Business Context and Reporting Period
Company: Zillow Group, Inc.
Filing Type: Form 10-K (Annual Report)
Reporting Period: Fiscal year ended December 31, 2025
Business Overview: Zillow operates a diversified, transaction-focused platform connecting consumers with real estate professionals, lenders, and rental providers. Key segments include Residential (agent and software offerings), Mortgages (Zillow Home Loans), Rentals, and Other. The company reported GAAP profitability for the first time in recent years, driven by growth in Rentals and For Sale revenue.
Key Financial Metrics
| Metric (in millions) | 2025 | 2024 | Change |
|---|---|---|---|
| Total Revenue | $2,583 | $2,236 | +16% |
| Gross Profit | $1,915 | $1,709 | +12% |
| Gross Margin | 74% | 76% | -200 bps |
| Net Income (Loss) | $23 | $(112) | $135 improvement |
| Adjusted EBITDA | $622 | $498 | +25% |
| Operating Cash Flow | $368 | $428 | -14% |
| Adjusted Free Cash Flow | $420 | $309 | +36% |
| Cash & Investments | $1,295 | $1,858 | -30% |
| Debt (Credit Facilities) | $364 | $145 | +151% |
Note: Debt figures represent outstanding borrowings under master repurchase agreements for Zillow Home Loans. Convertible senior notes were fully settled during 2024 and 2025.
Material Changes vs. Prior Period
- Revenue Growth: Total revenue increased 16% to $2.6 billion.
- Rentals: Revenue surged 39% to $630 million, driven by a 58% increase in multifamily revenue and higher revenue per visitor.
- Residential: Revenue grew 7% to $1.7 billion, supported by increased visits and revenue per visit.
- Mortgages: Revenue rose 37% to $199 million, reflecting a 52% increase in loan origination volume to $4.8 billion.
- Profitability: The company returned to GAAP profitability with $23 million in net income, compared to a $112 million loss in 2024. Adjusted EBITDA margin expanded to 24% from 22%.
- Cost Structure: Cost of revenue increased 27% due to higher lead acquisition costs (specifically the Redfin rentals syndication agreement) and amortization. General and administrative expenses decreased 5% due to lower headcount-related expenses and facility costs.
- Debt Settlement: The company settled all outstanding convertible senior notes (2024, 2025, and 2026 Notes) during the year, reducing interest expense by 50% to $18 million.
Guidance, Outlook, and Risks
Management Commentary & Outlook:
- Management expects Rentals revenue to increase in Q1 2026, driven by multifamily growth and property manager upgrades.
- Residential revenue is expected to increase in Q1 2026 due to seasonality.
- The company continues to invest in "Enhanced Markets" to integrate the transaction experience, with over 40% of connections now delivered through this model.
- Share repurchases continued, with $670 million spent in 2025; $711 million remains available under the $3.5 billion authorization.
Risks and Contingencies:
- Legal Proceedings: The company faces antitrust complaints from the FTC and state attorneys general regarding its February 2025 partnership with Redfin. Additionally, a securities class action regarding the former Zillow Offers business remains pending following a Ninth Circuit affirmation of class certification.
- Market Conditions: Performance remains sensitive to low housing inventory, elevated mortgage rates, and inflationary pressures.
- Regulatory: Risks related to MLS data access, NAR settlement impacts, and evolving data privacy laws (e.g., CCPA, GDPR).
- Cybersecurity: Ongoing risks related to data integrity, fraud, and third-party vendor security.
Investor Verification Checklist
- Redfin Partnership Impact: Verify the long-term ROI of the $100 million upfront payment and ongoing lead costs associated with the Redfin multifamily partnership.
- Debt Covenants: Review the financial covenants in the new $500 million Revolving Credit Facility (entered Jan 2026) and master repurchase agreements for Zillow Home Loans.
- Legal Exposure: Monitor the status of the FTC/State AG antitrust lawsuit and the securities class action appeal outcomes.
- Revenue Recognition: Assess the stability of variable consideration estimates for performance-based products (Zillow Preferred, Pay-Per-Lease) given market volatility.
- Share Repurchase Utilization: Track the pace of remaining $711 million in repurchase authorization relative to stock price volatility.