MMI Q2 Deep Dive: Private Client Momentum, Margin Pressure, and Market Uncertainty

Real estate brokerage and services firm Marcus & Millichap (NYSE:MMI) announced better-than-expected revenue in Q2 CY2025, with sales up 8.8% year on year to $172.3 million. Its non-GAAP loss of $0.28 per share was significantly below analysts’ consensus estimates.

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StockStory’s Take

Marcus & Millichap’s second quarter results drew a negative market reaction as profitability missed Wall Street’s expectations despite stronger-than-anticipated revenue growth. Management attributed the revenue gain to accelerating activity in its private client segment, which posted double-digit growth in both revenue and transactions as clients became more realistic on pricing. CEO Hessam Nadji noted, “We’re seeing improvement in loan terms and more lenders quoting on our private client financing assignments as well.” However, ongoing margin pressure and a notable decline in large transaction revenue created headwinds, with management citing the disruptive effects of recent tariff announcements and one-time expense factors as key contributors to the weaker bottom line.

Looking forward, Marcus & Millichap expects gradual improvement in transaction activity as market sentiment stabilizes and lending conditions continue to ease. Management believes investments in technology, talent, and an expanded auction platform will drive salesforce productivity and new revenue streams. Nadji cautioned that, while certain tax and policy developments offer tailwinds, “uncertainty regarding the impact of higher tariffs on consumers and corporate profits has increased in recent weeks and could lead to a more significant slowdown in the coming months.” The company is focused on leveraging its strong balance sheet to pursue both organic and acquisition-driven growth as the broader commercial real estate market recovers.

Key Insights from Management’s Remarks

Management credited the quarter’s revenue growth to renewed private client activity, robust financing momentum, and expanded use of its auction platform, while acknowledging ongoing cost pressures and volatility in larger transactions.

• Private client segment resurgence: The private client business saw transaction growth of 12% and revenue growth of 10.3%, as more sellers adjusted expectations to meet current market valuations, leading to higher conversion of client outreach into actual deals.
• Financing platform momentum: Financing revenue increased 44% year-over-year, driven by expanded teams, improved lender engagement, and greater integration between financing and investment sales, especially in multifamily and agency debt originations.
• Decline in large deals: Revenue from transactions over $20 million fell nearly 12%, with management citing a temporary pause by institutional clients following tariff announcements and challenging year-over-year comparisons after prior strong growth in this segment.
• Auction business expansion: The auction division handled 273 transactions over the past 12 months, representing 27% of all U.S. commercial auctioned assets; management is investing in specialists and salesforce education to accelerate this new revenue stream.
• Cost structure and investment impact: Operating expenses rose due to continued investments in talent, technology, and marketing, as well as one-time factors from management reorganization. Management expects these costs to level off, with future productivity gains anticipated as market conditions improve.

Drivers of Future Performance

Marcus & Millichap’s outlook reflects cautious optimism, balancing signs of market stabilization with external risks like tariffs and fluctuating transaction volumes.

• Market stabilization and policy tailwinds: Management expects continued improvement in transaction activity as pricing uncertainty eases, aided by favorable tax policy changes like 1031 exchange preservation and bonus depreciation, which are anticipated to stimulate investor demand in commercial real estate.
• Investments in productivity and technology: The company is channeling resources into salesforce productivity, AI-driven production support, and auction platform growth, aiming to drive higher agent output and boost operating leverage as market conditions normalize.
• External risks and volatility: Management highlighted potential headwinds from new tariffs impacting consumer and corporate sentiment, as well as continued volatility in large transaction volumes. While demand for most property types remains stable, industrial and hotel segments could face additional pressure in the coming quarters.

Catalysts in Upcoming Quarters

Looking ahead, the StockStory team will closely watch (1) whether private client transaction momentum sustains as market pricing continues to adjust, (2) the pace of recovery in large institutional transactions following recent volatility, and (3) tangible productivity gains from investments in salesforce technology and auction platform expansion. Updates on acquisition opportunities and management’s ability to manage costs as revenue recovers will also be key signposts.

Marcus & Millichap currently trades at $29.26, down from $32.18 just before the earnings. Is there an opportunity in the stock?The answer lies in our full research report (it’s free).

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