REA Group’s Q3 EBITDA Beats Expectations Amid Revenue Headwinds

The real estate tech giant REA Group (ASX: REA) delivered a mixed performance in its fiscal third quarter (Q3 2025), with revenue falling short of expectations but adjusted EBITDA surging ahead of forecasts. While foreign currency fluctuations and a soft Australian housing market clouded the top line, operational efficiency and strategic execution enabled the company to outperform on profitability. Here’s what investors need to know.

Revenue Under Pressure, but EBITDA Shines
REA reported Q3 revenue of $271 million, a 6% year-over-year increase, but this figure was dragged down by a $14 million (5%) adverse impact from currency fluctuations, primarily the strengthening Australian dollar. Management highlighted that Australian residential revenues grew due to pricing strategies and deeper market penetration, while REA India also contributed to growth. However, national buy listing volumes in Australia were flat, with Sydney listings up 4% and Melbourne down 3%, reflecting uneven regional demand.

Despite the revenue softness, adjusted segment EBITDA for REA’s parent company, News Corp’s Digital Real Estate Services division, rose 19% to $124 million, far exceeding prior-year results. This beat was driven by cost discipline, margin expansion, and the accretive impact of REA India’s operations. Management noted that adjusted EBITDA margins improved by 25% when excluding currency effects, signaling strong underlying performance.

Why the Disparity Between Revenue and EBITDA?
The disconnect stems from two key factors:
1. Currency Headwinds: Foreign exchange losses reduced revenue growth by 5%, but EBITDA was less impacted due to localized cost structures in markets like India.
2. Operational Leverage: REA’s focus on high-margin services—such as premium subscriptions and AI-driven tools—boosted profitability even as revenue faced macroeconomic headwinds.

Management’s Outlook: Resilience Amid Challenges
CEO Robert Thomson emphasized that the Digital Real Estate Services segment’s 19% EBITDA growth was a “strategic win,” reflecting cost controls and the benefits of REA’s focus on core markets. While acknowledging risks like foreign currency volatility and Australian housing affordability constraints, management pointed to record traffic on realestate.com.au and growing recurring revenue streams (e.g., subscriptions) as positives.

The sale of Foxtel earlier this year further strengthened News Corp’s balance sheet, allowing REA to prioritize investments in AI-driven analytics and global expansion without debt pressure.

Risks on the Horizon
- Currency Volatility: The Australian dollar’s strength continues to pressure international revenue.
- Housing Market Softness: High mortgage rates and affordability issues in key markets like Sydney and Melbourne could limit transaction volumes.
- Competitive Intensity: Rivals like Domain Group are launching aggressive subscription models, potentially compressing margins.

Investor Takeaway
REA’s Q3 results underscore its ability to convert top-line challenges into bottom-line wins through disciplined cost management and margin-focused growth. While revenue faces near-term headwinds, the company’s EBITDA resilience and balance sheet strength position it to capitalize on long-term trends in digital real estate services.

Conclusion
REA Group’s Q3 results are a testament to its operational agility. Despite currency and macroeconomic headwinds, the company’s focus on high-margin services and cost discipline enabled a 19% EBITDA surge, far outpacing revenue growth. With $146 million in cash and a zero net debt position, management has the flexibility to navigate near-term risks while investing in growth areas like AI and international markets.

Investors should weigh the currency exposure and housing market uncertainties against REA’s dominant market share in Australia (over 50% of residential listings) and its 25% margin expansion (excluding FX). For those with a long-term horizon, REA’s fundamentals remain solid—a 2025 guidance for $1.08 billion in annual revenue and continued EBITDA growth suggest the company is well-positioned to outperform in its core markets.

In a sector where profitability is king, REA’s Q3 results are a reminder that execution matters more than headlines.