10-Q: Zillow Group Reports Strong Revenue Growth, Faces Restructuring Costs

Zillow Group's Q2 2026 filing shows an 18% year-over-year revenue increase driven by robust mortgage and rental segments, though a net loss and restructuring charges impact profitability.

Summary

• Zillow Group reported an 18% increase in total revenue for the three months ended June 30, 2026, reaching $772 million, compared to $655 million in the prior year period.
• For the six months ended June 30, 2026, total revenue grew 18% to $1.48 billion from $1.25 billion in the same period last year.
• Mortgages revenue saw a significant surge of 75% to $84 million for the quarter, driven by a 94% increase in loan origination volume.
• Rentals revenue increased by 31% to $209 million for the quarter, attributed to higher revenue per unique visitor and increased property listings.
• The company incurred a net loss of $4 million for the three months ended June 30, 2026, compared to a net income of $2 million in the prior year.
• Restructuring costs of $36 million were recorded in the quarter related to a planned 7% workforce reduction.
• Adjusted EBITDA increased by 14% to $176 million for the quarter and by 21% to $374 million for the six-month period.
• The company ended the quarter with $578 million in cash, cash equivalents, and restricted cash.

Sentiment

Score: 6

Explanation: StockSavvy.ai views this as a moderately positive filing, with strong revenue growth driven by mortgages and rentals, but offset by a net loss and significant restructuring costs.

Positives

• Total revenue increased by 18% to $772 million for the three months ended June 30, 2026.
• Mortgages revenue grew by 75% to $84 million, driven by a 94% increase in loan origination volume.
• Rentals revenue increased by 31% to $209 million, with multifamily rentals revenue up 42%.
• Residential revenue increased by 7% to $465 million, with revenue per visit up 10%.
• Adjusted EBITDA increased by 14% to $176 million for the quarter.
• Loan origination volume for purchases increased by 95% to $2.17 billion for the quarter.
• The company has $1.1 billion remaining under its share repurchase authorization.
• The company has a $500 million revolving credit facility with no amounts drawn as of June 30, 2026.

Negatives

• The company reported a net loss of $4 million for the three months ended June 30, 2026, compared to a net income of $2 million in the prior year.
• Restructuring costs of $36 million were recognized in the quarter related to a planned 7% workforce reduction.
• Gross margin decreased from 75% to 73% for the quarter, primarily due to increased lead acquisition costs.
• Visits to the company's mobile apps and websites decreased by 2% for the quarter.
• Average monthly unique users decreased by 2% for the quarter.
• The company has significant ongoing legal proceedings, including antitrust litigation and shareholder derivative suits, with potential for future losses.

Risks

• The health and stability of the economy and the U.S. residential real estate industry, including changes in inflationary conditions, interest rates, housing availability and affordability, labor shortages, and supply chain issues.
• The ability to manage advertising, product inventory and pricing, and to maintain relationships with real estate partners.
• The ability to establish or maintain relationships with listing and data providers, or changes to rights to use or access listing data.
• The ability to comply with current and future rules and requirements promulgated by NAR, MLSs, or other real estate industry groups.
• The duration and impact of natural disasters, climate change, geopolitical events, and other catastrophic events on operations and demand.
• The ability to maintain adequate security controls or technology systems to protect data integrity and customer privacy.
• The impact of past, pending or future litigation and other disputes or enforcement actions.
• The ability to attract, engage, and retain a highly skilled workforce.

Future Outlook

The company expects Residential revenue to decrease in absolute dollars during the three months ending September 30, 2026, due to housing market seasonality and the scaling of the Zillow Preferred model. Rentals revenue is expected to increase in absolute dollars during the three months ending September 30, 2026, driven by continued growth in multifamily revenue. Headcount-related expenses are expected to decrease in absolute dollars during the three months ending September 30, 2026, due to cost management actions.

Management Comments

• Zillow Group is reimagining real estate to make home a reality for more and more people.
• We continue to invest in the growth of our business, which we believe has resulted in year over year total revenue results... that exceeded industry performance for the same periods.
• This headcount reduction is designed to allow the Company to move faster and operate more efficiently, including with a more sustainable cost structure.

Industry Context

StockSavvy.ai notes that Zillow's performance is closely tied to the broader U.S. housing market, which is currently characterized by low inventory, elevated interest rates, and fluctuating home prices. The company's revenue growth in mortgages and rentals, despite a general slowdown in residential transactions, indicates successful diversification and execution within these segments.

Comparison to Industry Standards

• The company's Total Transaction Value (TTV) increased by 6% for the three months ended June 30, 2026, compared to the prior year, while the industry average (NAR data) showed a 4% increase for the six months ended June 30, 2026. This suggests Zillow is outperforming the broader industry in transaction volume.
• For Sale revenue per TTV increased by 7% over the twelve months ended June 30, 2026, indicating improved monetization of transactions compared to industry benchmarks.
• The company's mortgage origination volume increased by 95% for the quarter, significantly outpacing the general mortgage market trends which have been impacted by higher interest rates.

Corporate Governance

Legal Proceedings

• International Business Machines Corporation (IBM) patent infringement lawsuit: Zillow filed a motion for summary judgment on April 17, 2026, which was denied on June 30, 2026. An agreement in principle to resolve remaining claims was reached in July 2026, expected to be immaterial.
• Federal securities class action lawsuits (consolidated): Allegations of materially false and misleading statements regarding Zillow Offers business. Class certification was granted, and Zillow filed a petition for certiorari with the Supreme Court of the United States on June 5, 2026. A potential loss is possible but not estimable.
• Shareholder derivative suits: Allegations of breach of fiduciary duties related to Zillow Offers wind-down and violations of federal securities laws. These suits remain stayed.
• FTC and State Attorneys General antitrust complaint: Allegations that the Redfin Partnership harmed competition for online multifamily rental-listings. Motion to dismiss was denied, and a motion for partial summary judgment was also denied. Trial is set for August 24, 2026. A potential loss is possible but not estimable.
• Purported class action lawsuit (Breidert v. Zillow Group, Inc. et al.): Allegations of federal securities law violations arising from the Redfin Partnership. Deadlines are stayed pending appointment of lead plaintiff and counsel. A potential loss is possible but not estimable.
• Shareholder derivative suits (related to Redfin Partnership): Allegations of breach of fiduciary duties in connection with the Redfin Partnership. A potential loss is possible but not estimable.

Stakeholder Impact

• Shareholders: The net loss and restructuring costs may negatively impact short-term share price, while revenue growth and strong mortgage/rental performance offer positive long-term prospects. Share repurchases may benefit shareholders through increased ownership percentage.
• Employees: The planned 7% workforce reduction will directly impact affected employees. The remaining employees may face increased workload or uncertainty.
• Real Estate Partners (Agents, Builders): Continued investment in agent tools and new construction marketplaces aims to enhance their businesses. The Redfin partnership and related legal challenges could indirectly affect the competitive landscape.
• Mortgage Lenders/Borrowers: Growth in Zillow Home Loans indicates increased activity in the mortgage market, potentially benefiting borrowers with integrated services and lenders through secondary market sales.
• Property Managers: Growth in Rentals revenue suggests continued demand for Zillow's advertising and tools, potentially leading to better lead generation and property management efficiency.

Next Steps

• The company expects to recognize the remainder of the restructuring costs during the three months ending September 30, 2026.
• The company plans to fund cash expenditures for restructuring through existing cash and investment balances.
• The company expects total headcount-related expenses to decrease in absolute dollars during the three months ending September 30, 2026.
• The company expects Rentals revenue to increase in absolute dollars during the three months ending September 30, 2026.
• The company expects sales and marketing expenses to decrease in absolute dollars during the three months ending September 30, 2026.

Key Dates

Recommendation

While Zillow demonstrates strong revenue growth in key segments like mortgages and rentals, the net loss, significant restructuring costs, and ongoing substantial legal risks temper enthusiasm for a buy recommendation. The company's ability to navigate these challenges and execute its strategic initiatives will be crucial. A 'hold' recommendation reflects a balanced view of the positive operational trends against the considerable headwinds.

Keywords

real estate, mortgage, rentals, online marketplace, Zillow, revenue growth, restructuring, financial results