Marcus & Millichap's Q3 2025: Contradictions Emerge on Transaction Revenue, Client Sentiment, Market Demand, and Tech/Talent Investments

Date of Call: November 7, 2025

Financials Results

• Revenue: $194.0M, up 15% YOY (Q3 2024: $169M)
• EPS: $0.01 per share, includes $0.08 per share legal reserve; prior year loss of $0.14 per share
• Gross Margin: 37.6% of revenue (implied), compared to ~37.8% in the prior year (cost of services 62.4% vs 62.2%)
• Operating Margin: 0.2% of revenue (calculated: gross margin 37.6% less SG&A 37.4%), compared to -4.1% in the prior year

Guidance:

• Q4 revenue expected to increase sequentially, consistent with normal year-end seasonality
• Cost of services as a percentage of revenue should be sequentially higher as revenue builds
• SG&A expected to increase modestly on a dollar basis (after normalizing the Q3 legal reserve)
• Q4 tax expense expected in the range of $4 million to $6 million

Business Commentary:

• Revenue Growth and Market Recovery:
• Marcus & Millichap reported a 15% increase in total revenue to $194 million for Q3 2025 compared to Q3 2024.

• The growth was driven by a 25% increase in transaction volume, outpacing the market's estimated growth of 12%.

  

• Private Client Business Performance:

• The private client segment contributed 63% of brokerage revenue, generating $102 million, up from 62% and $87.5 million in the same period last year.

• This increase was due to a 24% rise in transaction volume and a 22% increase in transaction count, indicating improved activity in smaller asset sales.

• Financing Revenue Growth:

• Revenue from financing activities grew by 28% year-over-year to $26 million in Q3, driven by a 34% increase in financing transaction volume totaling $2.9 billion.

• The growth reflects improved lending conditions and the company's ability to leverage its extensive network of active lenders.

• Cost Management and Strategic Investments:

• Adjusted EBITDA for Q3 was $7 million, compared to approximately breakeven in the prior year period, despite a $4 million legal reserve.
• The company maintained tight cost controls and made strategic investments in technology, talent, and branding to support long-term growth and competitiveness.
  

  Sentiment Analysis:

  Overall Tone: Positive

  • CEO: "pleased to report that we delivered a strong quarter with total revenue increasing 15% over Q3 2024." CFO: "Total revenue... $194 million, an increase of 15%... Net income of $240,000 or $0.01 per share". Adjusted EBITDA: $6.9M vs breakeven prior year; company highlights improving transaction momentum and return to profitability despite a $4M legal reserve.

Q&A:

• Question from Mitch Germain (Citizens JMP Securities): I know you talked about some of the tougher comps in the larger transaction segment of your business, but your hiring efforts have been on more experienced producers. So maybe just talk about that dynamic in terms of the ability to get some of that larger deal activity accelerating again.
  Response: No change in strategy; tough year-over-year comp driven by far fewer >$70M deals this quarter (7 vs 21 prior year); continuing targeted recruiting and IPA expansion to capture larger-deal market share.

• Question from Mitch Germain (Citizens JMP Securities): Are you getting a sense that customers have accepted the new pricing dynamic and are beginning to feel more constructive about transacting?
  Response: Yes—buyers/sellers are increasingly aligning on price as rate expectations normalize; motivation to sell is rising due to realized rate outlook, loan maturities and other private-client drivers; market realignment is underway but not complete.

• Question from Mitch Germain (Citizens JMP Securities): What's the new magic number to get back to producing pre-disruption profitability and how do you become more scalable?
  Response: Investments in talent, retention and technology created noncash amortization drag; around the ~$200M quarterly revenue level is an inflection point where operating leverage accelerates, though margins may not immediately match historical peaks.

• Question from Blaine Heck (Wells Fargo Securities): Can you give context around the scale of banks and credit unions expanding lending and their willingness to lend today, especially on smaller transactions?
  Response: Marked improvement: more lenders quoting and quotes are more actionable, LTVs and spreads have improved, regional banks and credit unions are back in market; roughly 50% of financing now funded by banks/credit unions and it takes less time to secure loans.

• Question from Blaine Heck (Wells Fargo Securities): Compared to pre-pandemic activity, are we all the way back or how far off is the market?
  Response: Overall market activity is roughly 15%–20% below normal; performance varies by region and property type—some markets (e.g., Texas) are closer to normal, small apartments and single-tenant net lease about 20%–25% below pre-pandemic averages.

• Question from Blaine Heck (Wells Fargo Securities): Can you discuss the auction business, its growth potential and fee differences versus typical brokerage?
  Response: Auction platform is scaling via dedicated specialists and leadership; it complements brokerage by yielding multiple fee streams (brokerage fee + auction fees + buyer premium) and works well for aged/unsellable listings, with material room to grow.

• Question from Blaine Heck (Wells Fargo Securities): With respect to the litigation, was this a one-time event or could there be ongoing headwinds?
  Response: This was an outlier disclosure-related trial verdict; company believes the verdict is erroneous and will appeal, reserved an appropriate amount; not indicative of a broader pattern or systemic business issue.

Contradiction Point 1

Transaction Revenue and Market Conditions

It involves differing statements on transaction revenue growth and market conditions, which are crucial for understanding the company's financial performance and market positioning.

Have customers accepted the market's new pricing dynamic and are they open to transacting? - Mitch Germain(Citizens JMP Securities, LLC, Research Division)

2025Q3: We are beginning to see a modest increase in incremental transaction volume, particularly in multifamily, net lease, and industrial properties, due to higher demand for these property types. - Hessam Nadji(CEO)

Can you elaborate on transaction volume trends across different size segments, especially the private market segment's year-over-year revenue increase compared to the middle and large markets facing tougher comparisons? - Blaine Heck(Wells Fargo Securities, LLC, Research Division)

2025Q2: We have experienced a modest increase in transaction volume, which we believe is a result of the factors that we discussed earlier: the improved alignment in market price expectations, an increased willingness of borrowers to transact with more favorable financing terms. - Hessam Nadji(CEO)

Contradiction Point 2

Client Sentiment and Transaction Motivation

It highlights differing views on client sentiment and the motivation for transactions, which can impact the company's ability to facilitate deals and generate revenue.

Have customers accepted the new pricing dynamics and are they constructive about transacting in this environment? - Mitch Germain (Citizens JMP Securities, LLC, Research Division)

2025Q3: Yes, more motivation to sell is due to the realization that there won't be a Fed miracle, other reasons like loan maturities, and alignment in market price expectations. - Hessam Nadji(CEO)

Can you share insight into client thinking across different product types and whether there are differences in thought processes for each? - Young Ku (Wells Fargo)

2025Q1: There hasn't been much shift in the sentiment toward different property types in the first quarter. - Hessam Nadji(CEO)

Contradiction Point 3

Market Demand and Sentiment

It reflects differing views on market demand and buyer sentiment, which can influence the company's transaction activity and revenue.

Have customers accepted the new pricing dynamics, and are they positive about transacting in this environment? - Mitch Germain (Citizens JMP Securities, LLC, Research Division)

2025Q3: Yes, more motivation to sell is due to the realization that there won't be a Fed miracle, other reasons like loan maturities, and alignment in market price expectations. - Hessam Nadji(CEO)

Could you provide details on the transaction size buckets for commission revenue, including any notable changes in buyer/seller types or transaction terms since the election or start of the year? - Jason Belcher (Wells Fargo)

2024Q4: Buyer sentiment has shifted due to concerns about missing out on opportunities, and new capital formation is increasing. - Hessam Nadji(CEO)

Contradiction Point 4

Investment in Technology and Talent

It involves differing statements on the company's investment approach in technology and talent, which can impact operational efficiency and growth.

What is the key metric to restore previous profitability levels? - Mitch Germain (Citizens JMP Securities, LLC, Research Division)

2025Q3: Investments in talent, technology, and retention are amortized, impacting margins. - Hessam Nadji(CEO) & Steve Degennaro(CFO)

Can you share more about specific external growth opportunities or internal strategic initiatives? - Jason Belcher (Wells Fargo)

2024Q4: There are ongoing discussions with potential strategic fits, but valuation and terms are obstacles. The firm has seen success in recruiting experienced individuals and teams. Investments in complementary technology platforms are underway, such as Equity Multiple and Archer. - Hessam Nadji(CEO)