Key Highlights

  • Zillow shares are down 10.94% in pre-market trading despite beating Q2 estimates.
  • Q2 2026 revenue reached $772 million, up 18% year over year, above expectations.
  • Adjusted EPS of $0.52 beat the $0.45 consensus estimate.
  • Third-quarter revenue guidance of $745 million to $760 million disappointed investors.
  • The company announced restructuring expected to eliminate approximately 7% of employees.

Shares Sink on Weak Q3 Guidance Despite Beat

Zillow (NASDAQ:Z) is trading sharply lower today, extending Wednesday's after-hours selloff, despite the company posting second-quarter results that beat expectations. Shares fell as much as 10.94% to $32.15 in pre-market trading, as investors focused on third-quarter guidance rather than the quarterly beat.

Zillow Group, headquartered in Seattle, Washington, is a leading digital real estate company operating the most visited real estate platform in the United States through its websites and mobile apps. The company connects consumers with agents, lenders, landlords, and property managers across the entire home lifecycle, buying, selling, renting, and financing, with brand portfolio including Zillow, Trulia, StreetEasy, HotPads, Zillow Home Loans, dotloop, ShowingTime, and Follow Up Boss.

Guidance Disappoints as Rentals Growth Continues

Zillow reported second-quarter total revenue growth of 18% year over year to $772 million, above expectations, with EBITDA of $176 million representing a 23% margin, and adjusted net income of $118 million, both above forecasts. Rentals revenue rose 14% year over year to $79 million, though the pace of growth has moderated from prior quarters.

The company is accelerating its transition to its 'preferred' monetization model, expecting over 75% of connections in preferred by end of 2026 and 44% at end of 2025, driving a 23% higher revenue per connection rate in 2025 and an expected 35% increase by end of 2026, though this creates revenue-recognition shifts between residential and mortgage categories and seasonal timing.

Restructuring and Leadership Changes

The company announced restructuring initiatives eliminating approximately 7% of employees, including planned headcount growth reductions, with $36 million in restructuring costs recorded in Q2 and an additional $23 to $28 million expected in Q3. Leadership changes were also announced, with Jeremy Hofmann expanded to Chief Operating Officer and CFO, June Chew stepping down as COO to focus on advisory work through year end, and Sandy Knight joining as new Chief Legal and Policy Officer from Google (NASDAQ:GOOGL).

Forward guidance calls for third-quarter total revenue outlook of $745 million to $760 million, with sale revenue growth of 5% to 7%, rentals revenue growth over 50% year over year, and EBITDA of $180 million to $200 million, representing 25% margin at midpoint. Full-year 2026 revenue growth guidance was reaffirmed at mid-teens percentage, with EBITDA of $730 million to $760 million, purchase mortgage origination market now expected down low-to-mid single digits, previously flat.

Conclusion

Zillow's sharp decline despite a genuine second-quarter beat reflects investor concern over decelerating growth signals in third-quarter guidance and the cost implications of the announced restructuring. With continued momentum in its preferred monetization strategy and rentals business, the coming quarters will be important for confirming whether growth can reaccelerate as guided.

This article is for informational purposes only and does not constitute financial, investment, or trading advice. Readers should conduct their own research or consult a licensed financial advisor before making any investment decisions.