REA Group Ltd (ASX: REA) shares are experiencing a significant downturn on Friday morning, with the ASX 200 stock plunging 18% to $150.01 at the time of writing. This sharp decline follows the release of the realestate.com.au operator’s half-year results before the market opened, which fell short of market expectations.
REA Group’s Financial Performance
For the six months ending December 31, REA Group reported a 5% increase in revenue, reaching $916 million. This growth was driven by an 8% increase in Australian revenue, although it was partially offset by a 31% decline in international revenue. On a like-for-like basis, which excludes acquisitions and divestments, the company saw an 8% revenue increase compared to the previous corresponding period.
Australian Residential revenue rose by 7% to $658 million, attributed to a 14% increase in yield despite a 6% decline in national listings. Other segments also saw growth, with Commercial and New Homes revenue increasing by 10% to $121 million, Financial Services revenue up 11% to $58 million, and other revenue rising 8% to $35 million.
However, operating expenses also climbed by 3% to $347 million, resulting in a 9% increase in net profit after tax to $341 million. Earnings per share also rose by 9% to $2.58, yet these figures did not meet market expectations, contributing to the stock’s decline.
Market Domination and User Engagement
REA Group’s first-half performance was bolstered by its strong presence in the Australian market. The company reported an average of 12.7 million monthly visitors, peaking at 13.2 million in November. Of these, approximately 6.4 million users exclusively accessed realestate.com.au. The platform also recorded 146.1 million average monthly visits, significantly outpacing its nearest competitor by 105.9 million visits.
Key metrics include a 20% increase in average monthly buyer enquiries, a 38% rise in seller leads, and a 10% uptick in active members.
CEO Cameron McIntyre commented on the results, stating, “REA Group’s first half performance was underpinned by strong double-digit yield growth in our core residential business. Our focus on richer, more immersive consumer experiences supported record audience and strong engagement.”
Looking Ahead: Strategic Focus and Challenges
Despite the disappointing market reaction, REA Group remains optimistic about future growth. The company anticipates 12% to 14% residential Buy yield growth in FY 2026, although this may be influenced by geographical mix changes over the year. The company also expects positive operating jaws, with costs growing at a slower pace than revenue, particularly in the Australian market.
McIntyre emphasized the company’s commitment to innovation, stating, “Into the second half we will continue to drive innovation with new product features and capabilities to enhance the value and experiences we deliver.”
Implications and Market Reactions
The sharp decline in REA Group’s share price reflects investor disappointment with the company’s financial performance and its failure to meet market expectations. This development highlights the challenges faced by companies in maintaining growth amidst fluctuating international revenues and rising operational costs.
Market analysts suggest that while REA Group’s strong market position in Australia provides a solid foundation, the company must address its international revenue decline and manage operational expenses to regain investor confidence. The coming months will be crucial as the company implements its strategic initiatives and navigates the complexities of the property market.
As REA Group continues to focus on innovation and market expansion, stakeholders will be closely monitoring its performance and strategic decisions, particularly in light of the evolving economic landscape and consumer behavior trends.
