UK's Rightmove stock tumbles 28% as AI investments expected to weigh on 2026 profit

British real estate listing company Rightmove saw its shares plummet by as much as 28% after forecasting significantly reduced operating profit growth of 3-5% in 2026, down from 9% this year, attributing the decline to accelerated investments in artificial intelligence. UBS analysts subsequently placed their price target and rating under review, anticipating a negative market reaction and substantial downgrades to future profit estimates. Despite the immediate market concern, Rightmove's CEO stated AI is central to its strategy, expecting these investments to drive a 12% annual operating profit increase by 2030.

Analysis

Rightmove's shares plummeted by as much as 28% on Friday, closing down 13%, after the company issued revised operating profit growth guidance. The firm now projects 3-5% growth for 2026, a significant reduction from the 9% forecast for the current year, attributing this deceleration to accelerated investments in artificial intelligence. This guidance triggered a new 52-week low for the stock, reflecting immediate market concern over the short-term financial outlook.

UBS analysts promptly placed Rightmove's price target and rating under review, noting the "strategic pivot poses important questions" and anticipating a negative market reaction. They project a potential 5-19% downgrade to FY2028 underlying operating profit versus consensus, highlighting the market's uncertainty regarding the short-to-medium term financial implications of the AI investment strategy. The company's AI focus includes upgrading internal systems, consumer-facing tools, and exploring new applications.

Despite the immediate profit growth slowdown, Rightmove's CEO, Johan Svanstrom, emphasized AI's centrality to their strategy, expecting these investments to drive a rebound in operating profit after 2028, targeting a 12% annual increase by 2030. This long-term vision contrasts with the market's current bearish sentiment, which is also influenced by broader fears of an "AI bubble" and recent losses in U.S. technology shares. The divergence between short-term financial impact and long-term strategic vision presents a key investment dilemma.

Key Decisions for Investors

• Investors should closely monitor Rightmove's upcoming earnings reports and operational updates for any signs of further profit growth revisions or clarity on the immediate impact of AI investments.
• Evaluate the credibility and potential return on investment of Rightmove's aggressive AI strategy, particularly its projected 12% annual operating profit growth by 2030, against the backdrop of current market skepticism and competitive landscape.
• Given UBS's expectation of significant downgrades to FY28 profit estimates, investors may need to re-evaluate their valuation models for Rightmove, factoring in both the reduced near-term growth and the uncertain long-term benefits of AI.
• Observe the broader market's reaction to AI-driven investment strategies, especially in the context of "AI bubble" concerns, as this sentiment could continue to influence Rightmove's stock performance.