Executive Summary / Key Takeaways

• Zillow Group is executing a strategic transformation from a listing portal to an integrated "housing super app," leveraging its dominant brand and audience to capture a larger share of the real estate transaction value across For Sale and Rentals.
• Core technological differentiators like AI-powered Zestimate, Zillow Showcase, Real Time Touring, and integrated tools like Follow Up Boss are enhancing the user experience, improving agent efficiency, and driving higher conversion rates within Zillow's ecosystem.
• The company delivered strong Q1 2025 results, with total revenue up 13% year-over-year to $598 million, driven by double-digit growth in Rentals (+33%) and Mortgages (+32%), and solid growth in Residential (+6%), outpacing the broader housing market.
• Zillow achieved GAAP profitability in Q1 2025 ($8 million net income) and is guiding for continued revenue growth (11-14% YoY in Q2 2025 midpoint), further EBITDA margin expansion, and positive GAAP net income for the full year 2025, demonstrating effective cost discipline despite macro headwinds.
• Strategic initiatives like the expansion of Enhanced Markets (targeting >35% of connections by end 2025), scaling Zillow Home Loans originations, growing the Rentals marketplace (targeting ~40% growth in FY25), and leveraging partnerships position Zillow for sustainable growth towards its mid-cycle targets of $5 billion revenue and 45% EBITDA margin.

The Evolution of Zillow: From Portal to Platform

Zillow Group, incorporated in 2004, began its journey with a mission to bring transparency to the opaque world of real estate. Its foundational product, the Zestimate, an early application of AI and machine learning for automated home valuation, set the stage for empowering consumers with information. Over two decades, Zillow built the most visited real estate app and website in the United States, cultivating a massive and highly engaged audience. This top-of-funnel advantage, with approximately two-thirds of the U.S. real estate audience using Zillow at some point in their journey and 80% of traffic arriving directly and organically, forms the bedrock of its current strategy.

Today, Zillow is actively transforming from primarily an advertising and listing portal into a comprehensive "housing super app." This strategic evolution aims to integrate various stages of the real estate transaction – from searching and touring to financing, closing, and even renting – within the Zillow ecosystem. The goal is to provide a seamless, tech-enabled experience for both consumers and real estate professionals, thereby capturing a larger share of the significant total addressable market. This shift is particularly critical in the current macroeconomic environment, characterized by low housing inventory, volatile interest rates, and affordability challenges, which have subdued transaction volumes across the industry.

Technological Edge: Powering the Integrated Experience

Zillow's strategic pivot is underpinned by its differentiated technology, which serves as a key competitive moat. Beyond the foundational Zestimate, the company has developed and integrated a suite of advanced tools designed to enhance the user experience and professional workflow.

Zillow Showcase, an AI-powered rich media technology, creates immersive 3D models and interactive floor plans for listings. This technology offers tangible benefits: Showcase listings drive higher buyer engagement and, crucially, sell faster and for more money, typically netting a 2% higher sales price than similar non-Showcase listings on Zillow, translating to over $9,000 on an average home sale. Agents using Showcase are also winning approximately 30% more listings. The recent acquisition and integration of Virtual Staging AI further enhance these capabilities, allowing for rapid creation of digitally staged images.

Real Time Touring, powered by the ShowingTime acquisition, removes friction from booking home tours online. This not only improves the consumer experience but also helps Zillow identify high-intent buyers. Touring connections convert at approximately 3x the rate of other actions on Zillow, and Real Time Touring now accounts for 36% of all connections, up significantly from 12% a year ago.

For real estate professionals, Zillow leverages technology to improve efficiency and effectiveness. Follow Up Boss, an industry-leading CRM acquired by Zillow, is integral to managing connections in Enhanced Markets, with over 90% of connections in these markets flowing through the platform. AI-powered features within Follow Up Boss, such as call summaries and automated follow-up messages, save agents and loan officers valuable time and provide actionable insights.

In the financing segment, Zillow Home Loans' BuyAbility feature utilizes technology to help buyers understand what they can afford in real-time, providing personalized estimates based on current mortgage rates. Over 1.5 million customers have enrolled in BuyAbility since its launch, highlighting its utility in the current affordability-constrained market.

These technological advancements are not merely features; they are foundational to Zillow's strategy. They enable the company to identify and convert high-intent customers, provide valuable tools to its partner network of top-producing agents, and build a more integrated, efficient transaction experience. This technological leadership provides a distinct advantage over competitors, many of whom lack Zillow's scale of audience and integrated tech stack.

Performance and Progress: Outpacing the Market

Zillow's recent financial performance reflects the traction of its strategic initiatives, consistently outpacing the broader residential real estate market despite challenging conditions. In the first quarter of 2025, total revenue grew 13% year-over-year to $598 million, exceeding the company's outlook. This growth was particularly strong in the Rentals segment, which saw revenue increase by 33% to $129 million, driven by a 47% surge in multifamily revenue. The Mortgages segment also posted robust growth, with revenue up 32% to $41 million, fueled by a 32% increase in purchase loan origination volume for Zillow Home Loans and a 13% increase in gain on sale margin. Residential revenue, the largest segment, grew a solid 6% to $417 million, benefiting from increases in revenue per visit and overall visits, as well as contributions from Showcase and other services.

This performance stands in contrast to the broader market, where Total Transaction Value (TTV) increased only 6% year-over-year in Q1 2025, with growth heavily skewed towards the high end (contributing over 500 basis points). Zillow's ability to grow its For Sale revenue by 8% against this backdrop, and its Rentals revenue by 33%, underscores its market share gains and the effectiveness of its diversified growth drivers.

The company also demonstrated strong cost discipline, with fixed costs growing only 3% year-over-year in Q1, significantly less than revenue growth. This operational leverage contributed to a 200 basis point expansion in EBITDA margin year-over-year, reaching 26% in Q1 2025. Crucially, Zillow achieved GAAP profitability in Q1 2025, reporting $8 million in net income, a significant milestone and a key target for the full year.

Over the past year, Zillow has consistently outperformed the industry. Full year 2024 revenue grew 15% year-over-year to $2.2 billion, while the existing housing market grew only 5-6%.

This outperformance, coupled with expanding EBITDA margins (22% in FY 2024), validates the company's strategy of converting its audience into transactions and leveraging its cost structure.

The increase in revenue per Total Transaction Value (Residential + Mortgages), up 800 basis points year-over-year in Q3 2024 and over 2,000 basis points since the beginning of 2023, further illustrates Zillow's success in capturing more value from each transaction.

Competitive Landscape and Strategic Positioning

Zillow operates within a competitive real estate technology landscape, facing rivals across its various segments. Key publicly traded competitors include Redfin (RDFN), Compass (COMP), and Opendoor (OPEN). While these companies offer overlapping services, Zillow holds a dominant position, particularly in audience reach and brand recognition, with 4x the app engagement and more than double the overall audience share of its next closest competitor.

Zillow's strategic positioning leverages its strengths as a leading aggregator and technology provider. Unlike brokerage-centric models like Redfin or agent-platform focused Compass, Zillow aims to be the central hub for the entire moving journey. Its comprehensive suite of services, integrating search, touring, financing (Zillow Home Loans), agent connections (Premier Agent, Follow Up Boss), and rentals, provides a broader and more integrated offering than most competitors. While Redfin competes on lower commissions and Opendoor on iBuying speed, Zillow's advantage lies in its network effects, driving unparalleled traffic, and its integrated technology stack, which enhances efficiency and user experience across multiple touchpoints.

In the Rentals market, Zillow has established itself as a leader by building the most comprehensive marketplace with over 2 million active listings, spanning both multifamily and long-tail properties. This scale, combined with the largest renter audience and a #1 preference among renters, gives Zillow a significant competitive edge over platforms with less inventory or reach. Strategic partnerships, such as the exclusive multifamily listing agreement with Redfin and the existing partnership with Realtor.com, further solidify Zillow's position by expanding its network and value proposition to property managers.

Despite its strong position, Zillow faces competitive pressures and risks. The recent lawsuit filed by Compass in June 2025, alleging anticompetitive tactics related to Zillow's listing standards, highlights ongoing tensions within the industry regarding data access and control. Zillow maintains that its standards promote transparency and benefit consumers by ensuring publicly marketed listings are widely accessible. Competition for agent partners and market share remains intense, particularly as other players also invest in technology and integrated services.

Outlook and Future Growth Drivers

Zillow's outlook reflects confidence in its ability to continue executing its strategy and driving growth despite the persistent challenges in the housing market. For the second quarter of 2025, the company expects total revenue between $635 million and $650 million, representing an 11% to 14% year-over-year increase at the midpoint. This guidance anticipates continued strong performance in Rentals (over 35% growth) and Mortgages (approximately 30% growth), with Residential revenue expected to grow in the mid-single digits.

For the full year 2025, Zillow is targeting low to mid-teens revenue growth, including approximately 40% growth in Rentals revenue. The company expects to achieve continued EBITDA margin expansion and deliver positive GAAP net income for the full year, building on the profitability achieved in Q1. Management's confidence is rooted in the expected progress of key initiatives: expanding Enhanced Markets coverage to over 35% of connections by year-end, scaling Zillow Home Loans originations, increasing the number of multifamily rental properties (already reaching 60,000 by early May 2025), and growing Zillow Showcase adoption (targeting 5-10% of U.S. listings in the intermediate term).

Management believes the company is appropriately invested at its current fixed cost base of approximately $1 billion annually, expecting these costs to grow only modestly with inflation. While variable costs may increase faster than revenue initially due to investments in growth areas like Rentals sales teams and Zillow Home Loans loan officers, the overall cost structure is managed to drive operating leverage. Share-based compensation expense is expected to decrease by at least 10% year-over-year in 2025, further contributing to GAAP profitability.

Looking beyond 2025, Zillow has articulated ambitious mid-cycle financial targets, assuming a return to a normalized housing market with 6 million annual existing home sales. Under these conditions, the company sees a clear path to $5 billion in annual revenue and a 45% EBITDA margin. This growth is expected to be driven by approximately $1 billion in incremental organic revenue from expanding the Enhanced Market experience to 75% of transactions and scaling Showcase, over $500 million in incremental revenue from growing the Rentals business to over $1 billion annually, and an additional $1.3 billion from the recovery of the broader For Sale market.

While the outlook is positive, risks remain. The health of the housing market, particularly the trajectory of interest rates and inventory levels, continues to be a significant external factor. Competition is intense, and the outcome of ongoing litigation, including the securities class action suit and the recent Compass lawsuit, could impact the business. The ability to successfully execute the complex strategy of integrating services and scaling the housing super app across numerous markets is also critical.

Conclusion

Zillow Group is in the midst of a profound transformation, leveraging its established market leadership and technological prowess to build an integrated real estate transaction platform. The strong performance in Q1 2025, marked by double-digit growth in key segments and a return to GAAP profitability, provides tangible evidence that this strategy is gaining traction. Despite operating in a challenging housing market, Zillow is demonstrating its ability to grow revenue, expand margins, and take market share by converting its massive audience into transactions within its expanding ecosystem.

The company's differentiated technology, strategic investments in growth areas like Rentals and Zillow Home Loans, and disciplined cost management position it well to achieve its full-year 2025 targets and progress towards its ambitious mid-cycle financial goals. While external market conditions and competitive pressures present ongoing risks, Zillow's foundational strengths and clear strategic roadmap suggest a compelling opportunity for investors seeking exposure to a company actively reshaping the future of real estate.