Rightmove shares crashes over 25% after 2026 profit forecast cut on higher AI cost

Rightmove plc shares plummeted over 25% after the property portal projected slower underlying operating profit growth of 3-5% for 2026, despite forecasting 8-10% revenue growth, citing increased investment in AI and technology. This guidance implies a 4-6% downgrade to consensus operating profit, according to RBC, as the company allocates £12 million to incremental P&L and £6 million to capitalized spending for AI development aimed at accelerating execution and digitizing services. While 2025 guidance was reaffirmed, this strategic shift towards future innovation means Rightmove's long-term EPS growth forecast of 5-12% annually through 2028 falls below the 15.8% consensus.

Analysis

Rightmove plc (RMV) shares experienced a significant decline of over 25% following revised 2026 guidance, which projected underlying operating profit growth of 3-5%, a notable deceleration from previous expectations. This revised outlook, driven by increased investment in artificial intelligence, implies a 4-6% downgrade to consensus operating profit, according to RBC analysis. The immediate market reaction reflects concerns over near-term profitability.

The company plans to allocate £12 million to incremental profit and loss investment and an additional £6 million in capitalized spending for AI and technology development, aiming to "accelerate execution" and digitize the home buying and renting process. This strategic pivot, while intended to "take Rightmove to a new level," is expected to depress operating margins to 67.4% by 2028, below the 70.5% consensus, and result in annual EPS growth of 5-12% through 2028, significantly underperforming the 15.8% consensus projection.

Despite the long-term re-calibration, Rightmove reaffirmed its 2025 guidance, expecting approximately 9% revenue growth and a 70% adjusted EBIT margin, though average revenue per advertiser (ARPA) is projected to grow only 1% to £95-£105, below the £109 consensus. The broader U.K. housing market presents a mixed picture, with sales agreed up 4% year-over-year and listings at 10-year highs, yet national prices remain broadly flat amidst budget uncertainty.

Key Decisions for Investors

• Investors should carefully assess if the immediate share price decline fully discounts the revised, lower near-term profit growth and long-term EPS trajectory.
• Consider the long-term value creation potential from Rightmove's significant AI investments against the delayed realization of previously stated strategic growth ambitions.
• Monitor the execution and tangible benefits of the AI initiatives, particularly their impact on ARPA, operating margins, and market share in a mixed housing market.