Zillow Group, Inc.

Hello and welcome to Zillow Group's second quarter 2026 financial results call. We ask that you please hold all questions until the completion of the formal remarks, at which time you will be given instructions for the question and answer session. Also, as a reminder, this conference is being recorded today. If you have any objections, please disconnect at this time. Brad, you may begin.

Thank you. Good afternoon, and welcome to Zillow Group's quarterly earnings call. Joining me today to discuss our results are Zillow Group's CEO, Jeremy Wacksman, as well as COO and CFO, Jeremy Hofmann. During today's call, we will make forward-looking statements about our future performance and operating plans based on current expectations and assumptions. These statements are subject to risks and uncertainties, and we encourage you to consider the risk factors described in our SEC filings for additional information. Thank you. Thank you. During the call, we will discuss GAAP and non-GAAP measures, including adjusted net income, diluted adjusted net income per share, adjusted EBITDA, which we refer to as EBITDA, and adjusted free cash flow, which we refer to as free cash flow. We encourage you to read our shareholder letter and earnings release, which can be found on our investor relations website, as they contain important information about our GAAP and non-GAAP results, including reconciliations of historical non-GAAP financial measures.

Good afternoon, everyone, and thank you for joining us. Q2 was another quarter of strong results that demonstrate our consistent execution and the durability of our strategy. Zillow is the operating system for modern real estate. AI-native, at the core of the transaction, empowering both consumers and professionals from end to end. We've earned consumers' trust for many years now by consistently showing up for them at every stage of the housing journey. That's why our brand and engagement are so strong. We have more than twice as many daily active app users as our next closest competitor, and 80% of our traffic comes directly to our apps and sites. According to Comscore, which tracks growth trends across the residential real estate category, Zillow's average monthly unique visitors in Q2 outperformed the category, which saw a decline overall amid the rise in mortgage rates. Zillow is the only large company in the category to consistently expand its reach with the real estate audience over the past seven quarters. In Q2, we delivered total revenue growth of 18% above our outlook range. We once again outperformed the broader housing market and even more so when looking at the purchase mortgage market, which was flat this quarter compared to a year ago. EBITDA was above our expectations and we reported $118 million in adjusted net income. We are on track toward our full year goals. In for sale, revenue grew 14% year-over-year in Q2 to $549 million, with 7% growth in residential revenue and 75% growth in mortgages revenue. In rentals, Q2 revenue was up 31% year-over-year, driven by 42% growth in multifamily revenue. Our consistently strong quarterly results, brand equity, and direct relationship with our users come from two decades of keeping the consumer as our North Star. In For Sale, we've built a platform where our interests align with the interests of buyers, sellers, and agents. Buyers want access to all available inventory. Sellers want to sell quickly and for the most money. Agents want tools that help them serve their clients and win business. Zillow delivers on what matters most to consumers and their agents, which is why we continue to grow our audience and revenue. For buyers, we've been investing in the depth of the experience, helping with each step from the first question to keys in hand. Buyers spend months on this decision because buying a home is an exhaustive and complex process that's not the same as other consumer purchases online. This is the largest financial decision most people make, and they make it only a few times in their entire lives. It requires hours of deep research. In fact, the average buyer who ends up transacting with a preferred agent partner visits Zillow nearly 100 times, totaling 15 full hours of time using Zillow before they even reach out to connect with an agent. The deeper buyers engage on Zillow, the more that they teach us about their needs and wants. which means Zillow gets more useful at every step of the journey, recommending the right home at the right moment while also connecting consumers with a great local agent and financing options. Providing end-to-end support ultimately drives transactions through Zillow and helps people get home. Zillow AI mode is starting to show us what's possible when consumers can engage differently from traditional search. were seeing them share more about their needs in AI mode than they ever entered into the typical residential search query, not just what they're looking for in a home, but their timeframe, their financial picture, the need to sell their current home, whether they need a fenced backyard for their pets, and other special circumstances that go into their decision. This is unique, personalized context we haven't had access to before, and it comes with engagement we can measure. AI mode is in early stages. But these are the signals we want to continue to see as we iterate. Consumers who use AI mode spend more than three times as long on Zillow, view more than twice as many homes, run nearly three times as many searches, and contact an agent at nearly three times the rate of consumers who don't use AI mode. The same pattern holds in rentals, where AI mode renters request a tour at nearly three times the rate and submit an application at nearly twice the rate. Context from repeated engagement compounds into a proprietary data advantage that is difficult to replicate and differentiates us from horizontal LLMs and other real estate companies. Here is one real-life scenario. A recent buyer came to Zillow looking for her next home, open to renting or buying, and 11 weeks later, she closed on a home purchase. Over the course of more than 200 AI mode prompts, She researched neighborhoods across multiple zip codes, compared properties, and ran affordability scenarios across both renting and buying. At one point, she was looking at a rental listing and asked AI Mode what it would cost to buy instead. The kind of question she could explore instantly without starting a new search. She submitted our form to contact a Zillow preferred agent partner and, meanwhile, kept using AI Mode to progressively narrow her search. Thank you for watching. We are actively expanding what AI Mode can do, adding skills and evaluations that serve buyers, sellers, renters, and homeowners. The opportunity in front of us is to deepen our engagement with our already broad audience across every stage in ways that weren't possible before. Zillow AI Mode is now live for about 20% of signed-in users, and we are scaling deliberately as we refine the experience. AI Mode captures the journey as it unfolds. Our new personalized moving hub organizes it. We launched the hub earlier this summer and it guides buyers through every milestone from setting a budget to closing. This is the first time buyers have had a single organized place for their entire move on Zillow, which means we can identify high intent buyers and service products that meet their needs. It's a good example of what becomes possible when a buyer's workflows are connected in Zillow's end-to-end infrastructure. We're also differentiating Zillow home loans with the integration of pre-approval directly into the home search. Shopping with a Zillow home loan's verified pre-approval lets buyers see in real time whether each listing fits their verified budget, accounting for taxes, HOA fees, and current interest rates, not just the list price. Thank you for joining us. The average loan officer with Zillow Home Loans originates roughly twice the industry average of purchase loans per month. And because buyers are already on Zillow, our customer acquisition costs are a fraction of what traditional mortgage lenders pay, a structural advantage that we expect to grow as we scale. Integrating our residential and Zillow Home Loans offerings is delivering a better buying experience. We've been expanding this integrated experience through our preferred partners, and it now accounts for 61% of our connections across Zillow. Our investment in the buyer experience is also what makes our seller solutions so powerful because listing on Zillow means reaching a broad, deeply engaged audience. We continue to expand our suite of products designed to provide differentiated ways to market homes and achieve better outcomes. Zillow Preview is one more way we're working with the industry to serve the needs of consumers and agents. Zillow Preview is a new product designed to help sellers who want to build demand and momentum before a home hits the active market. Preview gives sellers pre-market exposure on the most visited real estate platform in America so they can see useful real-time early demand signals, views, saves, tour requests from Zillow's full buyer audience. Meanwhile, buyers get public, no-cost access to pre-market inventory right in their regular Zillow search. And agents get a differentiated listing pitch that puts their clients' interests first and reaches buyers early on an open marketplace. We now have more than 100 brokerage partnerships enabling Zillow Preview, and we are actively onboarding agents in those companies in addition to new brokerages. Later this summer, Preview listings will also be syndicated to Realtor.com, the second most visited real estate platform in the country. And as MLSs give sellers, agents, and brokers more options and more flexibility in how long they can pre-market a listing, we welcome those changes because they boost the value proposition of Zillow Preview. After Preview builds initial momentum and a listing goes active, sellers and their agents can choose our Zillow Showcase product to maximize impact. showcases now on about 5% of all new listings, and agents who use Showcase on the majority of their listings win 35% more listings than peers who don't. Our proprietary rich media, which includes 3D home tours and interactive floor plans, is now on 11% of new for sale listings on Zillow. In our top 10 markets, 30% of new for sale listings on Zillow have 3D home tours, and more than 10% have Showcase. These markets are an early signal of what the future looks like. Later this year, we expect to launch instant floor plans, allowing photographers, sellers, and agents to capture a 3D floor plan right from their smartphone. We expect removing friction and lowering the cost will continue to expand the use of rich media, making it the future standard on every listing and providing a better buyer experience to drive engagement. Together, our preview and showcase products give sellers and their agents robust tools to launch a listing and market it actively. Agents who use both are putting showcase on nearly half of all preview listings when the listing goes live. Our two-sided platform connects buyers and sellers with the industry professionals who help them get home. But Zillow's value to agents goes far beyond a connection. Zillow powers many of the most successful agents in the industry. SmartMessages AI-generated text and email drafts based on a buyer's Zillow activity and prior conversations get more than four times the reply rate of manual outreach because it encourages the agent to follow up when it's top of mind for the consumer. Any agent, whether they advertise on Zillow or not, can access exclusive tools and follow a boss through Zillow Pro, a premium membership we launched nationwide last month. A Zillow Pro membership gives agents a single connected system to manage all of their clients, including those who originate outside the Zillow ecosystem. With a Zillow Pro membership, agents can invite any contacts in their follow-up boss database, a past client, a referral, a potential buyer they met at an open house, anyone, to collaborate with them on Zillow using a feature called My Agents. Once the client accepts the invitation, their trusted agent is right by their side throughout the Zillow experience. Easy messaging, tour booking, guidance at every step. And the agent gains real-time visibility into what their client is actively looking for on Zillow so they can show up to assist and foster the relationship into a transaction. Buyers with a MyAgent relationship are 80% more likely to meet with their agent face-to-face. and 50% more likely to progress through key home search stages compared with similar buyers without a MyAgent relationship. Our early data shows that Zillow Pro agents who use MyAgent are handling more transactions than similar agents who don't have a Zillow Pro membership. Zillow Pro also gives listing agents a meaningful edge through a new feature called Likely to List, which uses predictive AI signals from the unique context across our platform, including from AI mode, to flag contacts in an agent's follow-up off database whose homes are showing pre-listing activity, giving agents a reason to reconnect with past clients who may be ready to sell before they've raised their hand anywhere else. likely the list turns the CRM into an active opportunity engine. 70% of actual U.S. buyers and sellers are already on Zillow. That creates an opportunity for agents to reconnect with past clients they've already built relationships with. When agents can see those signals and act on them, they can give consumers a more responsive, more personal experience. The quality of service we're enabling for agents exemplifies the shift we've made to our agent partnership offerings. Over the years, we have deliberately evolved from a top-of-funnel model where agents paid for leads to a success-based model built around efficiently aggregating demand to connect high-intent consumers with high-performing agents. Zillow preferred agent partners pay when they close, which means Zillow wins when the agent and their client win. Zillow Preferred is optimized for outcomes, not just activity, which is why it's generating 23% more revenue per connection than our legacy advertising model did, and one reason why our for-sale revenue is growing faster than industry growth. Zillow is the only residential real estate company that is removing friction by integrating the end-to-end transaction experience at scale, improving outcomes for buyers, for sellers, for agents, for loan officers, and for Zillow. We are making progress toward our $1 billion incremental revenue opportunity in for sale. Since the beginning of 2025, we have added an incremental $287 million of for sale revenue, nearly a third of our goal. Now turning to rentals. Nearly every buyer starts out as a renter. And for millions of people, renting isn't a stepping stone, it's where they are for the long term. In recent years, three times as many movers have been looking to rent than to buy or sell. Many consumers are looking at buying or renting options at the same time, and Zillow is uniquely positioned to help them with both. The same thesis that drives for sale is behind our rental strategy, a streamlined operating system that modernizes the transaction experience on top of the largest and most varied inventory from single-family homes to large apartment communities. In Q2, we had 2.8 million average monthly active rental listings and reached an all-time high of 79,000 multifamily properties. Rentals revenue was up 31% year-over-year in Q2, with multifamily revenue up 42%. Growth that reflects the compounding value of what we've built on both sides of the marketplace. Property managers tell us Zillow delivers the highest return on marketing investment in our category, compared not just with other rental platforms, but with other digital marketing options available to them, including search and social media. They keep renewing and upgrading their presence on Zillow as a result, and we see a significant opportunity to capture more of the marketing dollars currently being spent elsewhere. We're also bringing Zillow's inventory and booking infrastructure to other platforms potential renters may be on. This summer, Zillow Rentals became the only real estate platform in Google's Gemini Connected Apps ecosystem. If a renter asks Gemini to find them available apartments, Zillow powers what happens next. The real-time availability, the tour scheduling, the booking confirmation. Wherever consumers begin their move, we're helping them complete it with our partners and our real estate operating system. Rentals is one of our most compelling growth opportunities with a clear path to a billion dollars and beyond in annual rentals revenue. Before I turn it over to our COO and CFO, Jeremy Hofmann, I want to put our results in context. Zillow has consistently outperformed industry total transaction volume for three long years, while the housing market has basically stood still. We have grown revenue by mid-teens or better each year Thank you for joining us. and consumers trust and return to Zillow throughout a month-long journey, no matter where that journey began. Our direct brand and audience engagement put us in a position of strength as we drive forward and expand our business. To position Zillow for the path ahead, yesterday we restructured parts of our organization and eliminated some roles. We made this decision to ensure we can move faster and operate more efficiently, including a more sustainable cost structure. We're grateful to every person who is leaving for their contributions through the years. Today, we also announced changes to our executive leadership team. We've appointed Jeremy Hofmann to an expanded role as Chief Operating Officer and Chief Financial Officer. Jeremy has been one of the key architects of Zillow's current business strategy, a driving force in the vision and execution of the housing super app. His deep command of our strategy and financial architecture, combined with the strength of the teams he has developed over nine years here, positions Zillow to move with greater coordination and speed. Jun Choo, who has served as Chief Operating Officer since 2024, is stepping down to focus on his health and will serve in an advisory capacity through the end of the year. We are also welcoming Sandy Knight to serve in a new role as Chief Legal and Policy Officer. Sandy joins us from Google, where she served as Vice President of Litigation and Discovery. She brings more than 20 years of experience in complex litigation and operational leadership across technology and financial services, including at Google, PayPal, and Morgan Stanley. Her appointment reflects our continued investment in building the leadership team that Zillow needs to support our future growth. The strength of our team and the strategy we're executing gives us every confidence in One Club's text. The Zillow experience gets people from curiosity to closing. The dreaming and decision-making, the tour for renters and buyers, the application or pre-approval, the financing, the agent relationship, the offer, and the lease or close increasingly run through Zillow. We support the whole transaction, and our ability to do so compounds as more of the transaction uses our infrastructure. Our focus is on serving consumers and helping professionals grow their businesses because that's what drives our results. Thanks, Jeremy, and good afternoon, everyone.