Zillow (ZG) Stock Posts Best Quarter in Years Then Tumbles After Hours

TLDR

• Zillow achieved first GAAP profitability since 2012 with 9 cents per share on $2.58 billion revenue in 2025
• Q4 revenue rose 18% to $654 million, surpassing $650.4 million analyst forecast
• Stock dropped 4.5% after hours as Q1 adjusted EBITDA guidance of $160-175 million missed $183.4 million estimate
• Rentals segment exploded 45% in Q4 to $168 million, driven by multifamily growth
• Company projects Q1 revenue of $700-710 million versus $691.1 million consensus

Zillow Group delivered something it hadn’t accomplished in over a decade on Tuesday. The company posted its first annual GAAP profit since 2012.

Wall Street wasn’t buying it. The stock tumbled 4.5% in after-hours trading.

The housing platform earned 9 cents per share on $2.58 billion in revenue for 2025. Analysts had penciled in 7 cents per share. Fourth quarter performance looked even better with revenue climbing 18% to $654 million against a $650.4 million estimate.

Zillow Group, Inc. Class A, ZG

The company flipped from a $52 million loss to a $3 million profit in Q4. CEO Jeremy Wacksman said Zillow hit all its full-year targets while capturing market share in home sales and rentals.

So why did investors bail? Guidance tells the story.

Profit Margins Fall Short of Expectations

Zillow expects first quarter revenue between $700 million and $710 million. That beats the $691.1 million Street forecast handily. But adjusted EBITDA guidance of $160 million to $175 million came up short of the $183.4 million analysts wanted.

That margin miss spooked investors despite the revenue beat. The company warned that challenging housing market conditions will persist through Q1.

For full-year 2026, management sees mid-teens revenue growth with rentals expanding roughly 30%. Those projections could prove conservative if housing activity picks up.

Diversification Strategy Gains Momentum

The home listings portal most consumers know represents only half the business now. Agent software, mortgages, and rentals make up the rest.

Residential revenue grew 7% in 2025. Mortgages jumped 37%. But rentals stole the show with 39% annual growth.

In Q4 alone, rentals revenue rocketed 45% to $168 million. Multifamily offerings drove most of that expansion. Traffic metrics reinforced the growth story with average monthly unique users rising 8% to 221 million.

CFO Jeremy Hofmann told Barron’s the company feels protected against AI disruption. He cited Zillow’s integrated platform and industry knowledge as competitive moats.

Legal Headwinds Persist

Zillow faces ongoing legal challenges including an FTC complaint over its Redfin rentals partnership. Management expects legal expenses to hit Q1 adjusted EBITDA margins by 200 basis points.

The company maintains confidence in its legal positions and doesn’t anticipate material long-term financial impact. Zillow stock has dropped over 20% in 2026 as tech sector volatility and AI concerns weighed on shares.

For Q1, the “for sale” segment should match or slightly exceed Q4 growth rates. Rentals revenue is projected to grow around 40%.

The company expects “for sale” revenue to track in line with or slightly above Q4 performance while rentals maintain momentum with 40% growth projected for the quarter.

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