Executive Summary / Key Takeaways

• Marcus & Millichap (MMI) is demonstrating resilience and strategic agility, achieving its fifth consecutive quarter of year-over-year revenue growth in Q3 2025, outpacing the broader commercial real estate transaction market.
• The company's core investment thesis is anchored in its specialized market leadership, particularly within the fragmented private client segment, complemented by a growing institutional platform and robust financing capabilities.
• Strategic investments in proprietary technology, including the MyMMI platform and AI-driven analytics, are enhancing operational efficiency, client targeting, and competitive differentiation, positioning MMI for stronger gains in a recovering market.
• Despite ongoing market disruption from interest rate volatility and economic uncertainty, MMI maintains a fortress balance sheet with no debt and a balanced capital allocation strategy, returning $200 million to shareholders since 2022 while funding growth initiatives.
• A cautious but optimistic outlook for market recovery is driven by anticipated Fed rate reductions, compelling asset valuations against replacement costs, and a significant pullback in new construction, expected to drive operating leverage and sustained growth in 2026 and 2027.

A Specialized Leader in a Shifting Landscape

Marcus & Millichap, Inc. (MMI), founded in 1971 and publicly listed in 2013, has carved out a distinct and enduring position as a leading real estate services firm specializing in commercial real estate investment sales, financing, research, and advisory services across over 80 offices in the United States and Canada. For over 15 years, MMI has consistently ranked as the top commercial real estate investment broker by transaction count, a testament to its deep specialization and client-centric approach. This foundational strength is particularly evident in its dominance of the highly fragmented private client market, encompassing transactions from $1 million to less than $10 million.

In the broader competitive arena, MMI operates alongside global real estate giants such as CBRE Group, Inc. (CBRE), Jones Lang LaSalle Incorporated (JLL), Cushman & Wakefield plc (CWK), and Colliers International Group Inc. (CIGI). While these larger competitors leverage extensive global scale and diversified service lines, MMI differentiates itself through a specialized, relationship-driven model and localized expertise. This focus allows MMI to achieve greater efficiency in deal execution for its target clientele, particularly in mid-market transactions. However, MMI's smaller scale compared to its global counterparts can present vulnerabilities, potentially leading to higher customer acquisition costs and slower adaptation to rapid market shifts.

MMI's strategic response to these competitive dynamics and its long-term growth ambitions are significantly underpinned by its technological differentiation and continuous innovation. The company has made substantial commitments to proprietary technology, including its MyMMI platform, which serves as an automated matching system for buyers and sellers, enhancing efficiency for both clients and its sales force. This platform, alongside an advanced CRM system and internal automation tools, aims to improve speed and output across brokerage operations. MMI's R&D initiatives extend to next-generation analytics, back-office production, and the application of artificial intelligence (AI) in client targeting. A notable investment in this area is its partnership with Archer, an AI-oriented startup specializing in data consolidation and modeling of net operating incomes, property profiles, and submarket analyses. This collaboration is designed to significantly enhance the efficiency of MMI's underwriting, broker opinions of value, and client probability assessments. These technological advancements are deemed essential to MMI's competitiveness, aiming to lower costs over time while improving service delivery and positioning its salesforce to capture stronger gains as market conditions improve.

The commercial real estate market has been in a prolonged state of disruption since March 2022, primarily due to the Federal Reserve's aggressive interest rate hikes. This environment has been characterized by high interest rate volatility, tightened underwriting standards, and a persistent bid-ask spread, leading to longer marketing and closing timelines, frequent price adjustments, and elevated transaction delays. Despite these headwinds, MMI's client-centric and relationship-driven culture has been a critical differentiator, enabling it to maintain close ties with clients and provide guidance during periods of uncertainty.

Financial Performance and Operational Resilience

MMI's recent financial performance reflects a company demonstrating resilience and strategic execution amidst a challenging market. In the third quarter of 2025, total revenue increased by 15.1% year-over-year to $193.9 million, marking the fifth consecutive quarter of revenue growth. This performance outpaced the broader market, with MMI's transaction growth of 25% significantly exceeding the estimated market growth of 12% for sales of $2.5 million-plus assets.

The company's core real estate brokerage commissions segment, which constitutes 83.6% of total revenue, grew by 14.2% year-over-year to $162.2 million in Q3 2025. This growth was primarily driven by a 19.2% increase in the total number of transactions, despite a 2% decline in total sales volume. The average commission rate also saw a notable increase of nearly 30 basis points to 1.94%, attributed to a favorable shift in revenue mix towards the Private Client Market, which generally commands higher commissions. The Private Client Market itself saw revenue increase by 16.9%, while the Middle Market and Larger Transaction Market combined grew by 6.5%. However, larger deals (over $20 million) experienced a 12% decline in revenue and a 13% drop in transaction count, largely due to exceptionally strong comparative growth in this segment during the prior year.

MMI's financing business, including Marcus & Millichap Capital Corporation (MMCC), posted strong growth, with revenue up 27.7% to $26.3 million in Q3 2025. This was fueled by a 34.4% increase in total financing volume and a 28% rise in transaction count, reflecting improved lending conditions and MMCC's extensive network of nearly 350 separate lenders. The average financing commission rate saw a nominal decrease of 4 basis points, primarily due to an increase in larger deals, which typically have lower commission rates.

Profitability, while showing improvement, continues to be impacted by strategic investments. Adjusted EBITDA for Q3 2025 was $6.9 million, a significant improvement from approximately breakeven in the prior year period. The company reported a net income of $240,000, or $0.01 per diluted share, compared to a net loss of $5.4 million, or $0.14 per share, in Q3 2024. This quarter's results included a $4 million legal reserve, which, if excluded, would have resulted in modestly lower SG&A year-over-year, underscoring the company's focus on cost management alongside strategic investments. The cost of services as a percentage of total revenue slightly increased to 62.4% in Q3 2025, primarily due to producers achieving higher commission thresholds as revenue grew.

For the trailing twelve months (TTM) ended December 31, 2024, MMI reported annual revenue of $696.06 million and a net loss of $12.36 million. The TTM gross profit margin stood at 37.74%, operating profit margin at -2.99%, and EBITDA margin at 0.81%. While these margins reflect the impact of the market disruption and ongoing investments, the sequential improvement in Q3 2025 profitability signals a positive trajectory.

Strategic Initiatives and Growth Drivers

MMI's strategic initiatives are designed to capitalize on market recovery and expand its competitive footprint. A key focus is on talent strategy, encompassing improved organic hiring and the attraction of experienced professionals and teams. The company has seen success in integrating seasoned talent, which helps offset the elevated turnover of trainees experienced during the market disruption.

The Institutional Property Advisors (IPA) division is central to MMI's expansion into larger transactions. Recent executive appointments, including Andrew Laehy as Head of IPA Multifamily and Dags Chen as Head of IPA Research, aim to deepen the institutional client base and further expand this platform. MMI believes this integration is crucial for bridging capital migration from private owners to the institutional market.

The financing platform, MMCC, continues to scale, leveraging its extensive lender network and the integration of sales and financing teams. The loan sales and advisory division, Mission Capital, is also experiencing a significant uptick in activity, posting solid revenue growth as more lenders bring performing and nonperforming loans to the market.

MMI's auction division, launched in 2022, has gained considerable traction, closing 191 sales year-to-date in 2025 and capturing an estimated 25% share of total commercial property auctions in the U.S. This division serves as a valuable alternative marketing channel, offering prequalified bidders and generating multiple fee opportunities for the firm.

In May 2025, MMI implemented a broad-based management reorganization to streamline decision-making and accelerate growth initiatives. This included the appointment of an enterprise-wide Chief Operating Officer and the creation of Chief Growth Officer and Chief Client Officer positions, all geared towards enhancing strategic partnerships, salesforce development, and client service delivery.

Outlook, Risks, and Capital Allocation

MMI maintains a cautiously optimistic outlook for a sustained market recovery. Management anticipates continued sequential revenue growth in Q4 2025, consistent with normal year-end seasonality, though acknowledging a tough comparison to Q4 2024, which benefited from an exceptional surge in activity. The company expects cost of services as a percentage of revenue to be sequentially higher than Q3 2025, while SG&A, normalized for the Q3 legal reserve, is projected to increase modestly on a dollar basis. Tax expense for Q4 2025 is guided to be in the range of $4 million to $6 million.

Several factors underpin this optimism: the expectation of continued interest rate reductions by the Federal Reserve, making real estate transactions more attractive; price adjustments over the past two years that have made many assets compelling on a replacement cost basis; and a significant pullback in new construction, particularly in apartments and industrial, which is expected to lead to stronger occupancies and rent growth in 2026 and 2027.

Despite the positive outlook, MMI faces several risks. The ongoing volatility in interest rates remains a significant challenge, impacting salesforce productivity and transaction timelines. Economic uncertainty, including the impact of tariffs and inflation, continues to influence investor sentiment. A notable risk is the recent jury verdict against a subsidiary in October 2025, totaling $34.08 million in actual and punitive damages. MMI has accrued $4 million for actual damages and intends to aggressively appeal the verdict, with an estimated range of possible loss from $0 to approximately $34.10 million. Other risks include talent turnover and the persistent bid-ask spread in acquisition opportunities.

MMI's liquidity and capital resources remain robust. As of September 30, 2025, the company reported $382 million in cash, cash equivalents, and marketable securities, with no debt. This strong balance sheet supports a balanced capital allocation strategy.

Since August 2022, MMI has repurchased over 2.4 million shares for $77 million and has returned a combined $200 million to shareholders through dividends and share repurchases over the past three years. The company also maintains a $10 million revolving credit facility, with no outstanding amounts as of Q3 2025, and was in compliance with all covenants. This financial strength allows MMI to pursue strategic acquisitions and investments in technology and talent without compromising shareholder returns.

Conclusion

Marcus & Millichap stands at a pivotal juncture, demonstrating impressive resilience and strategic foresight in a commercial real estate market undergoing a significant reset. The company's consistent revenue growth, particularly in its core private client and expanding financing segments, underscores the effectiveness of its specialized, relationship-driven business model. MMI's proactive investments in proprietary technology, including its MyMMI platform and AI-driven analytics, are not merely operational enhancements but fundamental differentiators that strengthen its competitive moat against larger, more diversified rivals. These technological advancements are crucial for driving efficiency, improving client targeting, and ultimately enhancing profitability as the market stabilizes.

While challenges persist, notably from interest rate volatility and a significant legal judgment, MMI's strong balance sheet, disciplined capital allocation, and clear strategic roadmap position it favorably for long-term growth. The anticipated easing of monetary policy, coupled with compelling asset valuations and reduced new construction, sets the stage for MMI to leverage its specialized expertise and technological leadership. As the commercial real estate cycle gains further momentum, MMI's ability to convert its strategic investments into operating leverage and expand its market share, particularly in the growing retail and industrial sectors, will be key to maximizing shareholder value.