Welcome, everybody. We have the Zillow Fireside Chat at the Goldman Sachs Communacopia + Technology Conference. My name is Mike Ng, and I cover Zillow here at the firm. It's my absolute privilege to introduce Jeremy Hofmann, who's the Chief Financial Officer and Chief Operating Officer at Zillow. First and foremost, thank you so much for being here, Jeremy. I really appreciate you coming out here again.
Yeah, thanks for having me.
Awesome. To start things off, I would just love to ask a big-picture strategic question. Zillow, clearly a household name, the primary digital front door for real estate discovery, diligence in the U.S. An incredible amount of reach as measured by unique users. Could you just walk through some of the core operational pillars of the Zillow ecosystem and how the strategy has evolved over time?
Sure. Yeah. We've been in existence for about 20 years now. I'd say the first 15 years were really around building what I'd call the dream and shop layer for our business. So what most people know us for today is you go on Zillow and you dream and shop. That has yielded great benefit to us. So our brand is quite strong. We're anywhere from 70%-75% of category share in real estate online. The term Zillow is more often Googled than the term real estate, and 80% of our traffic is direct to us. That comes from great product and innovation and really building that dream and shop layer. And it comes from having more content than anyone else across existing homes for sale, rentals, and new construction. So the shopping experience is more robust than you'll find anywhere else.
That was, I'd say, the first 15 years and the mission around really building a big consumer brand. Over the last five years, we've been building out, as fast as we can, a transactional layer and underlying operating system for real estate. I'll click into each of those because I think they're important. They're the things that are driving the revenue growth but probably less understood to a day-to-day consumer. On the underlying operating system front, we now power 90% of all tours in the country with Zillow through ShowingTime. Dotloop sees 50% of all offers in the country, another piece of software that we own. Our Rich Media, which is proprietary technology that we built and developed around floor plans and 3D media virtual walkthroughs, that's on more than 10% of all listings in the country today. In our biggest markets, it's upwards of 30%.
Last but not least is Follow Up Boss, which is a CRM that we bought now about three years ago. That is the CRM for the most productive real estate agents in the country. That is the first thing they log into on a day-to-day basis. We have about 138,000 active users of that on a monthly basis, which is up over 20% year over year. Within the most productive real estate agents, the folks that we work with, that we call Preferred Agents, who really work with our consumers, pretty much all of those Preferred Agents who are the most productive agents in the country use Follow Up Boss. We have the dream and shop layer, we have the operating system layer, and then we have the transactional layer. That transactional layer has been the big set of bets that we've made over the past few years.
It's really been around move the brand from just dream and shop to buy, sell, rent, and finance. Underlying those words has been really good growth. Zillow Home Loans has become a top 25 lender in the country. We continue to take share both in buy-side and sell-side transactions with Preferred. We are rapidly growing our rentals business on the back of that strategy as well. So that's been the strategic evolution. Started with dream and shop, moved into operating system for real estate professionals, and a transactional layer. The biggest challenge we've had in the category, and the biggest challenge with the real estate category online is it is a long shopping cycle, it is an infrequent purchase, and a lot of it still happens offline. Now we fast-forward to today.
AI gives us the opportunity to really accelerate and reinforce all three of those layers and give people so much more advice than we were able to do when it was solely map-based search. In each of those layers, dream and shop, we are now able to marry a really comprehensive and good visual search with a conversational assistant to learn more about what you're doing from a dreaming and shopping perspective than we were ever able to do before. We can answer so many more questions with AI and having an assistant guide you through that process. On the operating system layer, we are great builders of software. We have made the products better with AI, and we are the most capable technologists in the real estate space. The software strength that we have from those assets I highlighted earlier get only stronger with AI.
Last but not least, the transactional layer. There's so much more advice we can give people using AI in the transactional layer than we were ever able to do when it was solely map-based search. We look at today and say in the way that we've built the business and the underlying layers that we now have, AI becomes a reinforcement mechanism and an accelerant. To finish all that off, we've been executing quite well through this period of time as we've been on this strategy. The company's grown revenue 29% annually since being public at a 29% CAGR. Last few years, we've grown revenue mid-teens in a housing market that's been as challenged as it's ever been. We're growing profits faster than revenue.
We're growing net income faster than both EBITDA and revenue, and we've shrunk the share count by, call it, 10% over the last, call it, three or four years as well.
Great. Yeah, to your point, the results in many ways speak for themselves, in terms of the revenue growth that you've been able to deliver and what's been a very sideways real estate market. Yeah. I was wondering if you could talk a little bit about how unifying the CFO role and the COO role positions Zillow, allows you to execute with a higher level of speed and effectiveness.
Yeah. It's been a pretty seamless transition. I stepped into the role about a month ago, alongside our last earnings call. I've been at the company for almost a decade now. I've been heavily involved in the strategy and operations of the company through that period of time. Know the leaders well, I've worked with the management team. I think combining the roles, what I look forward to and what I've enjoyed even in the first month since, has just been, can we move with more speed? The strategy feels pretty well set. The structural growth algorithm is intact, and now it's how fast can we go and capture that? Going back to the first question, how much can AI really accelerate the business strategy as well?
Great. Moving to some of the revenue lines within the financial model. Maybe we can start with for sale revenue. That line grew 13% year-over-year. Looking out into the second half of 2026, an increasing portion of for sale monetization moves from residential into mortgage. It's a little bit harder, I think, to tease out what's happening as it relates to the underlying growth of the business, just because of some of that movement. Maybe you can just shed some light in terms of what's happening there in that residential to mortgage transition and how we should think about just the underlying growth of the business.
Yeah. For those of you that may not be as familiar with Zillow, what we're doing is we are moving the primary monetization model with real estate agents from a pay upfront ad-based model to a success-based model when a transaction closes. That is the move from market-based pricing to Zillow Preferred, which Mike just called out. That is a better business model for us because it allows us to more tightly integrate with the real estate agents that are working with our customers. It allows us to be more directive on the software and tooling that they use in service of those consumers. Then it allows us to better integrate services like Zillow Home Loans because we are working with the real estate agents in a more tightly integrated manner. So that's the reason why we're doing it.
What it means is that some of our residential revenue actually shifts into the mortgages category. As a result, there are some moving pieces that we outlined over the course of the next few quarters. When we get past that transition, why did we do this. Why do we want to do it. It is to accelerate our transaction layer, basically. Having a tightly integrated set of partners who work really closely with us and are incentivized the same, like all of us being incentivized the same way, which is basically happy customer, right. A consumer moves, agent gets paid, we get paid. That's a great mechanism to build a transaction strategy on top of, and we see our revenue per connection actually increasing as a result.
In the Zillow Preferred model, in 2025, that grew 23% more than the legacy ad-based model, and we expect that to be roughly 35% more growth in 2026. So it's a better business model. It's a bigger opportunity because we can touch more transactions. Then it's coupled with our Zillow Home Loans business getting profitable, so we can profitably scale that as well. That's why we're doing it. That's why we're so excited. The moving pieces between residential and mortgages is just mechanically what we have to do as we accelerate. We wanted to make sure folks understood that, but the underlying growth drivers feel well intact for us.
Great. Zillow has also made a lot of progress monetizing the sell side of the transaction, which I guess hasn't always been the case. Maybe we can talk a little bit about Zillow Showcase, which has scaled to 5% of all listings nationwide. How's the expansion of listing products like Zillow Showcase and agent software packages like Zillow Pro helping with your relationships with listing agents and brokerages? From a strategic standpoint, do you view some of the standalone software subscriptions evolving into distinct high margin, recurring revenue streams beyond just the transactional-based nature that some of your other revenue streams are based off?
Yeah. What I talked about in Preferred is basically how we come to market with buyers looking to buy a home. It's integrating agent and integrating Zillow Home Loans, and ultimately other adjacent services as well, doing more and more of that online. What Mike Ng's asking about is now what are we doing on the sellers, the folks that are looking to sell a home now. We've been able to grow our share there fairly rapidly over the last few years, primarily on the back of a product we call Zillow Showcase, which is a souped-up listing. It's basically you get higher quality photo, a digital walkthrough of the property, an integrated floor plan so you really understand where you are, and that's all built on our technology that we've been developing over the last, call it 10 or so years. The seller, that's been great.
We've been happy to grow the way that we have. I think seller continues to be an opportunity that is far bigger than even what we've been able to do, and that's where I get really excited about some of that conversational assistant stuff we were talking about earlier, where before we have had a Zillow AI mode, there's only so much you can put on a pixel. Or, sorry, there's only so much you can put on a screen.
Yeah.
Right? It's like, contact an agent, get pre-qualified, take a tour. That's about as much as a consumer can handle on a listing. In a conversational way, there are so many more ways in which we can interact with consumers. On the sell side, nothing to share today, but there's a lot of exciting ideas around the ability to be more impactful in helping people thinking about listing, potentially listing their home, and on and on. We pair that with best-in-class real estate agents to help guide them through. But there's so much more we can do online than we were ever able to think about pre having this really rich conversation back and forth with prospective sellers. So buy side feels well intact.
Sell side, there's a lot of growth to come on the back of what we've already seeded, plus the ability to use AI to make a seller even more thoughtful in what they do. You couple that with this software that we've either built or acquired over the years. To your question there, what we're trying to do is make a real estate agent's life easier, and make them more productive. We invest heavily to go do that. The software business for us, the software line item, is already decently sizable. It's part of the reason why residential has grown the way that it has. Most important in the software is to really help facilitate transactions. Yes, there's high margin business on top of that, but the bigger opportunity is around transactions.
With the software that we have, we want it really for adoption, and we'll make money on top of that, but it's really around adoption such that the transaction strategy is even further accelerated.
Perfect. If we could turn to rentals. This is a business where Zillow certainly hasn't achieved their fair share yet, and I think that speaks to some of the very strong growth that you've realized in that business to date. I think you have guidance for high 20% year-over-year revenue growth for the upcoming quarter, 30% for full year 2026. I was just wondering if you could walk through some of the levers that are driving that high growth trajectory within rentals, and any moving pieces that you would call out just as we think about the full year outlook.
Yep. Just to level it up, the stuff I've been talking about to date has all been on the for sale part of our business. We have two main lines of business. It's for sale, which is residential and mortgages, and then rentals. As you think about how to think about the growth in Zillow, there's for sale, there's rentals, there's total company, and we've been able to grow those quite nicely, because the business has diversified more than it was maybe five and 10 years ago. The big driver of that has been the Zillow Rentals business. The strategy there is to be the place that has all the rentals inventory available. It is single family homes for rent and apartment buildings for rent. That's like a labor of love.
We have been after it for a long time, but we are now at a point where more than 70% of all single family homes for rent in the country are on Zillow, and the majority of those are unique to us. That drives traffic advantage. As we have been able to do that, we have been able to rapidly grow our multifamily apartment buildings on the site as well. That has been the big driver of revenue growth over the past three or four years. Going forward, the goal is to get more and more of that inventory, and then with multifamily, specifically, it is continue to grow properties and to continue to have the advertisers that advertise on Zillow spend more with us by upgrading their packages.
It has been a pretty tried and true strategy over the last three or four years. The business has grown quite well. We think we have a real right to win in multifamily because our ROI is best in class.
Great. I guess related to rentals, I wanted to ask about the Redfin partnership. There was a recent settlement reached with the FTC and Zillow as it relates to the Redfin partnership. I was just wondering if you could lay the foundation for what the partnership was, what the settlement is, and if there are any changes that come on the back of that.
Yeah. This would have been early 2025. We did a partnership with Redfin, which basically had us distributing our multifamily content to Redfin's sites and apps. Redfin drives more and more traffic to their sites and apps, which provides value to the Zillow advertising product. A property management company who was the buyer of this advertising before the Redfin partnership, when we went and sold to them, we would say, "Hey, you are going to get great exposure on Zillow, Trulia, HotPads, realtor.com." That was another partnership we did. Fast-forward to post doing the Redfin partnership, we could walk into those folks' offices and say, "And by the way, now you are getting Redfin, rent.com, and Apartment Guide." This is expanding our network, expanding our reach. For us, it is a win because it allows us to give even more value to the property managers.
That's allowed us to really grow that property count. For Redfin, it was a win because they were getting more content than they had previously, so that helped their traffic. For consumers, it's a win because consumers are now seeing more properties on more parts of the internet. It was a pretty clear win-win-win, which is when you get into these partnerships, the only way they work is everybody has to be happy. Otherwise, one side doesn't invest. That's where we went. FTC had some questions about that. We got to a settlement probably about a month ago or so at this point, maybe a little bit less than that. We're pleased with the settlement. The partnership stays intact, so the way that we sell today will be the way we continue to sell.
There will be potential SKUs of Redfin-only and Zillow-only ad products. That adds potential ad products to the marketplace. But the most attractive advertising to these property management companies will continue to be what we are offering today. Not a lot of change to the business as a result.
Right. Nobody would willingly reduce their reach, I suppose.
Yeah. When you put yourself in the persona of each person, it's like a consumer wants to see more in more places, a property management company wants to advertise in more places, and both we and Redfin are incentivized to grow the pie.
Great. Very clear. If I could jump back to the for-sale piece, just to talk about mortgages since we haven't gone into a deep dive on that. Just given some of the macro softness across the residential lending industry, how does Zillow view the sustainability of mortgage revenue growth? How does the company balance scaling originations and profitability, particularly given that mortgage rates likely will remain elevated for the rest of the year?
Yeah. I'll take it in pieces. From an overall opportunity perspective, we are only scratching the surface in mortgage. We basically started with a standing start in 2022. Fast-forward to today, we have 10x-ed the amount of loans that we've been able to underwrite. That makes us a top 25 lender in the country. It is still quite small versus what we think the opportunity is. We think the opportunity for us in mortgage is to be one of the top one, two, or three purchase lenders in the country because we have a great consumer-friendly product. We have a set of real estate agents in Zillow Preferred who are amongst the best in the country, and that tends to be distribution. We have a great brand where a lot of the prospective buyers are already on Zillow when they're thinking about getting a mortgage.
That's the high level, why are we in the mortgage business? Why do we think it's the right consumer experience? What do we think the potential growth opportunity is? We have been able to structurally grow well beyond the market. As rates fluctuate, we have 10x-ed the business over four years, and I think mortgage originations are probably flat over that period of time, if not down. So that gives you a sense for the opportunity in front of us, regardless of what rates do. On the margin month to month, will there be fluctuations in conversion rates as a result of rising interest rates? Sure. But the long-term structural opportunity is to be far bigger than we are today, and we have the underlying building blocks in place.
With respect to speed of that, it is a business we have to be really thoughtful in how we roll out because you really only get one shot with a consumer, and you only get one shot with a real estate agent to provide a good mortgage experience. So it's just not one of these things you go and blitz scale. We've grown it quite nicely, but when it is a consumer looking to get into a home and saying, "Hey, Zillow Home Loans, are you delivering such that I can close that home?" That is not an A/B test. You have to get that right. So we have grown it, I'd say, quickly, but methodically, and we will continue to do that. One, because the consumer experience and agent experience has to be great.
But two, the opportunity in front of us feels so substantial, stubbing our toes trying to move too quickly doesn't feel like the right answer. Particularly given even the top player today has 5% market share. So it's a really fragmented market, and we have a real right to win. Combine that with we are now at a place where it is profitable on a variable indirect basis, so that scaling mechanism feels even more interesting as you get to profitability in that line.
Great. At the onset of the conversation, you talked a little bit about AI mode, and I was just wondering if you could spend a minute and talk about how AI impacts Zillow. How are you using AI for some of your consumer-facing features? And what are some of the proprietary data sets or things that Zillow has to make a differentiated product using AI for real estate that others may have a harder time doing?
Yeah. I think it comes back to those three layers I talked about earlier, which is stream and shop, the operating system, and the transactional layer, and they all reinforce each other with AI mode. So I'll give you some examples. Right now, AI mode is on 20% of all logged-in users. So we are being methodical because we need the experience to be really good. It's not just a search layer. It's supposed to be an assistant all the way through the transaction. So we are methodically scaling. Early days, the promise of it is good. We're seeing far more engagement for those that use AI mode than those that don't. That's the first thing you want to see. The conversations are richer.
The types of questions we can answer are so much more than when we were just in map-based search and trying to put as many facts and figures on a mobile screen. So that all feels really good early days. What it ultimately should do for us over time is make the dream and shop experience better because we can answer more questions about neighborhoods and commutes and schools and all sorts of stuff that we otherwise really couldn't do pre this conversational assistant, beyond other topics as well. We can also start to infuse smarter and smarter data about consumer search behaviors writ large. So you as a consumer say, "Hey, is this market hot or cold?" That question by a human being is pretty hard to answer. That question when you have all of Zillow's consumer data flowing through is a lot easier to answer.
That would be an example of why is it better. There are many more as we go on this journey. On the software side, we are highly capable technologists, particularly in the real estate space. It is fairly clear. You talk to a real estate agent, they say, "Who's the best technology company in the space?" It's us. We can make the software products better and stickier and make the software products allow agents to be more productive. We are doing that already in a variety of ways, but AI really helps there. The other thing to think about with our software is now we can start to marry Zillow data with the software.
Zillow Pro is a good example of this, where a real estate agent gets into Follow Up Boss, works Zillow consumers that way, but also has a network of people that just sit in their CRM that sit fairly dormant. We are now marrying Zillow consumer behavior, so long as that consumer opt-ins into Follow Up Boss, so that the real estate agent who hadn't talked to you in six months gets a ping that says, "Oh, Mike's actually searching in these areas. You should probably reach out to him." That's not replicable.
You have to have Zillow data and Follow Up Boss. That's a good example of where AI can really help us as well. On the transactional layer, it is making the transaction more efficient, of course, and AI will of course do that. Really important too is the richness of the conversations we are having with prospective buyers and sellers allow us to offer more to them and introduce them to Zillow Home Loans or a Preferred Agent, in way different ways, because it's not just three potential clicks. Before it was contact an agent, get pre-qualified, take a tour. Now it's like the questions are infinite, and the way in which we can introduce these people is way more conversational and persistent than solely those three sets of pixels.
All of that is like, you can probably tell I'm pretty excited about and I'm getting even more excited about being in the COO role and seeing this stuff way more deeply than I probably was just in the CFO role. It's fairly early days today and the signs are quite positive. It's like, how much can we innovate from there? We consistently, over the course of our history as a company, cross technology chasms quite well, and we expect to do so here too.
Great. If I can ask a nearer term financial question. I just wanted to ask about the guidance. You have revenue guidance for this year of mid-teens year-over-year growth. For the third quarter, you guys did call out some impacts from the mortgage market as well as the transition timing because of the Zillow Preferred agent program. Could you reiterate the guidance today? Is there anything that you would provide texture wise to just help us understand why the guidance is set the way it is?
Yeah, guidance I would reiterate today. The moving pieces and how we guided for Q3 and Q4 were two main factors. One was we were accelerating Zillow Preferred. So there are some moving pieces on the way in which we get revenue between our residential segment and our mortgages segment. There is a shift in that. Then there are a few things that are headwinds. One is basically a seasonal impact where the old model did better in Q4 than Zillow Preferred does, and then Zillow Preferred does better in Q1 than the old model did. So that is just a quarterly thing, but it is a headwind for Q4. The other is just the time it takes for a loan to actually become revenue. That is slower than an advertising-based model. So that was the stuff that was in our control as we accelerated Zillow Preferred.
The other thing that we called out, and we are seeing play out, is just softer macro. We had thought macro was going to be about flat for the year, and now we think it is down, and we incorporate that into the guide, and thought about that as we thought about Q3 and full year 2026.
Great. I wanted to ask about the mid-cycle targets. Zillow has mid-cycle targets of $5 billion of total revenue, 45% EBITDA margins. It is anchored around a macro assumption of 6 million units existing home sales sold annually. I was just wondering if you could talk about some of the drivers to reach those mid-cycle targets. How much of it is contingent on macro? What can you do without macro conditions improving? I think it would be helpful just to talk about how much is actually in your control.
Yeah. There's a bunch in our control. For context, 6 million home sales today, we're talking about 4 million home sales. So we are nowhere close to normal. That 4 million home sales has been pretty consistent over the last four years at this point. I think 2023, 2024, 2025, and 2026 will all be about 4 million home sales. So we're in a particularly depressed time in a cyclical market. We, Zillow, have been able to grow right through that. We expect to be able to continue to grow right through that. I would use history as a mechanism to think about how we think about the go forward, which is we expect to significantly outgrow the real estate market. We've grown in the mid-teens, pretty consistently through that housing market downdraft. We've grown EBITDA faster than revenue. We've gotten to GAAP profitability.
We're growing net income faster than both revenue and EBITDA. Our expectation is we continue to do that regardless of the housing market. So our expectation is we grow quite nicely through a challenged housing market, and when the housing market comes back, that's an obvious accelerant to the business, but we're not waiting for it.
Great. In the last few minutes here, I wanted to ask two more. One is just around listing access standards, right? Lots of things happening in listing access standards, Zillow Preview, pre-marketing. I was just wondering if you could provide an update of the state of pre-marketing today. Is it an opportunity? Is it a threat? How do you guys think about it?
Yeah. The question here is really around will marketing your home privately become more of a standard? The real estate market has always had some small portion of listings be private, right? If you think about ultra-luxury, divorces, deaths, you name, those types of things. That's always been around, I don't know, 1%-2% of all the available inventory in the country. Regardless of the rhetoric that has been thrown out, that number has been stubbornly the same. So the amount of noise has ticked up substantially over the last few years. The amount of private listings has stayed basically the same, like somewhere between 5,000 and 10,000 listings at any given time. 5 or 10,000 listings on the back of 1.1 million active listings in the country. So this is just kind of a ridiculous set of conversations.
Regardless of why they exist, I cannot totally figure that out. But the consumer behavior is you are going to sell the most important asset you own, for most people. You want the most eyeballs on it. That is the most obvious statement on the planet. It is like trying to argue whether the sky is blue, and, lo and behold, 98%-99% of the country continues to market their homes that way because it makes sense for the vast majority of people. That has been the case. That will continue to be the case. We do not see how limiting the amount of eyeballs people are able to put on a home results in a higher price for a seller. That is the private listings. With respect to the coming soons, like do you preview your home on the market before you go and sell it more broadly?
There are markets where that can make some sense, and we have a product called Zillow Preview to satiate that. But still not even close to the norm. Our Zillow Preview is quite small, and any other coming soons are quite small as well. Based on consumer behavior we see, we do not expect that to become the norm, but if it is, we think Preview is better positioned than anything else.
Yeah. In the last minute we have, I would just love for you to tie it all together for us and maybe talk about some of the things that you are looking forward to the most over the next one to two years, execution-wise, milestone-wise, that you would call out.
Yeah. I would say a lot of it you all have heard today, but the structural growth levers across for-sale and rentals are intact, and we see growth opportunity well into the future. Not to even mention all the things that we will invent from there, but the structural growth levers that you have seen be able to grow as nicely as we have over the last few years, we see intact going forward. Our job is to do that while growing EBITDA net income faster than revenue. We think we are well positioned to do that with a lot of internal excitement about what Zillow AI mode is going to do on top of that and whatever we invent around generative AI from here.
Great. That's a great way to wrap it up. Jeremy, thank you so much for participating in our conference. It's been a privilege to have you on stage here with us.
Thanks for having me.