Real estate technology company The Real Brokerage (NASDAQ: REAX) reported Q2 CY2025 results topping the market’s revenue expectations, with sales up 58.7% year on year to $540.7 million. Its GAAP profit of $0.01 per share was in line with analysts’ consensus estimates.

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StockStory’s Take

The Real Brokerage’s second quarter was marked by strong top-line growth, but the market’s negative reaction reflected concerns about underlying profitability trends and industry headwinds. Management pointed to a 62% increase in closed transactions and robust agent productivity as key drivers, with CEO Tamir Poleg highlighting, “Transactions per average agent increased by 7% year-over-year, significantly outpacing industry averages.” However, the effects of shifting agent mix and the offboarding of nonproductive agents impacted the quarter, with management acknowledging that more revenue is being generated by top-producing agents, which affects margins.

Looking ahead, management is leaning on continued expansion of its technology platform, scaling of ancillary services, and further automation to drive growth and efficiency. The company sees opportunity in rolling out new AI-driven features, including the integration of Flyhomes technology and the consumer-focused Leo for Clients. CFO Ravi Jani cautioned that, “We anticipate revenue in the third quarter to decline modestly from second quarter levels,” due to seasonality and a higher mix of agents reaching commission caps, which will also pressure gross margins. Real Brokerage’s focus remains on long-term investments in automation and ancillary services to offset near-term margin pressures.

Key Insights from Management’s Remarks

Management attributed quarterly growth to strong agent productivity, expansion of ancillary services, and operational automation, while noting that margin pressures reflect a higher proportion of revenue from top producers.

• Agent productivity outperformance: Management emphasized that the 7% year-over-year increase in transactions per agent was driven by both attracting high-quality teams and improved agent support tools. The company noted that the offboarding of nonproductive agents helped lift overall productivity metrics.

• Ancillary services scaling: The company’s ancillary lines, including One Real Mortgage and Real Wallet, grew by 50% year-over-year. One Real Mortgage led with 80% growth, and management attributed this to the expansion of the loan officer network and targeted client incentives, rather than agent-focused promotions.

• Automation and AI integration: Nearly 50% of transaction closings and payment processing are now automated, reducing the need for manual intervention. The rollout of Leo CoPilot, an AI assistant, decreased human support calls by 28%, freeing up staff for more complex issues and improving agent experience.

• Strategic acquisition: The acquisition of Flyhomes’ AI-powered home search platform is seen as a key step in advancing the company’s consumer-facing technology. This move brings experienced engineers and deepens the integration of artificial intelligence into the company’s offerings.

• Revenue share model changes: Recent adjustments to the revenue share model allow productive agents and network builders to unlock higher tiers more rapidly. Management clarified there would be no impact on the company’s financials, as the model redistributes existing payouts rather than increasing total expense.

Drivers of Future Performance

Management expects margin pressures to persist as more revenue shifts to top-producing agents, but is betting on automation and ancillary services to drive future growth and profitability.

• Gross margin mix shift: CFO Ravi Jani noted that as more agents reach their annual commission caps, a greater share of revenue is subject to flat fees, compressing gross margins. This trend is expected to continue in the near term, with margin relief tied to scaling higher-margin ancillary services.

• Ancillary services expansion: Management is prioritizing the rollout of state-based title joint ventures and U.S. lending products through Real Wallet. CEO Tamir Poleg explained that meaningful adoption and profitability in these areas will depend on product enhancements and AI-driven integration, rather than traditional cross-selling efforts.

• Ongoing technology investment: The creation of an in-house AI automation team and the integration of Flyhomes’ technology are intended to further streamline operations and improve the agent and client experience. Management believes these investments are necessary to maintain a competitive edge, but acknowledges they will drive operating expenses higher in the short term.

Catalysts in Upcoming Quarters

Looking forward, the StockStory team will watch (1) the pace of adoption for Real Wallet’s U.S. lending product and the rollout of state-based title joint ventures, (2) the impact of AI-driven automation on transaction efficiency and support, and (3) continued improvements in agent productivity and retention as nonproductive agents are offboarded. Execution on integrating Flyhomes’ technology and expanding ancillary services will be key markers for sustainable margin expansion.

The Real Brokerage currently trades at $4.04, down from $4.11 just before the earnings. At this price, is it a buy or sell? Find out in our full research report (it’s free).

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