Zillow (ZG) Q2 2026 Earnings Call Transcript

Zillow Group reported Q2 revenue of $772 million (+18% YoY) and adjusted EBITDA of $176 million (23% margin), both above the high end of guidance, alongside adjusted net income of $118 million and diluted adjusted EPS of $0.52. The company also raised confidence in its integrated transaction “preferred” model—Q2 residential revenue grew 7% to $465 million while mortgages revenue jumped 75% to $84 million—despite acknowledging Q4 for-sale revenue headwinds of ~400–600 bps from timing/seasonality. For Q3, it guided revenue of $745–$760 million (midpoint ~11% YoY growth) and EBITDA of $180–$200 million (25% margin at midpoint), while continuing capital returns with $200 million repurchased in Q2 ($826 million for 1H).

Analysis

The key market mechanism is not headline growth, but mix-quality improvement: Zillow is moving monetization from low-friction lead gen into a higher-take-rate transaction stack, and that should support revenue durability even if reported residential growth looks softer. The near-term winner is ZG/Z, while the biggest loser is the legacy-agent advertising ecosystem because the platform is pulling more economics into a closed loop that is harder for agents to bypass. Second-order, this pressures smaller portal/lead vendors and independent mortgage marketing channels more than large-cap brokers, because Zillow’s data advantage compounds when consumers stay inside the workflow.

The main risk is optical, not fundamental: the transition creates a multi-quarter accounting lag and a seasonal Q4 reset that can make growth look worse before it looks better. That means the stock can still de-rate on a ‘guide-down’ narrative over the next 1-3 months if investors focus on reported for-sale growth rather than revenue per connection and mortgage unit economics. What would falsify the bullish thesis is a drop in preferred conversion, a stall in Home Loans pipeline conversion, or evidence that the affordability/rate backdrop is compressing transaction volumes faster than Zillow can offset with mix and pricing.

Contrarian take: the market may be underestimating how much of the new model is already de-risked by direct traffic and product stickiness, while overestimating the impact of Google’s local search push. If 80%+ of traffic is direct and AI Mode engagement converts into more agent contacts, Google is more of a noise source than a share-loss threat. The bigger overhang is sentiment around Q4, where the stock may be vulnerable to a good business / bad optics setup.

Catalyst path: the next 4-8 weeks are about whether the market buys the framing around 2027 normalization; the next 2-3 quarters are about proving that mortgage gross profit and preferred mix can offset the revenue-recognition lag. If management executes, this is a 6-18 month multiple-expansion story; if not, the stock will likely trade as a ‘good-growth but complicated’ name with periodic guide-driven volatility.

Key Decisions for Investors

• Long ZG on any post-earnings pullback in the next 3-5 trading days; thesis is that the market is underpricing 2027 normalization and overpricing Q4 optics. Target a 10-15% upside over 3 months if preferred mix continues to expand.
• Use a call spread in ZG (3-6 month tenor) to express the view that the stock rerates on revenue-per-connection and EBITDA visibility rather than reported residential growth. Falsify if preferred conversion stalls below the current trajectory or if Q4 guidance is cut more than implied.
• Pair long ZG vs. a housing-sensitivity basket or homebuilder proxy if you want cleaner exposure to Zillow-specific monetization rather than macro housing activity. This isolates the company’s mix shift from mortgage-rate noise over the next 1-3 months.
• Do not chase the first move higher if the stock gaps up on the release; the better entry is after the market digests the Q4 headwind language. A cleaner entry should emerge once sell-side models reset to the 2027 seasonal unwind.
• Set an alert for any evidence that Google local search or other portal changes are impacting direct traffic, because that is the simplest bear case. If direct traffic and app engagement hold, the competitive moat argument stays intact.