Zillow Group Inc (Z) (Q3 2026) Earnings Call Highlights: Revenue Grows 7% to $724 Million as ...

Negative Points

• Mortgage rates rose nearly 100 basis points from the start of Q3 into early Q4, causing a sharp deterioration in housing affordability and weakening buyer demand.

• Residential revenue declined 4% year-over-year to $419 million, reflecting weak housing demand and an estimated 600 basis point headwind from the Zillow Preferred transition.

• Mortgages revenue of $70 million came in below outlook due to the mortgage rate shock, which caused lower conversion and hurt the finance-first pipeline.

• Q4 revenue guidance of $635 million-$665 million implies roughly flat year-over-year growth, with for-sale and residential revenue expected to decline 9%-15% year-over-year.

• The company expects continued pressure on affordability, with Q4 mortgage industry purchase origination volumes projected to decline 10%-15%, worse than the prior expectation of a mid-single-digit decline.

Q & A Highlights

Q: With AI Overviews and personal agents like Muse changing acquisition channels, are you seeing any changes in Zillow's traffic patterns, and how are you positioning Zillow with AI Mode now live? A: CEO Jeremy Wacksman said Zillow is not yet seeing any meaningful traffic impact from evolving AI search or agentic platforms. Category traffic fell 10% year-over-year in Q3, yet Zillow's unique visitors were roughly flat, meaning it gained share, helped by about 80% of traffic coming directly to Zillow. AI Mode, now available to 100% of signed-in users, is driving deeper engagement: users spend nearly three times as long on Zillow, run more searches, view more homes, and request more tours. Between March and September, more than 2.5 million people used AI Mode and asked 8.5 million questions, over half outside traditional business hours.

Q: The Q4 mortgage guide came in soft relative to prior outperformance. Has anything changed structurally in how you go to market? A: CFO Jeremy Hofmann attributed the softness primarily to a worse-than-expected macro backdrop, not structural change. He noted the Zillow Preferred-to-Zillow Home Loans channel is still expected to grow mid-20% year-over-year in Q4 versus a purchase market expected to decline 10%-15%. The bigger hit came from "finance first" buyers seeking pre-approval before meeting an agent, which fell off in Q3 amid the rate shock and hurt the Q4 pipeline. He said it will take time to rebuild the funnel, but Zillow Home Loans is still expected to grow more than 50% in 2026 after 53% growth in 2025.

Q: Can you elaborate on the path to translating Zillow's long-term growth drivers into improved financial performance, and what that timeline looks like amid a pressured housing macro? A: CFO Jeremy Hofmann said Zillow has consistently outperformed the market for three to four years and plans to continue. In for-sale, the levers are driving more transactions through higher buyer conversion and broader engagement via Zillow Home Loans and seller solutions, plus more revenue per transaction through integrating Zillow Preferred agents and Zillow Home Loans, with software and tools growing alongside. In rentals, multifamily is the continued accelerator, with a clear path to more than $1 billion in annual revenue and a long growth runway beyond that, given Zillow's superior ROI versus other advertising sources.

Q: Can you update us on the Zillow Preferred transition and whether it is tracking better, worse, or in line with expectations a quarter ago? A: CFO Jeremy Hofmann said the transition is going well, with partners converting from the legacy model at the rates Zillow wants. Zillow remains confident it can move the entire business to Zillow Preferred by roughly the end of Q1 into early Q2 of 2027, citing the right demand, supply, and agents across the country. He called Preferred a better business model because it aligns incentives among the consumer, agent, and Zillow, versus the old ad model where agents paid upfront for leads. Preferred connections generate 35% more revenue per connection than the legacy model.

Q: On the expense side, where are you in the cycle of fixed costs normalizing, and how are you thinking about the fixed versus variable split given macro headwinds? A: CFO Jeremy Hofmann said the cost framework is consistent: leverage fixed costs, manage variable costs commensurate with revenue, and invest in advertising opportunistically. Fixed expenses, excluding one-time items, were down 8% year-over-year in Q3, and he said to expect fixed costs to grow roughly with inflation into 2027 while fighting inflation where possible. Variable costs are trending more in line with revenue, pacing well in the second half, which supports about 5% total cost growth in Q4 and sets up 2027 well. He clarified the 8% fixed cost decline includes stock-based comp, which was down 25% year-over-year.

Q: Are you in a place to fulfill the mortgage demand coming from Zillow Preferred as you accelerate to 100%, and should we expect further loan officer hiring into 2027? A: CFO Jeremy Hofmann said Zillow is continuing to hire loan officers to meet demand, emphasizing that the Zillow Home Loans loan officer and Zillow Preferred agent must build a mutually beneficial, one-team relationship with the customer. He said Zillow has been methodical because it only gets one shot at doing well by its real estate agent partners. Once at 100% Zillow Preferred, Zillow will keep hiring as it drives more transactions, but hiring will be more in line with revenue growth. He said to continue to expect more loan officer hiring.

Q: Are there mile markers or dynamics to consider on industry trends, given buyers aren't stepping in while sellers keep coming to market? Could a reversal come faster than anticipated? A: CEO Jeremy Wacksman said forecasting macro is tough, noting the purchase mortgage market fell 4% in Q3 and is expected to decline 10%-15% in Q4 as affordability pressures buyers, while rental demand rose nearly 20% year-over-year in September. He said it is hard to know whether a coiled spring will uncoil faster, and that rate shock versus rate level is the better way to think about it, with the shock driving the drop more than rates sitting at a 7% handle. CFO Jeremy Hofmann added Zillow is planning as if macro stays difficult, noting about 40% of revenue now comes from Zillow Rentals and software, which is less rate-dependent and provides ballast.

Q: Is there any change in user behavior, such as dual-tracking between rentals and buying or fewer pre-approval searches, versus earlier in the year? A: CEO Jeremy Wacksman said demand is there and buyers want to buy, pointing to the brief relief seen earlier in the year when rates dropped. He said the majority of Zillow buyers have long dual-tracked rentals and purchases, and elevated rental demand, up nearly 20% in Q3, reflects that. Structurally, buyers and seller-buyers are present but are stuck on the sidelines or scared by the rate shock. CFO Jeremy Hofmann added that Zillow Rentals can be a star even in the current rate environment given the ROI it delivers to property management companies.

Q: Is expanding Zillow Preferred to 100% of partners by the first half

For the complete transcript of the earnings call, please refer to the full earnings call transcript .