Zillow (Z) Stock: Why Investors Sold Off After Strong Earnings Beat

TLDR

• Zillow reported its first year of GAAP profitability since 2012, earning 9 cents per share on $2.58 billion in revenue for 2025
• Fourth quarter revenue jumped 18% to $654 million, beating analyst estimates of $650.4 million
• Company forecasts Q1 2026 revenue between $700-710 million, above analyst expectations of $691.1 million
• Rentals segment revenue surged 45% in Q4 to $168 million, while full-year rentals grew 39%
• Zillow stock fell 4.5% after hours despite strong results, down over 20% year-to-date in 2026

Zillow Group posted results Tuesday that would have been cause for celebration just a few years ago. The company turned an annual profit under GAAP accounting rules for the first time since 2012.

But investors weren’t impressed. The stock dropped 4.5% in after-hours trading.

The housing platform earned 9 cents per share on $2.58 billion in revenue for full-year 2025. That beat analyst estimates calling for 7 cents per share.

Zillow Group, Inc. Class C, Z

Fourth quarter results told a similar story. Revenue climbed 18% year-over-year to $654 million, topping the $650.4 million analysts expected. The company posted a $3 million profit, compared to a $52 million loss in the same quarter last year.

CEO Jeremy Wacksman said the company achieved all its full-year financial targets while gaining market share in both home sales and rentals. Still, guidance is what moves stocks.

Revenue Guidance Beats, Profit Margin Disappoints

Zillow expects first quarter revenue between $700 million and $710 million. That’s well above the $691.1 million analyst consensus.

The problem? Adjusted EBITDA guidance came in at $160 million to $175 million. Wall Street wanted $183.4 million.

For the full year, Zillow projects mid-teens revenue growth. The rentals business should grow around 30%.

Those numbers might prove conservative if the housing market improves. But management isn’t counting on it. The company said it expects challenging housing market conditions to persist in Q1.

Beyond Home Listings

Zillow isn’t just a place to browse house photos anymore. Services like agent software, home loans, and rentals now represent nearly half of total revenue.

The residential segment grew 7% in 2025. Mortgages revenue jumped 37%. Rentals led the pack with 39% growth.

In the fourth quarter alone, rentals revenue surged 45% to $168 million. Growth came from the company’s multifamily offerings.

Traffic metrics showed strength too. Average monthly unique users across Zillow’s apps and sites rose 8% to 221 million.

CFO Jeremy Hofmann told Barron’s the company feels well-positioned against potential AI disruption. He pointed to Zillow’s integrated platform and industry expertise as key advantages.

Legal challenges remain a headwind. Zillow faces an FTC complaint over its rentals partnership with Redfin, plus other lawsuits. The company expects legal expenses to hit adjusted EBITDA margins by 200 basis points in Q1.

Management said it’s confident in its legal positions and doesn’t expect material financial impact long-term. The stock has dropped over 20% in 2026 amid tech sector weakness and AI-driven selling pressure.

For Q1 2026, Zillow expects “for sale” revenue growth to match or slightly beat Q4 levels. Rentals revenue should grow around 40%.

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