ZILLOW GROUP, INC. (ZG) Q3 2025 Earnings Summary

Executive Summary

• Q3 2025 delivered double‑digit top-line growth and non‑GAAP profitability: revenue up 16% to $676M, GAAP net income $10M, and Adjusted EBITDA $165M with 24% margin, exceeding the company’s outlook ranges .
• Street results vs S&P Global consensus: revenue and EPS both beat; revenue $676M vs $670.9M consensus and EPS $0.44 vs $0.423 consensus; management flagged stronger Rentals (+41% YoY) and Mortgages (+36% YoY) as drivers *.
• Guidance: full‑year 2025 outlook maintained (mid‑teens revenue growth, ~40% Rentals growth, Adjusted EBITDA margin expansion, positive GAAP net income) and Q4 guide calls for high‑single‑digit For Sale growth, ~20% Mortgages growth, and >45% Rentals growth; Q4 Adjusted EBITDA expenses expected to decline to $500M on seasonality .
• Narrative catalysts: product momentum (Showcase adoption, AI Virtual Staging, messaging, verified pre‑approval) and “only real estate app in ChatGPT” positioning, plus evidence of integrated transaction execution (Enhanced Markets adoption, Zillow Preferred, Zillow Pro) .
• Watch-outs: gross margin compressed (73% vs 76% YoY) and cost of revenue increased due to lead acquisition costs tied to Rentals syndication; these were within plan and offset by revenue outperformance and cost management .

What Went Well and What Went Wrong

• What Went Well

  • “Third‑quarter results exceeded our outlook for revenue and Adjusted EBITDA,” with $676M revenue and $165M Adjusted EBITDA; net income margin expanded 400 bps YoY to 1% .
  • Rentals acceleration: revenue +41% YoY to $174M, multifamily revenue +62% YoY; active listings averaged 2.5M and multifamily properties reached 69,000 (+47% YoY) .
  • Product and platform momentum: Showcase on 3.2% of new listings (up from 2.5% in Q2), AI Virtual Staging launched, messaging introduced, verified pre‑approval rolled out; “We are currently the only real estate app inside ChatGPT” .

• What Went Wrong

  • Gross margin compression: 73% in Q3 vs 76% in Q3 2024 (‑300 bps), with select operating expenses +8% YoY driven by higher cost of revenue (lead acquisition and ad‑serving costs for Rentals growth) .
  • Adjusted EBITDA expenses were $511M (+13% YoY), reflecting variable and advertising costs; although better than Q3 outlook, expense growth paced revenue scaling .
  • Industry macro remained at the “bottom of the housing cycle” and purchase mortgage industry volume was roughly flat YoY, providing limited external tailwind .

Financial Results

Segment breakdown

KPIs and operating metrics

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• “Zillow’s Q3 results show how well we’re delivering on our mission to make buying, selling, financing and renting easier… Zillow is leading the industry toward a more transparent, consumer‑first future” — CEO Jeremy Wacksman (press release) .
• “We are currently the only real estate app inside ChatGPT — a testament to the speed and technical depth of our teams, as well as our nearly 20‑year track record of using AI” — Shareholder letter .
• “Q3 Adjusted EBITDA was $165 million, and Adjusted EBITDA margin was 24%, a more than 200‑basis‑point increase year over year, driven by better‑than‑expected revenue growth and effective cost management” — Shareholder letter .
• “We are on track toward our full‑year 2025 goals of mid‑teens revenue growth, GAAP profitability, and expanded Adjusted EBITDA margins — with year‑over‑year revenue growth expected to accelerate in Q4” — Shareholder letter .

Q&A Highlights

• Regulatory environment and litigation: Analysts asked about impacts of the FTC suit; management emphasized confidence in execution despite “external noise” and reiterated focus on consumer‑first experiences .
• Revenue acceleration drivers: CFO detailed outperformance vs industry (For Sale +10% vs ~5% industry) and continued adoption of integrated offerings; EBITDA margin expanded >200 bps YoY .
• Resource planning and investments: Discussion on headcount/investment trajectory into 2026 framed around scaling Enhanced Markets and product innovation while maintaining cost discipline .
• Product differentiation: Highlighted leadership in AI (ChatGPT integration, Virtual Staging) and platform features (Showcase, messaging, verified pre‑approval) as conversion and engagement advantages .

Estimates Context

• Both revenue and EPS were beats; Adjusted EBITDA also exceeded the company’s outlook ($165M, 24% margin) .
• Values marked with an asterisk were retrieved from S&P Global via GetEstimates.

Key Takeaways for Investors

• Strong quarter with broad‑based growth: For Sale +10% YoY, Rentals +41% YoY, Mortgages +36% YoY; net income positive and EBITDA above outlook — a constructive setup into Q4 .
• Significant product momentum and differentiation: Showcase penetration rising (3.2% of new listings), AI Virtual Staging, messaging, and verified pre‑approval deepen engagement and improve conversion, supporting share gains .
• Integrated transaction strategy scaling: Enhanced Markets now drive 34% of connections (up from 27% in Q2), with Zillow Preferred and Zillow Pro expanding the monetizable footprint across agents and consumers .
• Near‑term guidance constructive: Q4 expects high‑single‑digit For Sale growth and >45% Rentals growth; expense seasonality should support EBITDA expense decline to $500M .
• Watch expense mix and margin path: Gross margin compression and lead acquisition costs tied to Rentals growth are deliberate; execution focus is on balancing growth with margin expansion .
• Medium‑term narrative supports re‑rating: Management continues to push innovation (ChatGPT integration, AI features) and signals confidence in scaling toward larger revenue and margin footprints; monitor regulatory developments but execution has remained resilient .
• Trading lens: Emphasize beats on revenue/EPS and accelerating Rentals trajectory as catalysts; any confirmation of Q4 acceleration and continued product adoption should be supportive for sentiment .

Additional context and Q3 press/media items:

• Messaging introduced in Fall Launch (collaboration within the app) .
• More than 50 brokerages adopted Zillow Showcase; enterprise traction strengthens go‑to‑market .
• AI‑powered Virtual Staging launched for Showcase listings .

Earnings call transcripts and press releases:

• Zillow Group Q3 2025 earnings call transcript (Motley Fool/Nasdaq) .
• Q3 2025 press release and exhibits (Form 8‑K): financial highlights, reconciliations, KPIs .
• Prior quarters for trend: Q2 2025 (Form 8‑K) ; Q1 2025 (Form 8‑K) .

* Values retrieved from S&P Global.