Zillow beats expectations, but loses money for second straight quarter

Zillow reported more losses in the second quarter, but executives sounded an optimistic note for the second straight period. 

The company posted a net loss of $35 million, up from the $22 million loss posted in the previous quarter, but said its revenue of $506 million and EBITDA of $111 million surpassed expectations. 

Performance in the quarter was boosted by a strong rental market and a relatively mild year-over-year decline in home sales (3 percent), compared to an industry-wide decline of 22 percent. But higher expenses compared to the first quarter pushed the company in the red. 

“You’ve heard me say many, many times that 2023 is a crucial year for Zillow,” said CEO Rich Barton. “We’re pleased with what we accomplished so far.”

Zillow posted a net income of $8 million in the second quarter of last year, when the market was just beginning to react to interest rate hikes from the Federal Reserve. The company closed the year with $72 million lost in the fourth quarter. 

Expenses jumped $67 million quarter-over-quarter to $469 million, but recently appointed CFO Jeremy Hoffmann said he believes Zillow’s annual fixed expenses of $1.1 billion will not “materially expand … as we scale our current growth initiatives.”

“While we expect variable costs to grow as we scale our business, we intend to drive operational leverages over time,” he said, adding that Zillow’s annual variable expenses are roughly $400 million.

Rental revenue jumped 28 percent year-over-year, which Barton attributed the growth to a greater number of listings on the Zillow platform. 

The company’s pursuit of a “housing super app” that integrates more aspects of the homebuying process will “set us up for long-term profitable growth,” according to Barton. The chief executive also claimed a number of “incremental improvements” have resulted in “better than expected” Premier Agent connections, Zillow’s lead generation program. 

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“We continue to see significant value in giving more customers the option to tour homes as the key call to action on our apps and sites, which is also driving this relative performance,” he said.

The site’s new construction marketplace also saw “strong growth,” which Barton called a “bright spot.”

Zillow in June closed Zillow Closing Services, its title and escrow provider built for its iBuying operation, which it closed last year. The company announced shortly before the conference call its purchase of Aryeo, a platform for real estate photographers, for $35 million in cash and stock.