsetting a -3 per cent decline in Melbourne. However, REA flagged that April listing volumes were down 11 per cent, including a sharper -16 per cent contraction in both Sydney and Melbourne, reflecting high prior-year comparables and the timing impact of Easter and the Federal Election. Management now anticipates full-year listings growth of 1-2 per cent, implying Q4 will likely mark the weakest quarter of FY25.

Despite the softer volumes (which we note have been declining for a decade or more), yield, which measures the Average Revenue Earned per Residential Property Listing, remains the standout pillar, with residential buy yield growth accelerating +15 per cent in Q3, up from +13 per cent in Q2. REA maintained guidance for FY25 yield growth of 13-15 per cent, highlighting the enduring pricing power embedded in its model. I note the company maintained its expectation for double-digit yield growth for FY25 in its first half results announcement.

For more than a decade, we have explained REA leverages its competitive advantage, charging more for its product, even as competitors offer property vendors the opportunity to list their homes for free. Even though REA charges the most, it has the most listings in the country.

Yield is the factor investors need to understand, not listing volumes (although they can provide a material boost when they rise), nor property prices.

Yield = Total Revenue from Residential Buy Listings ÷ Total Number of Residential Buy Listings.

This calculation reflects the average revenue generated per listing, influenced by factors such as:

Product mix: The proportion of listings using premium advertising products like Premiere+.

Pricing: Adjustments in the prices of listing products.

Geographical distribution: Listings in higher-value markets (e.g., Sydney and Melbourne) typically command higher yields.

Customer behaviour: Trends in agents and vendors opting for higher-tier products.

Notably, this yield momentum is a critical driver of shareholder value, with REA historically compounding yields at approximately 20 per cent Compound Annual Growth Rate (CAGR) over the past 15 years. The group continues to target positive operating jaws for the full year, reaffirming its commitment to disciplined investment and margin protection.

In Australia, core operating expenses grew nine per cent, with total group opex up 12 per cent, largely in line with expectations and reflective of strategic reinvestment in product and marketing. Management reiterated its outlook for low double-digit cost growth for FY25, though it flagged that Q4 growth will moderate given the phasing of marketing spend and lower costs in India.

Looking ahead

Looking to Q4, REA expects revenue growth to moderate to circa 11 per cent, given the deteriorating listings backdrop, while cost growth should ease into the low single digits. On balance, consensus forecasts for FY25 Australia residential revenue growth of about 15 per cent remain reasonable, though analysts may adjust forecasts slightly lower given recent trends.

Importantly, REA’s Q3 result reinforces the thesis that yield remains the dominant earnings lever, particularly with the AMAX subscription packages poised to contribute an additional 3-4 percentage points of buy yield growth in FY26. ‘AMAX’ refers to Audience Maximiser, a digital advertising solution designed to enhance property listings’ visibility beyond realestate.com.au

Importantly, a tailwind from AMAX adoption could persist into FY27 and beyond, supporting the sustainability of REA’s pricing-led growth.

India & competitive landscape

India delivered mixed results, with total revenue up 28 per cent year-on-year, but core housing revenue remained flat due to increased competition and pricing pressure. This, alongside a marginally higher depreciation and amortisation charge, has prompted low single-digit per cent downgrades to analysts’ FY25-26 earnings-per-share (EPS) estimates.

Management also addressed concerns around CoStar’s entry into the Australian market via the acquisition of Domain Holdings, reiterating confidence that REA’s dominant share of buyer leads and audience, combined with superior product investment, will protect its pricing power and customer retention. Historical precedent from mature overseas markets supports REA’s view that top-line impact is likely to be limited. Importantly, the deal is pending approval from shareholders and may face scrutiny from Australia’s Foreign Investment Review Board (FIRB) due to concerns over national data sovereignty.

I recall fears in 2013 about Google’s plan to enter Australia’s home listing market. Back then the share price was in the low teens, and that concern came to naught.

Associates contributed a A$6 million loss in Q3, reflecting continued weakness at Move in the U.S. and investments in Athena Home Loans. Guidance for associate losses has been adjusted modestly higher for FY25, though this remains immaterial to the broader earnings story.

REA’s yield engine intact, strategic pricing initiatives could be underappreciated amid concerns about CoStar

REA Group’s Q3 update validates its pricing-led growth strategy, which continues to offset volume volatility and underpins robust cash generation. While listings softness will weigh on Q4, the market may still underestimate the compounding power of REA’s yield initiatives, particularly the incremental contributions from AMAX packaging and subscription optimisation.

With the core Australian business defending its margin profile, reinvestment discipline intact, and the group positioned to benefit from structural yield drivers extending into FY27, I believe REA remains one of the top ten listed companies in Australia, when measured on the strength and profitability of a competitive advantage.