.....Bernstein's TMT Conference.
Thanks for having me.
Absolutely.
Yeah.
I'm sure many of you in the room already know Zillow. It is one of the leading online portals to search, discover, and now increasingly transact when you're in the home buying process and the rentals process. The business continues to evolve and sort of expand its reach across multiple different services within the housing ecosystem, we're going to get into all of that today. Jeremy, I'd love to kick it off with maybe a look back, right? You just wrapped up 2025. The business grew about 16%. Adjusted EBITDA grew about 25%. You've seen GAAP earnings now start to come through on a more consistent basis. Look back on last year, you know, what went well? What are areas that you're looking to continue to improve upon as a senior leadership team as you look ahead as well?
Yeah, we were really pleased with how 2025 went. Business grew, like you said, 16% overall. EBITDA grew 25%. We were a GAAP net income profitable all four quarters and for the full year, which was an important goal for us as a company. When I look beneath those overall drivers, we see green lights across the business. Our For-Sale business grew quite nicely versus the market. Our Rentals business grew 39% year-over-year. We're doing it with good cost discipline, so able to expand margins by about 200 basis points. All of that put together, against the housing market, that is, you know, at 40-year type lows. That all feels quite good in a, you know, very fluid and dynamic market. The business execution has been really solid.
As I think about your financial framework for this year, it feels like more of the same is in order. You've talked about mid-teens growth for 2026, a little bit of margin expansion, but there's various components to your guidance and your framework for the year. Can you walk through that a little bit and the key variables that you think would push you above or below on some of those metrics?
We are expecting mid-teens growth again this year, with not much coming from the housing market. Again, really good growth against a fairly depressed market, and expecting to expand margins at similar rates to what we did last year and the year before. The formula is the same in many ways. Beneath that, we are expecting Rentals to grow another 30% or so in 2026, that's on the back of it growing 39% in 2025 and 27% in 2024. That business has done really well. The For-Sale business across Residential and Mortgage, we're expecting good growth again too.
From a revenue drivers perspective, it's really the same strategy that we've been embarking on, which is taking all the great demand engagement that comes from having a brand as strong as Zillow and turning more and more of those folks into transactors. That's the strategy, that's what's driving the growth, and that's regardless of what the housing market does. Underneath the cost drivers, we're expecting to hold fixed costs effectively flat with inflation. We've done that since the second half of 2023. That's been a really good discipline for us, and we're able to continue to find ways to accelerate product development while keeping the same number of people. On variable, we grow.
We're growing faster in the first half of the year than revenue, and that's really on the back of rental sales folks and Zillow Home Loans loan officers. We expect that to come closer to in line with revenue growth in the second half of the year.
On the variables that would push you above or below, is that predominantly, would you say, macro-driven? As you look at the product roadmap or the things you're excited about that can be, you know, pulled forward if they're going well?
I think on the product side, everything like, feels quite strong, right? You look at the metrics across the board and the strategy that we're going after, the strategy is working quite well. We're executing well. From a product perspective, we feel good. What would be a boon to us, we're not counting on it, we didn't model it, but what would be a boon to us to extend further would be some bit of macro recovery. When we plan for the year, we plan our cost structure and we plan our revenue plan around, you know, consistent, kinda not much changing in the housing market.
Yeah, I think that's about as far as any of us can see out right now. That makes sense. You've described it as becoming increasingly a housing super app. Walk through that vision a little bit more. Why is this the right strategy and vision for Zillow in the long run? How do you think about some of these various initiatives coming together?
Yeah, the whole goal for us is to be all things housing to consumers in the U.S. How we do that is we take a lot of great brand engagement audience, and, you know, 80% of our audience is brand direct, or is direct, I should say. You know, less than 5% is in SEM. Just to give you a sense of the strength of the audience, it's, you know, 65%-70% of category share, depending on how you depending on the month. All of that has been built over 20 years.
It gives us the opportunity to then go deeper into the transaction funnel across buy, sell, and rent, and increasingly create more of an operating system for the real estate transaction overall, with some of the software and tools that we've either acquired or built over the years. That all makes good sense to us from both an offense perspective and then also defense perspective as well. The further we get into the vertical, the more we're in the guts of the transactions across Rentals and For-S ale, the more durable we think the offering is. That's been a strategy in some form or another, that we've been on for almost a decade at this point, and makes a ton of sense to us, and you're starting to see really good results that come out of it as well.
Bringing some of these factors in-house, right? Bringing Mortgage in-house, bringing, you know, aligning how you monetize with agents. Should we think about this as sort of improving the quality of service at the end of the day and improving conversion rates around the business at the end of the day?
In a lot of ways, yeah. I think we wanna have best consumer experience. We want to align those folks with best real estate professionals, which is not that hard a concept to think about, but it is hard in practice to do. The learning we had, 2017 or so timeframe, was back when we were just doing pure lead gen. Somebody would just, you know, submit their name, submit their phone number, submit their email, and off they went. What we learned at that point in time, consumer wasn't getting called back 50% of the time. That is just not going to work for a long-term, you know, value proposition.
We can continue to aggregate demand, if consumers aren't getting what they want and agents aren't getting what they want, we're gonna have to figure out something different. That drove so much of what is now a much more deeply verticalized, transaction-based business. You're right to say that the alignment mechanism of real estate agents - we get paid when the real estate agent gets paid - has been really good to drive just alignment, and then it allows us also to keep pushing on conversion.
To make that experience better for consumers, it makes it better for real estate agents as well if they're converting more customers. You do it in an integrated way with Mortgage and closing and all the other services associated with it, all inside their Zillow app. That ends up being a far easier consumer experience and a far better agent experience.
That's probably a good segue to, you know, a broader topic around AI, as investors are now trying to evaluate which business models have moats that are durable and which ones are more susceptible to change. This AI disruption narrative, you know, which started significantly in software, has completely bled over into consumer internet now. I think if I were to frame very simply what the bear case would be, is that, hey, housing data is in fact commoditized, and there's not a lot of proprietary information in this industry.
There's a risk over time that the way you search and shop and engage with agents and go around a home transaction might change in the long run. I know the company recently put out, you know, your rebuttal to the AI bear case and where you think Zillow adds value and why you think it can be a positive for you. Can you recount some of that a little bit? Why is the bear case wrong, in your opinion, and what is it missing?
I think it's obviously, like, a very hectic time...
Yeah
... in the capital markets at the moment. Whenever technology shifts occur, there is. Okay, how does this all play out, and how do you think about a future state? I don't necessarily think of it as, like, bear case, bull case. It's just how do we feel day to day on what we're doing, and why do we feel like we're advantaged as a result of using generative AI? Start with the top of the funnel and the brand. Brand is very strong. Consumer preference has never been higher for us. 80% of our traffic is direct. 65%-70%, depending on the month, of real estate shoppers are coming to us, that feels very good.
The term Zillow is more often Googled than the term real estate, just to give you a sense of, like, how much Zillow has become a verb. That is a great start, but it's not the end, right? How people first discover real estate listings, that has been commoditized for a very long time, right? Anyone that signs up as a brokerage can get access to all the inventory. We've been competing in that world for 20 years. Where we add value is far beyond just that first search. It's, you know, let's just use the user journey, the buyer journey in this case. It is then understanding what's actually going on inside the house. We have proprietary technology that captures 3D images, floor plans, walk-throughs. That's on 10% of all listings today.
That has grown quite nicely. That's a richer experience than a typical just photos on the internet. You go down the funnel, and by the time that somebody is looking to actually transact, the first thing they wanna do is tour the home. We own ShowingTime, ShowingTime powers 90% of all tours in the country. The experience is different than anywhere else on the internet if you look to take a tour, right? That's proprietary to us. That's interesting data that makes our LLM smarter. Get pre-qualified or pre-approved. We have Zillow Home Loans. We're doing that today. Work further down. The real estate agent who is gonna meet this consumer works in Follow Up Boss. 100% of our preferred agents use Follow Up Boss, which is CRM that we own.
That has interesting and unique data to make the LLM experience on Zillow even stronger. You get through offer writing. dotloop, which we own, has 50% of all offers in the country go through dotloop. Then we're starting to ramp up Zillow Closing. You put all that together, there's a lot of interesting data and unique data to us, not just at the tippy top of the funnel, but all the way through the transaction, that allows us to make our proprietary LLM smarter. That will be the experience on Zillow over time. That's pretty well-differentiated in a real estate category that is highly fragmented, highly complex, infrequent, and messy. We're doing all that. We've been doing it for a very long time. AI just accelerates all of what I just articulated.
I think one of the things that I've realized over the past two or three weeks as this has been a bigger conversation, is so many of the investor community doesn't use Zillow the way that we get paid, right? If you look at it and you use Zillow solely to just search homes at night, that's not how we get paid. We get paid all the way through of what I just articulated, and part of why we're doing this AI Day on March 24th, is to really expose that entire transaction life cycle and really understand from a buyer, a seller, a renter, and an agent, what is their experience within Zillow's ecosystem?
It's wonderful for me to talk about all the things I just talked about, but until you feel it, until you understand what we actually do and how we get paid, the quick bear case will be, "Oh, but what if somebody gets MLS data?" Like, okay. Like, if somebody's gonna get MLS data, they will get access to photos. That is a world we have lived in for a very long time. We've built so much more value all the way down the transaction, and that's how we get paid. We see it as this really substantial accelerator for us because of all the unique data that we can feed into our own proprietary experiences, but we've got to go prove that out, and it's important to be out and chatting with you all while you're trying to figure it out.
You mentioned their Zillow proprietary LLM or some sort of experience. You know, when do you think we can start to experience that as consumers using more conversational search in the home search process? I think I could see that being a differentiator for certain portals that are able to get to that point, and it's eventually gonna become the consumer expectation on search across almost anything, I would imagine, as you look out five, 10 years. When do you think we get there, and the level of investment and product development required to make that happen as well?
We're live now. We're testing it with a small number of users, and we're testing with a small number of users because it just has to keep getting better, right? Like, you don't wanna just. When you're releasing something like that could be pretty transformative for us. You don't wanna release it very widely, and it's not a great experience, right? It has to get better. We are live now, but what's unique about what we are doing, and you'll see more of this as we get to our AI Day, what we are doing is not just chatbot about a listing, it is an assistant that takes you through all of the transaction process. All the things I just articulated, our assistant will guide you through that.
It is not just, "Hey, what is going on on this property, and how many bedrooms does it have?" Something like that. It is, "Here's what's going on with the home. Let's help you understand that, and then when you're ready to take a tour, we're gonna facilitate that. When you're gonna meet a lender, we'll facilitate that. When you meet an agent, we'll facilitate that." All of the proprietary data that comes into those experiences, we're gonna guide you all the way through the transaction process. That's gonna be really hard to replicate because of the brand scale we have, the audience we have, and the unique data that flows through. That's where we get really excited.
The other thing we get really excited about in that future experience is it really widens the aperture for us to interact with consumers, right? Today, a map-based search with filters, it's great. It's as good as it can be, but there are a lot of questions we can't answer. Even in the early days of testing, our agentic experience, you're seeing these really rich conversations that would otherwise have no possibility to do for a consumer. The amount of queries come up, the amount of time you spend on Zillow comes up, and we're gonna make you more and more qualified, so that when you're ready to meet a real estate agent, you are really understanding what you're doing, which ultimately will mean higher conversion, which is a good thing for consumers and obviously a good thing for agents.
That's what we get really excited about. We've got to go prove all that out, but it's pretty obvious to us that it's a big win because it likely is gonna have people spend a lot more time with us through the shopping cycle. In real estate, it's a really long transaction cycle. There's a lot of starts and stops. It's not just like buying shoes. It's you're gonna go and make the biggest purchase of your life. Let's have Zillow alongside in an agentic experience that can help you through that discovery process, and also help you through the entire transaction process.
Do you foresee any risks or changes longer term to the role of the buyer agent, the human agent, in these connections?
I think our view is work with productive agents. Work with the best agents in the country. Because a real estate transaction is so infrequent, so expensive, such a big part of your net worth, and so emotional, people like advisors there, and they like good advisors. That's what we have oriented the business around. You know, 2015, we were, "Let's bring as many real estate agents as possible onto the platform to work with our customers." We've been pretty significantly culling that, to the point that now, you know, 20% of all of all agents do 80% of all transactions, and we work with that group of people.
Our perspective is all the things that we've just talked about. AI can make them more and more productive. The more and more productive agents who are using our technology, who are working with our highly qualified consumers, end up being the winners. That's been a story for a longer period of time. Like, we've been on that journey for a long period of time. We think AI pushes it even further that we can take so much of the busy work out of their day-to-day and let them work with consumers and do what they do best. That's our expectation. Our expectation is you're still gonna want that advice. At the end of the day, you're gonna want a human being on the ground to really be your therapist through a big purchase.
We're just gonna do as much as we possibly can to have that be the real estate agent's job rather than the busywork. We do that, you know, Follow Up Boss is a good example. We are now allowing the AI to listen, obviously opted in, but allowing the AI to listen to calls that agents have, type up smart messages, give them text messages that allow them to not have to go and write all their stuff down. Like, we're saving hours a day already with, like, fairly rudimentary stuff comparatively. We feel like we can make so much more productivity gains as we get smarter and smarter with the LLM.
The core part of your enhanced market strategy is that you bring the various pieces of the business together between Premier Agent, Home Loans, so again, software services for these agents. You've talked about 44% of the connections are now happening through these enhanced markets. The ambition is that is for that to be 75% +. What variables dictate the pace at which this strategy rolls out? Which aspects of it take longer to build, as you think about that roadmap?
The biggest, gating item for us in terms of rollout for, the enhanced markets is getting the integration between the loan officer, the Zillow Home Loans loan officer, and the preferred partner agent. That relationship has to be really good. It's a mutual sales cycle where an agent and a loan officer have to work well together, and they have to service the mutual customer really well. Building trust takes time. Like, you really only get. If we want a shot at the Mortgage business and we ask a real estate agent to help give us a shot and work with mutual customers, they have to believe that we're gonna do a good job.
You really only get one chance at a first impression, particularly in a real estate market where transactions are hard to come by. We're going to be methodical there. We're obviously moving as fast as we possibly can, but getting the mortgage integration with the real estate agent right is what paces the move in, into the enhanced markets.
On that point of Mortgage, what is the long-term ambition for how big and significant Zillow Home Loans can be for the business? Where do you see it going, and what's the general aspiration there?
Yeah, for context, for anybody that's not as deep in this as I am, we grew Mortgage 53% this past year on Zillow Home Loans, that is. We are now probably just around a top 25 lender in the country. We've made good progress over the past few years, but we're still basis points of share. The Mortgage market in purchase is extremely fragmented. The leader in the space maybe has 5%. We look at that, and we say, "We should be one of the biggest lenders in the country." We have great technology, we have a great brand, and we have really good real estate agents to pair with the Mortgage product in an integrated experience.
We're growing quite nicely, but the opportunity set from where we are today, which is great and growing and all the things, but where we could be is a lot bigger, and it's on the back of, you know, a really fragmented marketplace and one that we should be able to grow quite nicely. We haven't put out some long-term target around it, but our ambitions are to be one of the biggest purchase lenders in the country.
If we come back a bit to the Residential portion of the business, it's undergoing a bit of a business model shift, right? From market-based pricing, which is your traditional lead generation model, to now preferred, which is more of a transaction-based sort of revenue or commission share agreement with agents. Can you just talk a little bit about how that transition in the business model impacts your sort of relative performance rate? My understanding is there's a bit of a J-curve, as you move people over. You maybe upfront lose a bit of co-marketing dollars, but then over time, as transactions happen, you should be making that back. We talked earlier about incentives being aligned longer term as well. Can you walk us through that piece a little bit?
Yeah. Whole strategy is deliver a ton of consumer value, deliver a ton of partner value. We think the best way to do that, between buyers and real estate agents is to align where we get paid when they get paid. That's the preferred model. That is the model that, you know, will be the majority of the business and growing to 75%+ , as you highlighted earlier. As we go through that, what we're doing is we're changing the revenue from prepaid advertising to sharing at the commission. What happens there primarily is just you go through a point in time where the Mortgage revenue from Zillow Home Loans comes later because the transaction happens later. Whereas what you referenced, co-marketing, that's where a mortgage lender is paying alongside a market-based pricing advertising model.
What's different is you start to see the Mortgage revenue come in a little bit later, and we go through that model shift. you know, we knew that was gonna happen, and it's totally comfortable, and we feel really good about the growth of our Residential business, our For-Sale business, which is the combination of Residential and Mortgage, and obviously, total company. We are going through that shift, and there's just a lag in the revenue that comes off of Mortgage as a result.
How do you think about the monetization of the Residential, like the Premier Agent piece in new model versus old model? Eventually over time, get better with the new model? How do you know, what have you learned, I guess, from the markets that have already gone live with this?
Yeah, the key there is more transactions, right? Driving more transactions. That's through a combination of bringing more people through and also higher conversion. We see across these enhanced markets, continued conversion uplift, and that makes us really excited about it, why we're moving as fast as we can. We're also seeing consistent adoption of Zillow Home Loans. The two key metrics, regardless of MBP versus preferred or any headwinds in luxury versus first-time home buyers, like, market will always move around. The key to us, what we look at, is cancel all that noise out for a second. It's: Are we converting more customers, and are we adding more revenue per transaction? We're seeing that consistently feel good about it and why we're running as hard as we can at the enhanced market opportunity.
It's obviously a tough macro backdrop to be running against. You've got existing home sales that are bouncing along this 4 million number, give or take. On the last earnings call, I heard you sound more optimistic about the backdrop than I think in previous periods, the main factor being affordability starting to get better. What are you seeing with your agents on the ground? What's the feedback from operations on the ground around affordability, and how that is feeding into your broader view of existing home sales for this year?
Yeah. We did not model much of anything in terms of macro improvement. Where we are a little bit more excited is your point on affordability, which is we're starting to see wage growth outpace home price appreciation, and we're starting to see affordability come down as a result. At the peak of unaffordable two years ago, roughly 38% of your income was going towards housing. That number, at the end of December, was 32%. The magic number from economists is around 30%, that you start to say, "Okay, this feels affordable." We see affordability getting better. It's on the margin, right?
Like, when I say maybe I'm a little bit more excited than I've been the last few years, I don't expect some, you know, ramp up in a way that we see 5 million or 6 million home sales this year. I do think their affordability on the margin is getting better. We have not seen that play out in activity yet in this winter. Some of that has been weather-related. Like, it's tough to put your home on the market when there's 30 in of snow type going on, as many of you, I assume, have felt.
Yes, on the way to this conference in particular.
Exactly.
I think you've talked about a $1.3 billion revenue opportunity as the market hopefully eventually recovers to that 6 million a year normal cadence of transactions. What are the underlying assumptions you've made there on market share in that bridge?
The market share assumptions are we stay where we are. Like, that is just purely a macro move. we thought that was the right way to think about... Like, we tried to isolate, "These are our mid-cycle targets." We tried to isolate what's totally in our control, then what's macro. macro, we didn't expect that we would have more share. We just said, "At the share that we are, you get the macro improvement. What does that mean?" Obviously, we want to take share, we expect to take share, but when we put that assumption in, we want it to be as intellectually honest as possible.
Maybe a quick aside and reminder for folks in the audience, if you'd like to submit questions, you can do so via the QR code, but I've plenty more here that we'll get into. You know, we've talked a lot about the For-Sale and For-Sale piece of the business. If we switch gears a little bit to Rentals, this is a portion of your business that's doing quite well. You've talked about 30% growth this year, even as you start to lap that arrangement that you struck with Redfin last year. So good underlying growth there. Supply continues to grow.
How do you get from the $600 million + revenue run rate to that billion-dollar target when you think about the components of supply, mix shift as you upsell customers on more premium plans, and then pricing on a like for like basis? Walk us through some of the components of that longer term target.
Sure. Maybe I'll zoom out on the rental strategy first-
Sure
... just because it is, it is pretty unique and interesting. In For-S ale in the country, there's the MLS. That is the organizing function of supply. In Rentals, there is no MLS. Our goal is to be the one-stop shop for all things Rentals. That's what the consumer wants. The consumer wants to see all homes for rent that are Single-Family homes, and they want to see all homes for rent that are apartments or condos or whatever else. That's the strategy we've been pushing on. We now have over 70% of all the single-family homes in the country on Zillow, which is primarily unique to us as well. Going back to some of the questions around content, Rentals, single-family homes, primarily unique to us.
That drives really good traffic because we have more selection than anyone else, so it allows us to drive organic traffic. That organic traffic allows us to show up at a multi-family operator's office and say, "We should be taking your apartment buildings on Zillow as well because we have more traffic and higher quality traffic than anyone else." That, in a nutshell, is the strategy. It has been a labor of love for a long period of time. Single-family home rentals are very hard to find and very hard to make unique, but we've been able to do it quite well with great product ingenuity and brand. And now we are really well monetizing the apartments portion of the Rentals market, and that's been really the main driver of growth the last few years.
You know, stats-wise, we're now at 72,000 buildings as of the end of December. That's more than double two, three years ago. The growth has been really strong, and that's translated quite nicely to revenue. Revenue grew 27% in 2024, 39% in 2025, and expecting to grow 30% in 2026. How do we grow further, right? The Rentals category for us is $630 million at the end of 2025. We've been quite clear that we have a clear path to a $1 billion+ in that business in these mid-cycle targets, and we think there's a far bigger business to build beyond that. The way we do it is continue to add more buildings.
We're 72,000 buildings out of a addressable market of 140,000. We need to keep adding buildings. We need to keep adding value such that the existing buildings and new buildings want to spend more money with us. That's just through really good ROI, those two levers are the ones that we think about growth from here. We have been, you know, we have best-in-class ROI, that's by design. We want to be able to be a preferred advertising source for these operators across not just internet listing sites, but also they spend a lot of money with folks like Google, they're telling us that our ROI is better than anyone. It's like, okay, let's go get the share of all of that as best we can.
That really is gonna come down to, can we keep adding more buildings, adding wallet share? That's gonna come off of, like, can we fill more leases, and can we keep growing traffic, which is, you know, that's been a good formula, and we think it's a really good formula from here. We're a lot less focused on pulling price because we think there's so much wallet share to go get and so much market to still get.
Do we know what the ceiling on building count or volume count can be?
The addressable market is 140,000. I think when you get into the tail end of that, there'll be things like senior living and, you know, student housing, things like... It's not gonna be all big apartment buildings in New York, but we think there's still plenty of apartment buildings to get. Again, if you zoom all the way back, we wanna wake up in some time in the future and have most, if not all, of the Rentals, no matter what it is, on Zillow, because consumer wants that. If consumer wants that and we become the one place for them to go look for a rental because we have all the inventory, there are a lot of business opportunities for Rentals beyond just multifamily advertising as well.
With the single-family homes, is there monetization opportunity there as well, or should we primarily think about it, as you mentioned, traffic acquisition, and then it feeds that overall network effect?
It's primarily traffic acquisition and network effect. We lightly monetize it today, a natural question is like, why have we been able to build so much supply? Why have we been able to get so much of it unique to us? You cannot build a sales force to sell into the dentist in the middle of the country that owns two rentals. Like, there's no enterprise sales effort that you can possibly do. You have to be able to attract that person via brand. Zillow's brand, known for housing, like, is a great start. We have a bunch of these people already on Zillow. We've been able to attract them that way. We then make the ability to get leads, to take payments, to create leases, all effectively free to that landlord.
They're able to basically fill their vacancy on Zillow without having to pay any money. That's huge value, and they don't go anywhere else because they're satisfied. That's the supply portion of the Single-Family Homes business. On the consumer front, the way we monetize is via an application primarily, and that application, if you're in our network, you pay one time, and it travels to any home that's for rent in the network. It's a common application, which is real benefit to a consumer. They don't have to apply all these different times. The one application they take goes throughout the network. That is how we created it. We started that in, like, 2015, 2016, something in that timeframe. It's a, it's a long slog, but it feels very, very durable, and it's now allowing us to grow the business, substantially with multifamily operators as well.
Speaking of Rentals, one of the aspects that investors have been debating recently has been around some of the regulatory or legal headlines that have hit the business in the last few months. One of them has been specifically focused on the Rentals business, which is the FTC case that is placed against the arrangement between yourselves and Redfin. Any impact on how you were thinking about running the Rentals business this year, right? Given there is some sort of pending risk that maybe that agreement has to be unwound, how does that influence how management and the sales teams on the ground think about upselling these customers into your broader distribution, which I imagine is a pretty strong pitch you can make today, but if that's in question, how does that change your day-to-day?
I can't comment on active litigation. What I can say is we feel really good about the partnership. The partnership has worked really well. We obviously feel confident that we're gonna grow from here and expect to grow 30% in 2026. Bringing Redfin on as a source of demand has been great. They've done really well with us, and obviously, our partners really like it because we're perceived to be best in class ROI. All of that is working quite well. With respect to the case we feel good about our defenses is maybe the best way I can say it. From a consumer perspective, it's pro-competitive because Redfin and its sites pre-partnership had 20,000 or so buildings. They now have 72,000 buildings.
We are actually competing for traffic with Redfin. Renters are seeing more inventory in more places. That's pro-competitive. On the property management company side, the payers, they're seeing best-in-class ROI. We've been able to do both of those things. We're happy to defend ourselves and explain that, but feel quite good about the defenses because it is so pro-competitive on both sides of the market.
Yeah, I appreciate there's not much you can say at this point. I guess the one other case that has come up to some degree recently has been around the RESPA case or the or the dynamic in in the enhanced markets between the Premier Agents and the loan officers. Similar question there, to the extent that you can talk about how you feel about your position in that. Just any changing views on how to operate and manage that relationship between those two sides of the business?
Yeah. The case itself, we find, is deeply mischaracterized the business, so we'll put the case to the side. How do you operate within the framework of RESPA is something that we think about every day and something we've thought about since the moment we started in Mortgage, because Zillow is a big brand and RESPA is a gray area law, and we knew Zillow, being a big brand, was going to have scrutiny around RESPA, and we've designed programs with that in mind. When I think about what we're doing from a consumer perspective, is we're giving folks choice, right?
We think an integrated transaction is the right one because it makes it easier for a consumer to transact, but there's obviously a ton of choice that comes alongside that, and that's backed up by the fact that we're double-digit adoption rate, which we're proud of. We're double-digit adoption rate in Zillow Home Loans, but that's a portion of Zillow customers, meaning anywhere between 85% and 90% of folks that consumers that go and work with our Premier Agent aren't using Zillow Home Loans. There's obviously a ton of choice there, and we expect that to be the case going forward. People need choices. We think if we compete well on price, on service, and on technology, we hope to win that business, but we're doing it through those means rather than anything beyond that.
In terms of the ability to improve attach rates on Mortgage over time, operationally, you know, what do you anchor on, and what's the ambition there for that relationship growing?
It's gonna come down to, you know, can we deliver a great consumer experience on Zillow? Can we help people better understand what they can afford, better understand the value that they can offer a home, all of those sorts of things? We should do that on Zillow through things like BuyAbility that we've built and others that we'll build in the future. Such that by the time you're ready to get off the couch, you're actually pre-approved with us. Like, that's a great outcome. That's a smarter buyer, that's a more high-quality buyer, and ultimately, likely a more high-converting buyer as well. We've got to do that. We've got to be competitive on price.
We are competitive on price, and we've got to deliver service such that we're closing on time and doing all the things necessary to make sure the transaction actually gets done. That's how we win here. If you go back to, like, what is the Mortgage opportunity? That's the opportunity, right? It's brand, it's technology experience, and then it's delivering great service. Because we are, you know, we are one of the key places that people start their home buying journey, one of the key questions is understanding what you can afford, and that gives us a great in to get people to use Zillow Home Loans, and then you pair them with a great real estate agent, and it all comes together quite nicely and is, you know, the building blocks of what we've already been doing.
Switching gears a bit to margins. I think what we've seen from the business recently is that there's been more consistent margin expansion. This year, you talked about 200 basis points or alluded to, you know, the last couple of years as a framework, which pointed to about 200 basis points of margin expansion, and that includes some legal headway as well. It seems like the underlying margin of expansion of the business is actually getting better, even with the increased litigation costs. Can you talk about what's happening there and what's helping that? Are we just at a point of scale now on the revenue front, coupled with, just culturally, how you're managing the cost base overall? Like, what's allowing the margin expansion to get better on a core underlying basis?
I'll take the legal one first, and then-
Sure
....go to margin expansion overall. We have about 200 basis points of headwind, we estimate in Q1 around legal expenses. The reason that is because the Redfin matter, FTC matter we just talked about is fast-tracked, so we'll be in that trial sometime over the summer, is what we estimate. As a result, we're compressing a lot of time to get ready for a trial in a short period of time. Usually, you have three, four years for these things, and we have, whatever, five, six months. That's why it's heavier in the first half of the year, then we expect it to tamp down in the second half of the year and be ultimately 100 basis points of drag to EBITDA throughout 2026.
Underneath all of that is just really good cost discipline that we've had infused in the company for, you know, almost three years at this point. That's, yeah, it's cultural at this moment. Like, every year that we get into annual planning, at this point, people know the fixed part of our company is going to be flat. Like, we're going to continue to push on getting more out of the same number of people, and we're able to do that by good prioritization and thoughtful things like that, but also AI helps us there. Right? Like we are not by any means slowing down. If anything, we've gotten faster at product development, and you've probably seen that if you followed us the last few years.
The product development is ramping, and we're able to do it with the same number of folks as a function of some of it being AI-related.
Does the AI aspect, as a CFO, the world's changing very quickly as you kind of look at the capability of these tools and how you think about managing resources. I mean, how is your worldview around this changing? You know, do you envision being able to do a lot more with less at a quicker and quicker rate? Do you envision running even leaner? Like, how do you think about just what all of this means for the productivity of the Zillow workforce?
We think the opportunity for us is far bigger than we are today. We start with, "Let's invest in all the places we think we can grow." Right? Underneath that flat construct, there's a lot of ups and downs, associated with product development. At the moment, that has worked really well for us. Now, if tools change and we can do better, great. I think the ability to take savings, reinvest into product development, and run after these really, really big opportunities, that's been the goal the last few years. That's what we've executed on. We've been able to drive really nice leverage in the business. We've expanded margins 200 basis points in 2024, expanded margins to 200 basis points in 2025, and expecting similar framework for 2026.
We've been able to do that with growing the Mortgage business the way that we have, the Rentals business, the way that we have, introducing Listing Showcase, introducing Zillow Pro. Like, these are really impressive things to do. Adding all these features and Follow Up Boss, like, all of that speed, agility, and new product development is happening with the same number of people, and it's allowing us to grow revenue in the mid-teens, despite a housing market that has been really challenged. That feels like the right formula. To the extent things change over time and we can, you know, do more, we'll obviously look at that. The formula of, like, "Let's do more with the same," I think, one, is a great employee message, and two, is a really important message for long-term growth of the business.
In terms of those core product development or investment areas for you in 2026, does it look the same, or are there other ones you would highlight in terms of focus areas?
I think it's, you know, it's executing on the same strategy that we have talked about for a while now. We need to grow our Residential business, we need to grow our Mortgage business, we need to grow our Rentals business. Then the exciting one that's not included in our mid-cycle targets in any real way is Zillow Pro. I'd say that's the most interesting new product development that we're out in market, really in beta right now. That's one other. It's not a contributor to 2026 revenue in any meaningful way, but we think it meaningfully expands the serviceable addressable market that we have.
What we're doing is taking all the goodness from these enhanced markets and Follow Up Boss, and extending it to real estate agents' sphere of influence, so that they start to get those tools to work their customer that they don't meet on Zillow. Maybe just, like, breaking down the funnel, you have 100 people that are on Zillow today-- or sorry, 100 people that transact today, 70 of those folks are on Zillow. 6% transact with us, 25% of the people actually reach out to us. Our opportunity on Zillow is make that 6%, 25%, there's the 25 to 70 that may not ever transact with us. Zillow Pro. They're on Zillow, they're shopping, they're buyers. Zillow Pro helps us access that addressable market.
Again, not a big contributor this year, but the expansion of addressable market is really exciting as well.
The explanation on why it's not a big contributor this year, is that simply because of the timing of the beta test to broader rollout, or is it something else?
It is just we are beta testing. Price for adoption and planning to learn a ton. Like, one thing that we've learned time and again, over the years is, real estate agents are really busy small business entrepreneurs. Introducing new technology takes time, takes training, and you learn along the way, what works and what doesn't work. We've done that, you know, consistently, and we've figured out ways to grow quite nicely. Zillow Pro, we're gonna learn a ton through the course of 2026, and then we expect it to be more meaningful in the out years, 2026 is really about learning and adoption.
The longer-term margin target is about 45%. Today, sits at roughly half that, give or take. you know, how do you come up with the 45%? Why is that the right number longer term, and help us work towards that?
Yeah. The framework of fixed staying flat, there's gonna be some inflation there, but fixed staying flat with inflation is a big driver. As you grow revenue, you see margins expand. Variable will grow where we see opportunities. Marketing will grow where we see opportunities. Fixed cost leverage is an important one. Macro recovery helps. We did an estimate, if we had the 6 million homes sold in the country in 2025, what do we think our margin profile would have been? It would have been mid- to high 30%.
There's not... That macro is gonna matter as well, and it's, you know, we wanna be very clear about that in the mid-cycle targets. There's a lot of margin expansion to go without macro, but macro also helps. When we build all that out, you know, we're not that far away in a normalized housing cycle.
We're at the point now where we should think about pretty healthy incremental margins from this business.
Yeah. I mean, you've seen it the last few years, and we expect to continue to do so.
Closing question for me is just, you know, what do you want to leave investors with? What should investors continue to expect of Zillow from here as you look out over the next few years? We'll leave it to you.
Yeah
You know, set the stage.
Yeah, it's an interesting time to say, ask that question. I think strategy feels very sound. Execution has been very good. We expect it to be very good. We see AI as a meaningful accelerator because of the complexity of the real estate industry, all that we've built, all the proprietary tools that we have, all the proprietary data that we have, and the brand that we are. We're really excited about the future, and excited to chat with you all.
Great. With that, we will leave it there. Jeremy, thank you so much for your time. Thanks, everyone, for listening in as well.