Online real estate marketplace Zillow (NASDAQ:ZG) announced better-than-expected revenue in Q3 CY2025, with sales up 16.4% year on year to $676 million. Guidance for next quarter’s revenue was better than expected at $650 million at the midpoint, 0.9% above analysts’ estimates. Its non-GAAP profit of $0.44 per share was 3.7% above analysts’ consensus estimates.
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Zillow (ZG) Q3 CY2025 Highlights:
- Revenue: $676 million vs analyst estimates of $670.5 million (16.4% year-on-year growth, 0.8% beat)
- Adjusted EPS: $0.44 vs analyst estimates of $0.42 (3.7% beat)
- Adjusted EBITDA: $165 million vs analyst estimates of $158.4 million (24.4% margin, 4.2% beat)
- Revenue Guidance for Q4 CY2025 is $650 million at the midpoint, above analyst estimates of $643.9 million
- EBITDA guidance for Q4 CY2025 is $150 million at the midpoint, in line with analyst expectations
- Operating Margin: -0.4%, up from -7.7% in the same quarter last year
- Market Capitalization: $17.96 billion
StockStory’s Take
Zillow’s third quarter results were shaped by robust growth in both its For Sale and Rentals segments, which management linked to continued digital product innovation and strong customer adoption. CEO Jeremy Wacksman cited the success of features like virtual staging in Zillow Showcase and the expansion of the Rentals marketplace, particularly multifamily listings, as key contributors to revenue growth. Management also emphasized that disciplined cost management and effective integration of software tools for agents and property managers helped drive margin expansion and positive net income.
Looking ahead, Zillow’s guidance is underpinned by accelerating momentum in its Rentals segment and the rollout of new agent-focused products such as Zillow Pro. Management believes that continued investment in AI-powered experiences and the expansion of partnerships like those with Redfin and Realtor.com will further differentiate Zillow’s platform. CFO Jeremy Hofmann outlined plans for modest fixed cost growth and targeted investments in variable costs, signaling a focus on scaling revenue while maintaining profitability.
Key Insights from Management’s Remarks
Management attributed the quarter’s performance to product enhancements, stronger Rentals performance, and increased adoption of integrated transaction tools across its ecosystem.
- Rentals segment acceleration: Rentals revenue grew sharply, powered by multifamily property adoption and expanded syndication partnerships, resulting in increased wallet share with property managers.
- AI-driven product launches: The debut of AI-powered virtual staging for Showcase listings and the integration of Zillow’s app with ChatGPT reflect ongoing efforts to enhance the digital home search experience and drive consumer engagement.
- Integrated agent and mortgage tools: Uptake of tools like Follow Up Boss and the BuyAbility calculator improved transaction rates by streamlining collaboration between buyers, agents, and loan officers.
- Enhanced market expansion: The proportion of Zillow’s connections routed through enhanced markets rose to 34%, supporting management’s longer-term strategy of deeper transaction integration and higher monetization.
- Cost discipline and margin gains: Fixed cost growth remained modest while operating leverage and increased adoption of premium software offerings helped expand EBITDA margins and generate positive GAAP net income.
Drivers of Future Performance
Management expects AI-powered features, continued Rentals momentum, and agent-focused product rollouts to drive growth while navigating a challenging housing market.
- AI and platform integration: Zillow is investing in AI to personalize and streamline the home search and transaction process, aiming to differentiate its offerings and improve user engagement despite macro housing headwinds.
- Rentals as a growth engine: Management anticipates ongoing acceleration in Rentals revenue, driven by further multifamily property growth and deeper partnerships with major listing platforms, positioning Rentals as a substantial contributor to both revenue and profit expansion.
- Agent-centric product expansion: The upcoming rollout of Zillow Pro is expected to broaden the company’s addressable market among agents, though management cautions that revenue impact will be modest in the near term while initial adoption and learning are prioritized.
Catalysts in Upcoming Quarters
In the coming quarters, our team will monitor (1) the pace of Rentals inventory and revenue growth, especially in multifamily, (2) early adoption and feedback from agents using Zillow Pro, and (3) the impact of AI-driven product features on user engagement and transaction rates. Additionally, we will assess how regulatory developments and syndication partnerships influence Zillow’s ability to expand its listings ecosystem.
Zillow currently trades at $71.53, up from $68.79 just before the earnings. Is there an opportunity in the stock?Find out in our full research report (it’s free for active Edge members).
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