Z — Zillow Group, Inc. Class C

Zillow Group Q4 and Fiscal Year 2025 Earnings Call Summary

1. Key Financial Results and Metrics

• Q4 Revenue: $654 million, up 18% year-over-year, near the top of the outlook range.
• Full Year Revenue: $2.5 billion, up 16% year-over-year, consistent with mid-teens growth outlook.
• Q4 EBITDA: $149 million, with a margin of 23%, up 260 basis points year-over-year.
• Full Year EBITDA: Grew 25% year-over-year; achieved positive GAAP net income of $23 million for the full year.
• For Sale Revenue: $475 million in Q4, up 11% year-over-year; $1.9 billion for the full year, up 9%.
• Rentals Revenue: $168 million in Q4, up 45% year-over-year; $630 million for the full year, up 39%.
• Free Cash Flow: $420 million, a 36% increase year-over-year.
• Cash and Investments: Ended 2025 with $1.3 billion.

2. Strategic Updates and Business Highlights

• Zillow continues to evolve as an integrated ecosystem for real estate, focusing on enhancing consumer experience and improving workflows for agents and loan officers.
• Significant growth in Rentals, particularly in multifamily properties, with a 63% increase in multifamily revenue.
• Launched Zillow Pro, a suite of offerings for agents, currently in beta testing, aimed at improving lead conversion and agent efficiency.
• Enhanced markets strategy is gaining traction, with 44% of connections coming from these markets, up from 21% a year ago.
• Continued investment in technology, including AI, to streamline processes and improve customer experiences.

3. Forward Guidance and Outlook

• Q1 2026 Revenue Guidance: Expected between $700 million and $710 million, implying an 18% year-over-year increase.
• 2026 Full Year Outlook: Anticipates mid-teens revenue growth, with Rentals expected to grow approximately 30%.
• EBITDA margins are expected to expand, despite headwinds from elevated legal expenses.
• Continued focus on maintaining a disciplined cost structure while investing in growth areas, particularly Rentals and Zillow Home Loans.

4. Bad News, Challenges, or Points of Concern

• Legal challenges and elevated legal expenses are expected to impact margins, with a projected 200 basis points headwind in Q1 and 100 basis points for the full year.
• The housing market remains challenging, with existing home sales flat year-over-year, which could limit growth potential.
• Competitive pressures from other real estate platforms, particularly in advertising, though Zillow maintains a strong brand preference.

5. Notable Q&A Insights

• Rentals Growth: The strategy is effectively capturing market share, with high ROI reported by property managers. Zillow sees significant potential beyond the $1 billion revenue target in Rentals.
• AI Integration: Zillow views AI as a tool to enhance its vertically-integrated experience rather than a threat, focusing on improving efficiency for agents and better service for consumers.
• Listing Distribution Standards: Zillow is actively enforcing standards to ensure broad distribution of listings, which is expected to mitigate risks from recent industry consolidations.
• Marketing Strategy: Zillow plans to increase marketing spend modestly in 2026, focusing on enhancing market awareness and engagement without a significant channel shift.

Overall, Zillow Group reported strong financial results for Q4 and the full year, driven by strategic initiatives in Rentals and For Sale segments, while navigating challenges related to legal expenses and a tough housing market. The company remains optimistic about its growth trajectory and strategic investments in technology and agent support.