Zillow (ZG) Q3 2026 Earnings Call Transcript

Zillow Group reported Q3 2026 revenue of $724 million, up 7% year over year, and adjusted EBITDA of $182 million, with a 25% margin that expanded 70 basis points; adjusted diluted EPS was $0.55 versus $0.44 a year earlier. Rentals revenue rose 26% to $220 million and mortgage revenue increased 32%, while residential revenue fell 4% and net loss was $158 million, including a $165 million securities class action settlement charge. Management expects Q4 revenue of $635 million to $665 million and industry purchase mortgage origination volumes to decline 10% to 15%, citing mortgage-rate volatility and weaker housing conditions; full-year revenue growth is forecast at 10% to 11%. Zillow repurchased $20 million of shares in Q3 and $846 million year to date, with $1.1 billion remaining under its authorization.

Analysis

Zillow Group (Z) is becoming less exposed to transaction volume, but the transition does not remove the near-term housing beta: it changes where and when that exposure appears. The Preferred model’s higher revenue per connection is attractive only if closed transactions and attached services hold up; a rate shock can delay closings and defer revenue recognition even as connections migrate. Thus Q4 weakness may be partly timing, but the key test is whether revenue per connection and conversion improve after the rollout—not simply whether adoption reaches 100%.

Rentals is a genuine counterweight, and multifamily growth gives Zillow a different demand pool from home purchases. But management’s ROI claims and $1 billion revenue path are not yet proof of durable pricing power; property additions and revenue per property need to sustain growth as rental advertising budgets compete with Apartments.com and other channels. AI engagement is similarly promising but unproven as monetization: longer sessions do not establish incremental closed transactions.

Near term (days to 1 quarter), weak housing guidance and mortgage-funnel rebuilding risk dominate; the settlement charge is non-operating noise, not evidence of deteriorating core economics. Over 1–3 quarters, watch Preferred cohort conversion, Zillow Home Loans adoption, revenue per connection, and Rentals revenue per property. Over 6–18 months, successful integration could lift transaction participation and diversify earnings, while a prolonged affordability shock could overwhelm that operating leverage. The contrarian angle is that the market may over-penalize the transition’s reported revenue headwind—but management’s unquantified mature-market upside also invites over-crediting. No clean read-through to Alphabet (GOOG): the call reports no meaningful impact from Google’s real-estate ad product.

Key Decisions for Investors

• Keep Z neutral rather than chase growth: the near-term guide leaves little evidence that macro pressure has bottomed, while the long-term Preferred upside is not yet sufficiently quantified. Reassess after Q4 results and early-2027 conversion data.
• Conditional long Z only if subsequent results show improving revenue per connection and conversion, Zillow Home Loans adoption expanding beyond mature markets, and Rentals growth holding near current levels. This offers upside from monetization normalization; the principal downside is continued rate-driven transaction weakness and delayed closings. Falsify the thesis if residential performance remains weak after adjusting for the Preferred transition or Rentals growth materially decelerates.
• Monitor the next 1–3 quarters for mortgage-rate volatility, purchase-loan funnel recovery, Preferred partner capacity, and multifamily revenue per property. Treat user engagement and management TAM estimates as leading indicators, not earnings evidence.
• No GOOG trade from this call: management reports no material traffic effect from Google’s real-estate ad product, and the transcript provides no basis for a directional Alphabet view.