Zillow Misses Q2 Earnings Estimates Despite Higher Revenues

Zillow Group (ZG) reported mixed second-quarter 2025 results, with total revenue of $655 million surpassing the Zacks Consensus Estimate, driven by robust growth in its rental segment (up 36%) and residential segment (up 6%). However, non-GAAP EPS of 40 cents missed consensus by 4 cents. Despite the EPS miss, the company achieved a GAAP net income of $2 million, reversing a prior-year loss, and recorded an adjusted EBITDA of $155 million, signaling improved profitability. Management provided a positive outlook, projecting continued revenue growth and EBITDA margin expansion for the third quarter and full-year 2025.

Analysis

Zillow Group reported mixed Q2 2025 results, characterized by a significant top-line beat counterbalanced by a narrow miss on earnings per share. Total revenue increased to $655 million, surpassing the consensus estimate of $647 million, propelled by exceptional strength in its Rentals and Mortgages segments. Rental revenues surged 36% year-over-year to $159 million, driven by a 56% expansion in multifamily revenues, while the Mortgages segment revenue grew to $48 million on the back of a 48% increase in purchase loan origination. The core Residential segment also posted a solid 6% revenue increase to $434 million. Despite this revenue outperformance, non-GAAP EPS of 40 cents missed estimates by 4 cents. However, profitability metrics showed marked improvement, with the company swinging to a GAAP net income of $2 million from a $17 million loss in the prior-year quarter, and adjusted EBITDA increasing to $155 million from $134 million. Forward-looking guidance remains robust, with management projecting Q3 revenue between $663-$673 million and continued strong growth across all segments, particularly a 40%+ rise in rental revenues. The full-year outlook for low to mid-teens revenue growth with expanding adjusted EBITDA margins and positive GAAP net income signals sustained operational momentum.

Key Decisions for Investors

• Investors should consider the strong top-line momentum and positive forward guidance, particularly the accelerating growth in the high-margin Rentals segment, as key bullish indicators that may outweigh the minor non-GAAP EPS miss.
• It is crucial to monitor the company's ability to manage operating expenses, which rose to $500 million, to ensure the guided full-year adjusted EBITDA margin expansion materializes and translates revenue growth into consistent bottom-line leverage.
• Given the outperformance in the Mortgages and Rentals segments, the results could be viewed as a successful execution of Zillow's diversified platform strategy, warranting close observation of user engagement metrics and adoption of new tech offerings like Zillow Showcase.