Zillow Group, Inc. (ZG) Earnings & Analysis

Latest quarter

Zillow reported Q2 revenue of $772.0 million, above the $759.5 million consensus. Adjusted EPS was $0.52, also above the $0.44 consensus. Diluted EPS was −$0.02, compared with $0.01 a year earlier.

The company attributed revenue growth to mortgages, residential and rentals. Its filing said mortgages revenue rose 75% to $84 million as loan origination volume increased. Residential revenue grew 7% to $465 million, helped by higher revenue per visit. Rentals revenue rose 31% to $209 million as revenue per visitor and the number of visitors increased.

Zillow’s gross margin declined to 72.8% from 74.7% a year earlier; its filing attributed the decline primarily to increased lead acquisition costs associated with its rentals syndication agreement. Operating margin was −1.30%, compared with −1.68% a year earlier. Free cash flow was −$34.0 million, versus $43.0 million in Q2 FY2025.

The filing also said Zillow began excluding certain litigation costs from adjusted EBITDA in Q2 and revised its Q1 measure accordingly.

Adjusted EPS is the figure the consensus estimates, not the GAAP EPS above.

What management said on the call

CEO Jeremy Wacksman said the integrated experience with preferred agent partners accounted for 61% of Zillow’s connections. COO and CFO Jeremy Hofmann said Zillow was accelerating the shift to preferred because the model generated more revenue per connection than legacy advertising. He said the comparison includes agent products and loans chosen by consumers, alongside partner revenue.

Hofmann said the transition shifts some revenue from residential to mortgages and changes when Zillow recognizes it: home-loan revenue generally arrives 6 to 12 months after a connection. He also said preferred revenue follows seasonal connection volumes more closely than the legacy model. For Q3, he expected a timing headwind to for-sale revenue growth and flat residential revenue year over year.

Asked about the margin trade-off, Hofmann said Zillow had invested in Home Loans earlier in the rollout. He said, “Across fixed and variable costs, our per mortgage unit economics are positive today.” He added that Zillow saw a path for dollars earned per loan to reach the level of preferred-agent referral fees.

On rental demand, Wacksman said property managers were upgrading their packages and that Zillow had 2.8 million average monthly active rental listings in Q2. Asked about competition from Google’s local service advertising product, he said Zillow had seen no impact on its traffic or metrics and noted that “80% of our traffic comes directly to our apps and sites.”

Hofmann said the restructuring eliminated approximately 7% of employees and was intended to support efficiency and cost discipline. In response to an analyst, he said he did not expect the changes to affect Zillow’s growth investments. Wacksman also announced Hofmann’s expanded role as chief operating officer and chief financial officer.

Guidance

For Q3, Hofmann said Zillow now expects purchase mortgage originations across the industry to decline year over year, rather than remain flat. For the rest of 2026 and the full year, he said Zillow assumes the market will be down low to mid single digits, also changed from a flat assumption.