A month has gone by since the last earnings report for Zillow (Z). Shares have lost about 17.8% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Zillow due for a breakout? Well, first let's take a quick look at its latest earnings report in order to get a better handle on the recent drivers for Zillow Group, Inc. before we dive into how investors and analysts have reacted as of late.
Zillow Q1 Earnings & Revenues Top Estimates on Strong For Sale Growth
Zillow Group delivered first-quarter 2026 adjusted earnings of 53 cents per share, which rose 29.3% year over year and beat the Zacks Consensus Estimate by 23.3%. The upside reflected broad-based strength across the For Sale business and continued momentum in Rentals.
Total revenues came in at $708 million, up 18.4% year over year and narrowly ahead of the consensus mark of $704.27 million. Multifamily revenues, a key Rentals growth lever, increased 57% year over year during the quarter.
Zillow Shows Broad-Based For Sale Momentum
Zillow generated For Sale revenues of $514 million in the first quarter, increasing 12.2% year over year. Residential revenues rose 8% year over year to $450 million, driven by growth across Preferred, Zillow Showcase, the company’s suite of agent software tools and its New Construction marketplace. Mortgage revenues climbed 56% year over year to $64 million, primarily due to a 96% increase in purchase loan origination volume to $1.5 billion.
Zillow Leans on Rentals Marketplace Expansion
Rentals revenues increased 42% year over year to $183 million, reflecting continued progress in scaling the platform’s marketplace reach and monetization. Management attributed the growth primarily to strength in multifamily, supported by both audience and partner adoption.
Operationally, Zillow continued to add supply. Multifamily properties advertising across Zillow reached 76,000 at quarter-end, up 38% from the end of the first quarter of 2025. Zillow also reported 2.7 million average monthly active rental listings in the quarter, reinforcing the breadth of inventory that underpins engagement and lead volume.
Zillow Navigates Higher Costs, Sustains Profitability
Zillow produced gross profit of $519 million in the quarter, up 13.1% year over year, as total revenue growth outpaced expense growth across several major lines. Gross profit as a percentage of revenues was 73.3% compared with 76.8% a year ago, reflecting a heavier cost profile tied to growth initiatives and mortgage-related activity.
Total operating expenses and the cost of revenues were $672 million, up 10.7% year over year, with the higher cost of revenues cited as a key driver. Management noted that the cost of revenues increased $50 million year over year, primarily tied to higher lead acquisition costs associated with the rentals syndication agreement with Redfin and higher mortgage loan processing costs due to increased purchase loan origination volume. Despite the cost headwinds, Adjusted EBITDA was $182 million, and the Adjusted EBITDA margin held at 26%, even as incremental legal expenses created a 160-basis-point headwind.
Online traffic on Zillow Group’s mobile applications and sites was down 3% year over year to 220 million average monthly unique users. Visits declined 3% year over year to 2.3 billion.
Zillow Strengthens Liquidity While Funding Buybacks
Cash and investments totaled $788 million at the end of the first quarter, down from $1.3 billion at the end of 2025. The decline largely reflected capital returns, as Zillow repurchased 13.5 million shares for $626 million during the quarter.
Cash generation remained solid. Net cash provided by operating activities was $200 million, up 92% year over year. Adjusted free cash flow was $127 million, increasing 44% from the year-ago period. Zillow also ended the quarter with a $500 million undrawn revolving credit facility, and management cited total liquidity of $1.3 billion. The company had approximately $1.3 billion remaining under its share repurchase authorizations at quarter-end.
Zillow Outlines Q2 Targets and Maintains 2026 Growth View
For the second quarter of 2026, Zillow expects total revenues in the range of $750 million-$765 million. Management anticipates year-over-year For Sale revenue growth similar to the first quarter, with Residential revenue growth expected in the mid-single digits and Mortgages revenues projected to grow at levels similar to the first quarter.
On profitability, Zillow expects Adjusted EBITDA of $150 million to $165 million in the second quarter, with Adjusted EBITDA expenses projected at $600 million. The outlook also includes planned total advertising spend of approximately $80 million in the second quarter, up from $64 million last year, with the year-over-year increase tied to the timing of planned product launches.
For full-year 2026, management reaffirmed expectations for mid-teens total revenue growth, Rentals revenue growth of approximately 30% and year-over-year expansion of the adjusted EBITDA margin, alongside an updated outlook for share-based compensation expenses to be down more than 15% year over year.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
The consensus estimate has shifted -42.03% due to these changes.
VGM Scores
At this time, Zillow has a great Growth Score of A, a score with the same score on the momentum front. However, the stock has a grade of C on the value side, putting it in the middle 20% for value investors.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Zillow has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Zillow Group, Inc. (Z): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).