Zillow Group, Inc. Class A Q4 FY2025 earnings call

• Company Evolution: Celebrated 20 years since zillow.com launch, evolved into an integrated ecosystem for real estate transactions from buying, selling, renting to financing.
• Segment Focus:
  • For Sale: Focus on integrated experience across search, touring, financing, with enhanced markets driving growth. Zillow Home Loans has double-digit adoption, and products like BuyAbility and Zillow Pro are in development.
  • Rentals: Addressing fragmented rental market with comprehensive marketplace, driving growth through multifamily and renter experience improvements.
• Technology and AI: Leveraging AI in product innovation to enhance workflows, consumer experiences, and professional tools.

For Sale: In Q4 2025, For Sale revenue was $475 million, up 11% year-over-year. Residential revenue was $418 million, up 8% year-over-year, driven by agent and software offerings and new construction marketplace. Mortgages revenue in Q4 was $57 million, up 39% year-over-year. Full year 2025 For Sale revenue totaled $1.9 billion, up 9% year-over-year. Rentals: Q4 2025 Rentals revenue was $168 million, up 45% year-over-year, comprising 26% of total revenue. Full year 2025 Rentals revenue reached $630 million, up 39% year-over-year, with multifamily revenue growing 63% in Q4 and 58% for the full year.

• Q1 2026: Total revenue expected between $700 million and $710 million, EBITDA between $160 million and $175 million.
• Full Year 2026: Mid-teens revenue growth, ~30% Rentals revenue growth, EBITDA margin expansion, share-based compensation expense down over 10%.
• Long-Term: Aim for $5 billion in revenue and 45% EBITDA margins in a normalized housing market.

• Legal Matters: Confident in positions, but legal expenses could impact EBITDA margins, with approximately 200 basis points headwind to EBITDA margins expected in Q1 2026 due to legal expenses.

Q: Can you elaborate a little bit on rental trends? What are you hearing from the multifamily side as far as product market fit goes and how much more opportunity or wood to chop do you see there kind of maybe this year and beyond?

A: On Rentals, the growth is driven by solving renter and property manager pain points with a comprehensive marketplace. Multifamily advertisers are bringing more portfolios online due to high ROI, and there's significant opportunity beyond $1 billion-plus revenue target.

Q: You had a great slide on your positioning for vertically-integrated AI. Can you talk about how you see kind of a vertical AI future and Zillow's place in it?

A: Residential real estate is a unique category where AI can help build a vertical experience. Zillow's assets, industry expertise, and proprietary data make it well-positioned to leverage AI to improve workflows and consumer experiences.

Q: Just curious how you think about maybe any effects from some of this recent consolidation going on in the industry and private listing networks and all that. Does that represent any kind of risk to the business from your perspective?

A: The short answer is no. Historically, these approaches have been a very small share of listings as agents and sellers want broad exposure for homes.

Q: Just curious if that's creating any sort of adverse effects or friction on the ground for you as you go to market with ZHL or even just the enhanced market strategy overall?

A: No, it's not. The long-term strategy is based on consumer choice and building an integrated transaction, with Zillow Home Loans showing strong growth in mortgage originations.

Q: Maybe a quick follow-up on Brad's just now with all the legal challenges that are out there, maybe Jeremy, talk to us about just is there any change in approach to Zillow's business strategy that has to happen because of these challenges or anything that you feel needs to change just because of the multiple suits out there?

A: No, we don't expect any change. We're confident in our positions and approach, and legal matters don't expect to have a material impact on long-term strategy or financial position.

Q: I wanted to start with Zillow Pro, update us on where that rollout stands and any early learnings into how it's impacting lead conversion and agent adoption of your CRM tools. And second, on guidance, you've come in closer to the high end of your guidance in the past couple of quarters, which compares to more consistently delivering upside to the high end in recent years. Has your approach to guidance transitioned so you're looking to sort of get closer to the high end rather than beat the high end?

A: On Zillow Pro, it's in beta test with plans for nationwide expansion in the second half of the year. On guidance, we've been trying to be as close to the pin as possible, getting closer to the high end rather than consistently beating it.

Q: I wanted to ask about margins. So on the last earnings call, you had kind of anchored to the last couple of years, which implied roughly 200 basis points or so of opportunity in margin expansion for 2026. So I just wanted to clarify, is that still how you're thinking about margin expansion this year? And then considering the 100 basis points of headwind you're calling out from legal, does that mean that your underlying margin expansion is actually getting better than what you've seen in the past couple of years as the business scales and you get a stronger handle on the various cost buckets you've already talked about?

A: Consensus feels right for the year on EBITDA, implying around 200 basis points of margin expansion. The underlying margin profile is better, with legal costs being a drag, but overall expecting margin expansion similar to 2024 and 2025.

Q: On mortgages, years ago, when you had disclosed segment EBITDA, I think it was approaching EBITDA breakeven when the business was around about $250 million in revenue, so a bit bigger than where we're at today. Is mortgages EBITDA profitable today? And how should we think about margin here in the recovery scenario as we bridge to that mid-cycle 45% EBITDA margin bogey?

A: We don't break out mortgages EBITDA, but we see strong growth in mortgages with purchase originations accelerating, and see long-term opportunity in the mortgage landscape.

Q: I have a question on macro. So could you elaborate on the improvements you're seeing in affordability versus your expectations for housing markets to bounce along the bottom. Are you seeing anything that might be curbing some of the optimism warranted by the affordability improvement? And separately, I guess, related to the -- are any of your investment plans meaningfully sensitive to the housing market growth? Or should we expect your expense framework to be less correlated to the housing conditions?

A: Affordability is improving, but not necessarily playing out in home sales yet. Investment plans are consistent regardless of macro environment, with expense framework being consistent.

Q: First, just can you give us a sense of if you're planning to step up enforcement of Zillow listing access standards to just sort of ensure that broad distribution of listings? And then secondly, when we look at the sort of percent of leads coming from enhanced markets, it was a big sequential step-up relative to what you've been seeing this quarter. So can you just help us understand like, I think you recognize a lot of the revenue at the time of the lead. But like is there a leading indicator component of that at all? And like are underlying lead volumes also accelerating as enhanced market scale up? Anything you could say there would be great.

A: On listing access standards, there's no step-up needed as we're enforcing them now. On enhanced markets, Zillow Home Loans revenue lags, so it's not 1:1 with lead volume acceleration.

Q: Can we just touch on the opportunity to grow marketing in '26 that you guys called out? Obviously, you've got competitors still spending pretty aggressively, although traffic seems to be accruing to you rather than them. We saw Redfin advertise during the Super Bowl. And so just curious what channels you guys are looking to press and why you think this year is a particularly good year to step up on the marketing spend?

A: We'll be opportunistic in marketing, focusing on enhanced markets and Rentals. As the category leader with strong brand preference, we'll find the right places to deepen engagement and earn consumer right, with a slight increase in marketing spend this year.