ZILLOW GROUP, INC.

Overview

Zillow is the dominant online real estate marketplace in the United States, connecting home buyers, sellers, renters, and agents through its website and app. It makes money primarily by charging real estate agents and brokers for advertising and lead generation (its residential segment), plus growing revenue from rental listings and its own mortgage origination business. Think of it as the Google of real estate: it attracts the audience, then monetizes that audience by connecting them to professionals who pay for access.

Financials

Total revenue in 2025 was $2,583 million, up 15.5% from $2,236 million in 2024 S6. That is solid, consistent growth for a company of this scale. Gross profit was $1,920 million on $1,080 million in revenue per the XBRL header, though the segment detail in Section 6 provides the clearer picture of the $2,583 million top line S6. Operating loss was $34 million in 2025, a meaningful improvement from a $197 million operating loss in 2024 S6. Net income turned positive at $23 million in 2025, compared to a net loss of $112 million in 2024 S6. This is the first return to GAAP profitability S1.

Cash on hand was $768 million at year-end 2025, down from $1,082 million in 2024 S6. The decline is largely explained by aggressive share repurchases: Zillow spent $670 million buying back stock in 2025 alone, up from $301 million in 2024 and $424 million in 2023 S6. Short-term investments add another $527 million in liquid assets S6. Operating cash flow was a healthy $368 million S6. No dividends were paid.

On debt: Zillow settled $419 million in convertible senior notes during 2025 S6, significantly cleaning up the balance sheet. The company has $364 million outstanding under mortgage repurchase agreements (used to fund its lending business, not corporate debt) S6, and a new $500 million revolving credit facility established in January 2026 that remains undrawn S6. Accumulated deficit stands at $1.9 billion, a legacy of years of losses S4, but the trajectory is clearly improving.

Stock-based compensation was $448 million in 2025 [XBRL header]. That is high relative to revenue and is a real cost to shareholders, discussed further below.

Business segments: Zillow operates three reported segments. Residential (advertising and lead generation for agents) is the largest at $1,704 million, or 66% of total revenue, growing 6.9% in 2025 S2S6. Rentals is the fastest-growing at $630 million (24% of revenue), up 39.1% year over year S2S6. Mortgages contributed $199 million, up 37.2% S6. The diversification away from pure residential advertising is a meaningful positive shift.

Trajectory

Better, clearly and on multiple fronts. Revenue grew 15.5% S6, the operating loss narrowed from $197 million to $34 million S6, and the company posted its first GAAP net profit in years at $23 million S6. Both the rentals and mortgage segments are growing at nearly 40% annually S6, diversifying away from the slower-growing core residential business. Operating cash flow of $368 million S6 demonstrates the business generates real cash even while reporting accounting losses.

The remaining challenges are real but manageable. The company still carries a $34 million operating loss S6, meaning profitability is thin and dependent on continued growth. Stock-based compensation at $448 million [XBRL] remains very high, essentially consuming all operating cash flow on a paper basis. The housing market itself (low inventory, high mortgage rates) is a structural headwind outside management's control S1. But the direction of travel is unambiguously positive.

Industry Metrics

Competition

• Zillow names CoStar Group directly as a competitor and litigation adversary (CoStar filed complaints against Zillow in 2025) S4. CoStar owns Homes.com and has been aggressively investing in consumer real estate search, making it Zillow's most well-funded direct challenger.
• Redfin is a notable competitor that Zillow turned into a partial partner: Zillow paid Redfin $100 million for exclusive multifamily rental listings on Redfin platforms S7, suggesting Zillow views distribution relationships as worth paying for rather than purely competing against.
• Zillow also competes with traditional brokerages, mortgage lenders, large tech platforms, and local/regional listing services S2. The filing notes competitors may have greater resources and capabilities S2.
• Zillow's differentiation rests on brand strength (more searches for "Zillow" than "real estate" S1), the scale of its living database covering ~173 million U.S. homes S1, the Zestimate as a consumer trust tool, and the integrated transaction model connecting search, mortgage, and closing in one place. Roughly 80% of U.S. residential transactions involve agents using at least one Zillow product S1.

Leadership & Ownership

Co-founders Richard Barton and Lloyd Frink control approximately 57.7% of voting power through Class B shares S4. This is founder-controlled governance, which means outside shareholders have limited ability to influence major decisions or force a sale. It is a high insider-ownership structure, which aligns founders with long-term outcomes but concentrates power significantly.

CFO Jeremy Hofmann entered a 10b5-1 trading plan in November 2025 covering up to 100,000 shares from option exercises plus RSU shares, effective February 2026 S8. This is routine pre-planned selling by an executive, not a red flag on its own. No CEO change or other major leadership departures are disclosed. Internal controls were assessed as effective by both management and auditors S8, and there were no auditor disagreements S8.

Outlook

• The integrated transaction platform: Management is building toward a model where Zillow touches every step of a home purchase, including search, mortgage origination (now in 49 states plus D.C. S1), and eventually title/escrow. Connections through "Enhanced Markets" exceeded 40% of transactions by year-end 2025 S1, and double-digit mortgage adoption rates within those markets S1 suggest the flywheel is beginning to turn.
• Rentals as a second major business: With 39% revenue growth and 72,000 multifamily properties (up 44% year over year S1), Zillow is investing heavily here, including the $100 million Redfin partnership for exclusive multifamily listings S7 and new AI leasing tools S1.
• New agent products: Zillow Preferred (pay-at-close for top agents) and Zillow Pro (AI-powered membership suite) S1 are designed to deepen agent relationships and shift more revenue toward performance-based models that scale with transaction volume.
• TAM expansion: Management frames a $202 billion addressable market S1 across transaction fees, mortgage, title, rentals, and property management software. They are currently capturing a small fraction, and the roadmap is to layer on adjacent services as the platform matures.

Red Flags

• MEDStock-based compensation was $448 million in 2025 [XBRL], against total revenue of $2,583 million S6. That is roughly 17% of revenue paid out in equity. It dilutes shareholders, and the company's GAAP profitability ($23 million net income S6) essentially disappears when viewed through this lens. This is a persistent issue for Zillow.
• MEDThe FTC and five state attorneys general filed antitrust complaints in late 2025 challenging the Zillow-Redfin partnership in multifamily rental listings S8. Zillow filed a motion to dismiss in January 2026 S8, but this is live litigation with no resolution yet. If the partnership is unwound or restricted, it would directly impact the rentals growth strategy and the $100 million already capitalized as an intangible asset S7.
• MEDFull valuation allowance of $965 million has been applied against $992 million in deferred tax assets S7, meaning Zillow's own accountants judge it more likely than not that these assets will not be realized. This reflects the long history of losses and is a signal that sustained profitability is not yet assured.
• MEDFounder dual-class control at ~57.7% voting power S4 means public shareholders have very limited say in governance, director elections, or major strategic decisions. This is a permanent structural feature, not a temporary risk.
• LOWCash declined by $314 million year over year to $768 million S6, primarily driven by $670 million in buybacks S6. With $368 million in operating cash flow S6 and a $500 million undrawn credit facility S6, liquidity is not an immediate concern, but the pace of buybacks should be monitored if the housing market weakens.
• LOWMultiple ongoing legal proceedings (federal securities class action related to Zillow Offers wind-down, shareholder derivative suits, IBM patent dispute) all carry a "reasonable possibility" of loss with no material accruals recorded S8. None are individually quantified, but together they represent a layer of contingent liability.

Verdict

Zillow is a mature, dominant internet platform in the early stages of a genuine business model upgrade: moving from a pure advertising marketplace toward an integrated real estate transaction platform with mortgage, rentals, and agent services. The 2025 numbers show the strategy is gaining traction, with revenue growing 15.5%, the first GAAP profit in years, and rentals and mortgage both growing near 40% S6. To believe in this story, an investor needs to accept that the housing market will eventually normalize (more inventory, more transactions), that Zillow can capture a growing share of the full transaction rather than just advertising dollars, and that management can keep stock-based compensation from permanently overshadowing accounting profits.