Online real estate marketplace Zillow (NASDAQ: ZG) met Wall Street’s revenue expectations in Q1 CY2026, with sales up 18.4% year on year to $708 million. Its non-GAAP profit of $0.53 per share was 15.8% above analysts’ consensus estimates.

Is now the time to buy ZG? Find out in our full research report (it’s free for active Edge members).

StockStory’s Take

Zillow delivered first quarter results that met Wall Street’s revenue expectations and surpassed profit estimates, but the market responded negatively. Management attributed the performance to continued momentum in both core 'For Sale' and fast-growing rentals businesses, aided by product integration and increased adoption of tools like Zillow Preview and Showcase. CEO Jeremy Wacksman highlighted that, despite a flat housing market, Zillow's integrated platform enabled it to outpace industry transaction trends. Wacksman also emphasized that the company's margin expansion was driven by operational discipline and lower-than-expected costs, particularly in personnel and legal expenses.

Looking ahead, Zillow’s forward guidance centers on expanding its AI-powered platform, further integrating consumer and professional tools, and growing its rentals segment. Management expects margin expansion in the back half of the year as advertising and legal costs normalize. CFO Jeremy Hofmann stated, “Our expectations include variable expense growth slowing and legal expenses diminishing as the year progresses.” The company will focus on scaling products like AI Mode, expanding its network of agent partners, and pursuing its $1 billion annual rentals revenue goal, while remaining cautious about broader housing market conditions.

Key Insights from Management’s Remarks

Zillow’s management credited AI-driven product advancements and strong rentals growth as key drivers, while acknowledging continued challenges from a sluggish housing market and higher legal expenses.

• AI-powered platform rollout: Management highlighted early traction with Zillow's new AI Mode, now live for about 5% of users. This feature fosters deeper, more personalized engagement, which is expected to result in higher-intent leads and improve overall conversion rates over time.
• Rentals segment acceleration: The rentals business, especially multifamily, continued to outperform, with 57% year-over-year growth in multifamily revenue. Management attributed this to a robust value proposition for property managers and an expanding inventory of rental listings, now at 76,000 multifamily properties.
• Zillow Preview and Showcase adoption: New listing tools like Zillow Preview and Showcase have seen rapid adoption among brokers and agents. Preview, launched two months prior to the quarter, quickly expanded from five initial brokerage partners to more than sixty, and is now being integrated with realtor.com to broaden exposure.
• Margin expansion drivers: The company achieved a meaningful improvement in net income margin, attributing this to operational discipline, lower personnel costs, and some cost deferral in legal and advertising outlays. Management expects further cost leverage as fixed expenses are held steady and variable expenses moderate.
• Enhanced market strategy: The push towards integrated experiences in “enhanced markets” led to higher adoption of Zillow Home Loans and agent collaboration tools. These markets accounted for 49% of agent connections in Q1 and are on pace to reach the company’s target of at least 75%, supporting both revenue diversification and higher transaction conversion rates.

Drivers of Future Performance

Zillow’s outlook for the remainder of the year is anchored by continued AI innovation, rentals expansion, and expense normalization, even as management remains cautious about the broader housing market.

• AI-enabled consumer and agent workflows: Management is investing in AI-powered features for both home buyers and real estate professionals, aiming to make Zillow the default end-to-end transaction platform. Early signs point to deeper user engagement and higher conversion potential, but broad rollout and adoption are still in progress.
• Rentals revenue growth path: The rentals segment remains a principal growth driver, with management reiterating its $1 billion annual revenue target. The strategy involves expanding inventory, improving property manager ROI, and introducing new analytics and advertising tools for partners, but faces tougher year-over-year comparisons in the second half.
• Expense management and margin expansion: Margin improvement is expected to accelerate in the back half of the year as legal and advertising costs subside. Management identified fixed cost leverage and a deceleration in variable expenses—especially in rentals investment—as key factors, though external risks such as litigation and macroeconomic conditions persist.

Catalysts in Upcoming Quarters

Looking forward, the StockStory team will be tracking (1) the pace of AI Mode expansion and its impact on consumer engagement, (2) continued growth and wallet share gains in the rentals business, and (3) progress towards the target of 75% enhanced market adoption for agent connections. Additionally, we’ll monitor how expense normalization—especially in legal and advertising—translates to sustained margin improvement.

Zillow currently trades at $43.74, down from $44.83 just before the earnings. Is the company at an inflection point that warrants a buy or sell? The answer lies in our full research report (it’s free).

Our Favorite Stocks Right Now

WHILE YOU’RE HERE: Top 9 Market-Beating Stocks. The best stocks don't just beat the market once. They do it again. And again. Robust revenue growth, rising free cash flow, returns on capital that leave their competition in the dust. The market has already rewarded these businesses.

But our AI platform says the party isn't over. Find out which 9 stocks made the cut this week - FREE. Get Our Top 9 Market-Beating Stocks for Free HERE.

Stocks that have made our list include now familiar names such as Nvidia (+1,326% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Exlservice (+354% five-year return). Find your next big winner with StockStory today.