ZILLOW GROUP INC CLASS A 2026 Q2 Earnings Call

Good afternoon. Welcome to Zillow Group's quarterly earnings call. Joining me today to discuss our results are Zillow Group CEO, Jeremy Wacksman, as well as COO and CFO, Jeremy Hofmann. During today's call, we will make forward-looking statements about our future performance and operating plans based on current expectations and assumptions. These statements are subject to risks and uncertainties. We encourage you to consider the risk factors described in our SEC filings for additional information. We undertake no obligation to update these statements as a result of new information or future events except as required by law. Please review the cautionary statement and additional information in our earnings release, which can be found on our investor relations website. This call is being broadcast on the internet and is available on our investor relations website. A recording of the call will be available later today.

During the call, we will discuss GAAP and non-GAAP measures, including adjusted net income, diluted adjusted net income per share, adjusted EBITDA, which we refer to as EBITDA, and adjusted free cash flow, which we refer to as free cash flow. We encourage you to read our shareholder letter and earnings release, which can be found on our investor relations website, as they contain important information about our GAAP and non-GAAP results, including reconciliations of historical non-GAAP financial measures. We will open the call with remarks followed by live Q&A. With that, I will now turn the call over to Jeremy Wacksman.

Good afternoon, everyone. Thank you for joining us. Q2 was another quarter of strong results that demonstrate our consistent execution and the durability of our strategy. Zillow is the operating system for modern real estate, AI native at the core of the transaction, empowering both consumers and professionals from end to end. We've earned consumers' trust for many years now by consistently showing up for them at every stage of the housing journey. That's why our brand and engagement are so strong. We have more than twice as many daily active app users as our next closest competitor. 80% of our traffic comes directly to our apps and sites. According to Comscore, which tracks growth trends across the residential real estate category, Zillow's average monthly unique visitors in Q2 outperformed the category, which saw a decline overall amid the rise in mortgage rates.

Zillow is the only large company in the category to consistently expand its reach with the real estate audience over the past seven quarters. In Q2, we delivered total revenue growth of 18%, above our outlook range. We once again outperformed the broader housing market, and even more so when looking at the purchase mortgage market, which was flat this quarter compared to a year ago. EBITDA was above our expectations, and we reported $118 million in adjusted net income. We are on track toward our full-year goals. In for sale, revenue grew 14% year-over-year in Q2 to $549 million, with 7% growth in residential revenue and 75% growth in mortgages revenue. In rentals, Q2 revenue was up 31% year-over-year, driven by 42% growth in multifamily revenue.

Our consistently strong quarterly results, brand equity, and direct relationship with our users come from two decades of keeping the consumer as our North Star. In for sale, we've built a platform where our interests align with the interests of buyers, sellers, and agents. Buyers want access to all available inventory. Sellers want to sell quickly and for the most money. Agents want tools that help them serve their clients and win business. Zillow delivers on what matters most to consumers and their agents, which is why we continue to grow our audience and revenue. For buyers, we've been investing in the depth of the experience, helping with each step, from the first question to keys in hand. Buyers spend months on this decision because buying a home is an exhaustive and complex process that's not the same as other consumer purchases online.

This is the largest financial decision most people make, and they make it only a few times in their entire lives. It requires hours of deep research. In fact, the average buyer who ends up transacting with a preferred agent partner visits Zillow nearly 100 times, totaling 15 full hours of time using Zillow before they even reach out to connect with an agent. The deeper buyers engage on Zillow, the more that they teach us about their needs and wants, which means Zillow gets more useful at every step of the journey, recommending the right home at the right moment, while also connecting consumers with a great local agent and financing options. Providing end-to-end support ultimately drives transactions through Zillow and helps people get home. Zillow AI mode is starting to show us what's possible when consumers can engage differently from traditional search.

We're seeing them share more about their needs in AI mode than they ever entered into the typical residential search query. Not just what they're looking for in a home, but their timeframe, their financial picture, the need to sell their current home, whether they need a fenced backyard for their pets, and other special circumstances that go into their decision. This is unique, personalized context we haven't had access to before, and it comes with engagement we can measure. AI mode is in early stages, but these are the signals we want to continue to see as we iterate. Consumers who use AI mode spend more than three times as long on Zillow, view more than twice as many homes, run nearly three times as many searches, and contact an agent at nearly three times the rate of consumers who don't use AI mode.

The same pattern holds in rentals, where AI mode renters request a tour at nearly 3 times the rate and submit an application at nearly twice the rate. Context from repeated engagement compounds into a proprietary data advantage that is difficult to replicate and differentiates us from horizontal LLMs and other real estate companies. Here is one real-life scenario. A recent buyer came to Zillow looking for her next home, open to renting or buying, and 11 weeks later, she closed on a home purchase. Over the course of more than 200 AI mode prompts, she researched neighborhoods across multiple zip codes, compared properties, and ran affordability scenarios across both renting and buying. At one point, she was looking at a rental listing and asked AI mode what it would cost to buy instead. The kind of question she could explore instantly without starting a new search.

She submitted our form to contact a Zillow Preferred agent partner and meanwhile kept using AI mode to progressively narrow her search until she spent an hour one night stress-testing a single home with questions like, "What trade-offs should I consider when looking at this home?" That's what Zillow AI mode enables. It's the deliberation partner that can get a buyer from looking to connecting with an agent. It helps the buyer do the homework that makes the eventual agent conversation efficient, so the agent gets a buyer who is ready to act. We are actively expanding what AI mode can do, adding skills and evaluations that serve buyers, sellers, renters, and homeowners. The opportunity in front of us is to deepen our engagement with our already broad audience across every stage in ways that weren't possible before.

Zillow AI mode is now live for about 20% of signed-in users, and we are scaling deliberately as we refine the experience. AI mode captures the journey as it unfolds. Our new personalized Moving Hub organizes it. We launched the Hub earlier this summer, and it guides buyers through every milestone from setting a budget to closing. This is the first time buyers have had a single organized place for their entire move on Zillow, which means we can identify high-intent buyers and service products that meet their needs. It's a good example of what becomes possible when a buyer's workflows are connected in Zillow's end-to-end infrastructure. We're also differentiating Zillow Home Loans with the integration of pre-approval directly into the home search.

Shopping with a Zillow Home Loans verified pre-approval lets buyers see in real-time whether each listing fits their verified budget, accounting for taxes, HOA fees, and current interest rates, not just the list price. It makes the shopping experience more grounded and more actionable, and it's a clear signal of serious buyer intent. We continue to deliver double-digit adoption of Zillow Home Loans in the integrated experience, thanks to a strong value proposition, convenience, and competitive lending terms when compared with other industry-leading mortgage originators. Zillow Home Loans is now a top 25 purchase lender in the country. The average loan officer with Zillow Home Loans originates roughly twice the industry average of purchase loans per month. Because buyers are already on Zillow, our customer acquisition costs are a fraction of what traditional mortgage lenders pay, a structural advantage that we expect to grow as we scale.

Integrating our residential and Zillow Home Loans offerings is delivering a better buying experience. We've been expanding this integrated experience through our preferred partners, and it now accounts for 61% of our connections across Zillow. Our investment in the buyer experience is also what makes our seller solutions so powerful, because listing on Zillow means reaching a broad, deeply engaged audience. We continue to expand our suite of products designed to provide differentiated ways to market homes and achieve better outcomes. Zillow Preview is one more way we're working with the industry to serve the needs of consumers and agents. Zillow Preview is a new product designed to help sellers who want to build demand and momentum before a home hits the active market.

Preview gives sellers pre-market exposure on the most visited real estate platform in America, so they can see useful real-time early demand signals, views, saves, tour requests from Zillow's full buyer audience. Meanwhile, buyers get public, no-cost access to pre-market inventory right in their regular Zillow search. Agents get a differentiated listing pitch that puts their client's interests first and reaches buyers early on an open marketplace. We now have more than 100 brokerage partnerships enabling Zillow Preview, and we are actively onboarding agents in those companies in addition to new brokerages. Later this summer, preview listings will also be syndicated to realtor.com, the second most visited real estate platform in the country. As MLSs give sellers, agents, and brokers more options and more flexibility in how long they can pre-market a listing, we welcome those changes because they boost the value proposition of Zillow Preview.