Zillow Q1 2026: Revenue Up 18% But Q2 Outlook Drags Shares Lower

Zillow Group has reported a strong start to 2026, beating analyst estimates on the top and bottom lines. However, shares slid as much as 9% in after-hours trading after the company set out softer-than-expected guidance for the second quarter and reported a third consecutive quarter of declining first-party traffic.

Quarterly highlights include:

• Revenue was $708 million, up 18% year on year, near the high end of the company's outlook range.
• For Sale revenue was $514 million, up 12%. Residential revenue rose 8% to $450 million, while Mortgages revenue jumped 56% to $64 million on the back of a 96% rise in purchase loan origination volume to $1.5 billion.
• Rentals revenue was $183 million, up 42%, driven by a 57% increase in multifamily revenue.
• Net income was $46 million, up from $8 million in Q1 2025. Diluted EPS was $0.19, versus $0.03 a year ago.
• Adjusted EBITDA was $182 million, with margin flat at 26% despite a 160-basis-point headwind from incremental legal expenses.
• Cash and investments closed Q1 at $788 million, down from $1.3 billion at year-end 2025 after Zillow repurchased 13.5 million shares for $626 million.

Jeremy Wacksman, CEO at Zillow, framed the quarter around what the company calls its three AI advantages: content, context and integration.

"We're embedding AI throughout the real estate experience in ways that make Zillow increasingly indispensable, and we're innovating with speed and intention," he said.

Several product updates featured in the accompanying shareholder letter. Zillow's consumer-facing AI Mode is now live for around 5% of the company's audience, with broader rollout planned as testing continues. Zillow Preview, the pre-market listing tool launched seven weeks ago alongside the rollback of the company's listing access standards, has signed up more than 60 brokerages and is now syndicated through Realtor.com following a deal announced earlier this week. Zillow Pro, an agent operating system that brings Follow Up Boss, ShowingTime and dotloop into a single workflow, is in beta with more than 12,000 agents and is on track for nationwide release in the second half. Internally, Zillow says its engineers are shipping 40% more code per head thanks to AI tooling.

Despite the operational momentum, investors focused on softer signals. Q2 revenue guidance of $750 million to $765 million came in slightly below consensus, while Adjusted EBITDA guidance of $150 million to $165 million fell well short of the $191 million analyst estimate. Zillow flagged roughly $20 million of incremental legal costs in Q2 and around $80 million of advertising spend, up from $64 million a year earlier, as planned product launches pull marketing forward.

Headline traffic also raised eyebrows. Average monthly unique users on Zillow's apps and sites fell 3% year on year to 220 million, with visits down 3% to 2.3 billion. The company countered with Comscore data showing average monthly unique visitors up 12% to 127 million, framing itself as the only large company in the category to grow audience reach over the past six quarters.

Zillow reaffirmed its full-year guidance for mid-teens revenue growth and Adjusted EBITDA margin expansion, while management said it is planning for the macro housing environment "to continue to bounce along the bottom of the housing cycle". Legal expenses are expected to ease in the second half once the company's pending FTC trial passes, and share-based compensation is now forecast to decline by more than 15% year on year, an upgrade from the previous 10% target.