Zillow Posts $46M Profit in First Quarter

Zillow Group posted $46 million in first-quarter net income, nearly six times what it earned in the same period a year ago.

Revenue at the Seattle-based home search giant rose 18 percent year over year to $708 million in the quarter that ended March 31, according to a release issued Wednesday afternoon.

Traffic to Zillow’s websites and mobile apps was down 3 percent from the first quarter last year, coming in at 220 million monthly unique users.

The growth came against a flatter picture for the industry. The broader residential real estate industry expanded by 2 percent in the last quarter, according to the National Association of Realtors, and Zillow estimated industry-wide purchase mortgage origination volume declined about 1 percent year over year.

Mortgages revenue jumped 56 percent year over year to $64 million, driven by a 96 percent increase in purchase loan origination volume to $1.5 billion. The for-sale business overall pulled in $514 million, up 12 percent, with residential revenue rising 8 percent to $450 million on growth.

Revenue from rentals climbed 42 percent to $183 million, with multifamily revenue up 57 percent. Zillow CFO Jeremy Hoffman said during Wednesday’s earnings call Zillow’s rental inventory reached 76,000 total properties, up 38 percent from last year.

Adjusted EBITDA for the quarter was $182 million, with margin holding flat at 26 percent from last year. That metric took a hit from legal headwinds, the company said, noting that it had $11 million in incremental year-over-year legal expenses. Hoffman said the company expects $20 million in incremental year-over-year legal costs in Q2, and expects legal costs to ease in the second half of the year.

Zillow has been fighting several lawsuits over the last year, from competitors like Compass and CoStar, as well as government regulators. Compass dropped its lawsuit in March after a protracted fight over Zillow’s listing access standards. The Federal Trade Commission sued Zillow and Redfin in September, alleging the companies colluded in a $100 million agreement to syndicate rental listings.

Hoffman said Zillow expects $750 million to $765 million revenue in the second quarter, a 16 percent growth year-over-year.

AI integration

Pointing to the recent launch of Zillow AI mode, Wacksman said the company was focused on integrating AI across its products and operations. He said the company has an advantage over generic AI tools and other real estate platforms, saying Zillow can use proprietary data like home browsing patterns, messages, closed deals and other metrics to power AI tools.

Zillow debuted a consumer-facing AI mode in March that is currently available to about 5 percent of Zillow’s audience, and Wacksman said the company plans to expand it throughout the year.

“Zillow users in AI mode are having deeper, more substantive conversations than they do in traditional search, and we are seeing more actionable engagement as a result,” Wacksman said.

Wacksman also noted the company’s recently announced partnership with Realtor.com, which will see Zillow Preview listings syndicated to Realtor.com for its similarly titled Realtor.com Preview program. Wacksman said the deal will put pre-marketed listings in front of more consumers outside private channels.

“It’s really just a win-win for both Zillow and our agent partners, as well, obviously, as Realtor,” Wacksman said.