Zillow Group Q3 Earnings Call Highlights

Key Points

• Zillow’s Q3 revenue rose 7% year over year to $724 million, with adjusted EBITDA of $182 million and a 25% margin. Rentals revenue grew 26% and mortgage revenue 32%, offsetting a 4% decline in residential revenue.
• Higher mortgage rates are weighing on the outlook: Zillow expects Q4 revenue of $635 million to $665 million and anticipates industry purchase mortgage originations will fall 10% to 15% year over year. Management expects continued macroeconomic pressure into 2027.
• Zillow is shifting buyer connections to its Preferred model, which generates 35% more revenue per connection but will create near-term revenue headwinds; the company expects the transition to be complete in the first half of 2027. Its AI Mode has attracted more than 2.5 million users since March.

Zillow Group NASDAQ: Z reported 7% year-over-year revenue growth in the third quarter of 2026, as strength in rentals and mortgages offset weaker residential revenue in a housing market pressured by rising borrowing costs.

Revenue reached $724 million, while adjusted earnings before interest, taxes, depreciation and amortization, or EBITDA, were $182 million. The adjusted EBITDA margin expanded 70 basis points from a year earlier to 25%, according to the company.

CEO Jeremy Wacksman said mortgage rates rose nearly 100 basis points from the beginning of the third quarter to early October, moving from the mid-6% range to the mid-7% range. Zillow estimated that industry purchase mortgage origination volume fell 4% year over year in the third quarter and expects a steeper decline in the fourth.

Rentals growth offsets residential weakness

Rentals revenue rose 26% to $220 million in the third quarter, driven by a 35% increase in multifamily revenue. A record 81,000 multifamily properties advertised on Zillow at quarter-end, up 17% year over year, as property managers added or upgraded advertising packages, the company said.

Wacksman said rentals accounted for 30% of Zillow’s total revenue, compared with 21% two years earlier. He said the business has a path to more than $1 billion in annual revenue, with further growth opportunities in multifamily and smaller rental properties.

For-sale revenue was flat at $489 million. Within that category, residential revenue fell 4% to $419 million, while mortgages revenue rose 32% to $70 million. Zillow Home Loans purchase origination volume increased 55% year over year, although mortgage revenue came in below the company’s outlook as the rate increase reduced conversion, COO and CFO Jeremy Hofmann said.

Zillow reported a net loss of $158 million and adjusted net income of $124 million. Diluted adjusted net income per share rose to 55 cents from 44 cents a year earlier. Adjusted EBITDA expenses increased 6% to $542 million, below the company’s expected range, which Hofmann attributed to restructuring and cost management.

Fourth-quarter outlook reflects rate shock

Zillow forecast fourth-quarter revenue of $635 million to $665 million, roughly flat year over year, and adjusted EBITDA of $100 million to $135 million. The outlook assumes industry purchase mortgage origination volume will decline 10% to 15% year over year, compared with the company’s prior expectation for a mid-single-digit decline.

The company expects fourth-quarter for-sale and residential revenue each to decline roughly 9% to 15% year over year. Mortgage revenue is expected to fall by low single digits at the midpoint of the outlook, while rentals revenue growth is expected to be similar to the third quarter’s 26% rate.

Hofmann said rate volatility particularly hurt Zillow’s pipeline of customers seeking financing before connecting with an agent. Responding to an analyst’s question about the mortgage outlook, he said nothing had changed structurally in the business and that it would take time to rebuild the pipeline.

For full-year 2026, Zillow projected revenue growth of approximately 10% to 11%, including about 30% growth in rentals, and adjusted EBITDA of $655 million to $690 million. Management said it was planning for continued macroeconomic pressure into 2027 rather than assuming housing conditions would improve.

Preferred transition and AI expansion

Zillow is moving more buyer connections to Zillow Preferred, under which agent partners pay the company when a transaction closes. About two-thirds of buyer connections went to Preferred partners in the integrated experience during the third quarter, up from about one-third a year earlier. Zillow expects that share to exceed 75% by year-end and reach 100% in the first half of 2027.

The transition creates a near-term revenue headwind because of differences in timing and seasonality. For the fourth quarter, Zillow expects a 400- to 500-basis-point headwind to for-sale revenue growth and a 900- to 1,000-basis-point headwind to residential revenue growth. Hofmann said the rollout remains on track and that the headwinds should begin to dissipate in the second half of 2027.

Wacksman said Preferred connections generate 35% more revenue per connection than the legacy advertising model. He also said Zillow Home Loans adoption in the markets where the lender and Preferred have been integrated the longest is roughly 20%, though management did not forecast a long-term adoption rate.

Zillow’s AI Mode is now available to all signed-in users. More than 2.5 million people used it between March and September, asking 8.5 million questions, Wacksman said. He added that users of the feature spend nearly three times as long on Zillow and request more tours than nonusers.

Wacksman said Zillow had not seen a meaningful shift in traffic from changing search and AI channels. According to Comscore data cited by the company, Zillow’s unique visitors rose 1% year over year in the third quarter while traffic to the real estate category declined 10%. Approximately 80% of Zillow’s traffic comes directly to its platform, he said.

About Zillow Group (NASDAQ:Z)

Zillow Group, Inc NASDAQ: Z operates a digital real estate marketplace in the United States. Its platforms help consumers search for homes, research neighborhoods and market conditions, connect with real estate professionals, and manage various steps in the home-buying, selling, renting and financing processes.

The company's portfolio includes Zillow, Trulia, StreetEasy and HotPads, which provide property listings and real estate information. Zillow Group also offers services for real estate professionals, including marketing, lead generation, transaction management and showing coordination through products such as Zillow Premier Agent and ShowingTime+.

Through Zillow Home Loans and other affiliated services, the company provides or facilitates mortgage and closing-related solutions.

This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to contact@marketbeat.com.