8-K: Zillow Group Reports Strong Q1 2025 Results, Exceeding Expectations and Achieving GAAP Profitability

Zillow Group's Q1 2025 financial results surpassed expectations, demonstrating strong revenue growth and achieving GAAP profitability.

Summary

• Zillow Group announced its Q1 2025 financial results, exceeding expectations with strong top-line growth.
• Total Q1 revenue increased by 13% year-over-year to $598 million, surpassing the midpoint of the company's outlook range by $15 million.
• The company achieved GAAP profitability with a net income of $8 million, representing 1% of revenue.
• Adjusted EBITDA was $153 million, with an Adjusted EBITDA margin of 26%, up 200 basis points year-over-year.
• For Sale revenue increased by 8% year-over-year to $458 million.
• Mortgages revenue increased by 32% year-over-year to $41 million, driven by a 32% increase in purchase loan origination volume to $791 million.
• Rentals revenue increased by 33% year-over-year to $129 million, primarily driven by multifamily revenue growth of 47%.
• Traffic to Zillow Group's mobile apps and sites increased by 5% year-over-year to 227 million average monthly unique users.
• The Board of Directors authorized the repurchase of an additional $1 billion of its Class A common stock, Class C capital stock or a combination thereof.
• The company expects lowto mid-teens revenue growth for the full year 2025, with continued Adjusted EBITDA margin expansion and positive GAAP net income.

Sentiment

Score: 9

Explanation: The document presents a highly positive outlook with strong financial results, exceeding expectations, and strategic initiatives driving growth. The management's confidence and the authorization of a share repurchase program further contribute to the positive sentiment.

Positives

• Zillow Group exceeded its Q1 outlook for revenue and Adjusted EBITDA.
• The company achieved GAAP profitability in Q1.
• Revenue growth was strong across multiple segments, including For Sale, Mortgages, and Rentals.
• Traffic to Zillow Group's mobile apps and sites increased year-over-year.
• The Board authorized an additional $1 billion share repurchase program.
• The company is on track to meet its full-year 2025 goals of lowto mid-teens revenue growth, continued Adjusted EBITDA margin expansion, and positive GAAP net income.
• Multifamily revenue grew 47% in Q1, outpacing property count growth, as more property managers upgrade their advertising subscriptions.

Negatives

• Cash and investments decreased from $1.9 billion to $1.6 billion, primarily due to share repurchases of $250 million in Q1 and a $100 million payment to Redfin.
• Sales and marketing expenses increased by $32 million year-over-year.
• Cost of revenue was up year over year primarily due to an increase in amortization of website development costs as we continue to test and release new products, as well as an increase in lead acquisition costs related to strategic partnerships.

Risks

• The health and stability of the economy and United States residential real estate industry, including changes in inflationary conditions, interest rates, housing availability and affordability, labor shortages and supply chain issues, could impact results.
• The company's ability to manage advertising and product inventory and pricing and maintain relationships with real estate partners could affect performance.
• The company's ability to establish or maintain relationships with listing and data providers, which affects traffic to our mobile applications and websites, or changes to our rights to use or timely access listing data, or to the quality or quantity of such listing data, could impact results.
• The company's ability to comply with current and future rules and requirements promulgated by the National Association of REALTORS, multiple listing services, or other real estate industry groups or governing bodies, or decisions to repeal, amend, or not enforce such rules and requirements, could affect performance.
• The company's ability to navigate industry changes, including as a result of past, pending or future lawsuits, settlements or government investigations, which may include lawsuits, settlements or investigations in which we are not a named party, could impact results.
• Uncertainties related to potential policy changes or enforcement priorities at the federal and state levels could affect performance.
• The company's ability to continue to innovate and compete to attract customers and real estate partners could impact results.
• The company's ability to effectively invest resources to pursue new strategies, develop new products and services and expand existing products and services into new markets could affect performance.
• The company's ability to operate and grow Zillow Home Loans mortgage operations, including the ability to obtain or maintain sufficient financing to fund the origination of mortgages, meet customers financing needs with product offerings, continue to grow origination operations and resell originated mortgages on the secondary market, could impact results.
• The duration and impact of natural disasters, climate change, geopolitical events, and other catastrophic events (including public health crises) on our ability to operate, demand for our products or services, or general economic conditions could affect performance.
• The company's targets and disclosures related to environmental, social, and governance matters could impact results.
• The company's ability to maintain adequate security controls or technology systems, or those of third parties on which we rely, to protect data integrity and the information and privacy of our customers and other third parties could affect performance.
• The company's ability to navigate any significant disruption in service on our mobile applications or websites or in our network could impact results.
• The impact of past, pending or future litigation and other disputes or enforcement actions, which may include lawsuits or investigations to which we are not a party, could impact results.
• The company's ability to attract, engage, and retain a highly skilled workforce could impact results.
• Acquisitions, investments, strategic partnerships, capital-raising activities, or other corporate transactions or commitments by us or our competitors could impact results.
• The company's ability to continue relying on third-party services to support critical functions of our business could impact results.
• The company's ability to protect and continue using our intellectual property and prevent others from copying, infringing upon, or developing similar intellectual property, including as a result of generative artificial intelligence could impact results.
• The company's ability to comply with domestic and international laws, regulations, rules, contractual obligations, policies and other obligations, or to obtain or maintain required licenses to support our business and operations could impact results.
• The company's ability to pay our debt, settle conversions of our convertible senior notes, or repurchase our convertible senior notes upon a fundamental change could impact results.
• The company's ability to raise additional capital or refinance our indebtedness on acceptable terms, or at all could impact results.
• Actual or anticipated fluctuations in quarterly and annual results of operations and financial position could impact results.
• Actual or perceived inaccuracies in the assumptions, estimates and internal or third-party data that we use to calculate business, performance and operating metrics could impact results.
• Volatility of our Class A common stock and Class C capital stock prices could impact results.

Future Outlook

Zillow Group expects lowto mid-teens revenue growth for the full year 2025, with continued Adjusted EBITDA margin expansion and positive GAAP net income. Rentals revenue is expected to grow approximately 40% for the full year 2025. Q2 For Sale revenue growth to be in the mid-single digits year over year, driven by Residential revenue growth in the mid-single digits and Mortgages revenue growth of approximately 30%. In Rentals, we expect revenue to grow by more than 35% year over year in Q2 as we benefit from our execution on building our two-sided marketplace and from the Redfin rentals partnership that went live in April.

Management Comments

• Zillow Chief Executive Officer Jeremy Wacksman stated, 'strong Q1 results surpassed our expectations and demonstrate how well we're executing.'
• Jeremy Wacksman also said, 'We are on track to meet our full-year 2025 goals, and we're well-positioned to deliver sustainable profitable growth.'
• Jeremy Wacksman also stated, 'As we expand our services and scale the housing super app across more markets, we are bringing more customers and real estate professionals together and making buying, selling, and renting easier for them, which is helping us grow both our revenue and profits.'

Industry Context

Zillow Group's Q1 revenue outperformed the residential real estate industry's year-over-year total transaction value growth of 3% according to the National Association of REALTORS (NAR) and 6% according to industry data tracked and estimated by Zillow. The company's growth in the rentals market is also notable, given the increasing demand for rental properties.

Comparison to Industry Standards

• Zillow's revenue growth of 13% significantly outpaced the overall residential real estate industry's transaction value growth, as reported by NAR (3%) and Zillow's own estimates (6%).
• The company's Adjusted EBITDA margin of 26% demonstrates strong profitability compared to other players in the real estate technology space.
• Zillow's rentals marketplace, with over 2 million active rental listings, is a leading platform in the industry, competing with Realtor.com, Redfin, and AppFolio.
• The company's strategic partnerships with Realtor.com and Redfin aim to expand its reach and simplify the renter's experience, similar to how other industry players are forming alliances to enhance their offerings.

Stakeholder Impact

• Shareholders will benefit from the strong financial performance and the share repurchase program.
• Customers will benefit from the expanded services and improved user experience.
• Real estate professionals will benefit from the increased connections and opportunities to grow their business.
• Employees will benefit from the company's growth and success.

Next Steps

• Continue scaling the housing super app across more markets.
• Expand and improve services to help buyers and sellers at every step of their move.
• Increase connection and conversion rates in Enhanced Markets.
• Integrate Premier Agent with Zillow Home Loans.
• Build out touring services to remove friction from booking a home tour online.
• Develop and scale seller services, such as Zillow Showcase.
• Expand reach, simplify renters experience, enhance value proposition with advertisers, and drive growth in leads, leases, and revenue in the Rentals segment.
• Settle $419 million of convertible debt outstanding before the end of Q2.

Key Dates

Keywords

Zillow, Real Estate, Financial Results, Q1 2025, Revenue, Adjusted EBITDA, Mortgages, Rentals, GAAP Profitability, Share Repurchase