Financial Trends -- 7/10
Textbook worse-to-better inflection. Revenue growth accelerating every quarter (+18.4% YoY in 2026Q1),
first GAAP operating profit in years in 2026Q1, Adjusted FCF positive and growing, diluted share count
declining YoY on buybacks, and a net-cash balance sheet. The one blemish that caps the score: gross margin
is structurally compressing (~350bps YoY) as the mix shifts toward lower-margin Rentals/Mortgages, and GAAP
profitability is brand-new and thin. Growth is monetization-led, not volume-led -- against a flat housing
market and declining traffic. No penalty modifiers trigger.
Weight: 25%
GAAP Op Margin
+5.1%
Turned positive Q1'26 | +~1,360bps YoY
Adj FCF
Growing
FY25 $420M, +36% YoY | Net cash
Share Count
Declining
-6.5% YoY (buyback) | No dilution
Quarterly Revenue Trajectory ($M)
Clean revenue acceleration: +13.0% to +18.4% YoY across five straight quarters.
Growth is monetization-led, not volume-led -- driven by Rentals (~+42% YoY), Mortgages (~+56% YoY) and
improving For Sale monetization (Enhanced Markets connections 49% in Q1'26 vs 44% in Q4'25), against a
flat housing market and declining traffic (users 220M, -3% YoY).
Gross Profit ($M)
Gross profit dollars grew +13.1%, but gross margin compressed ~350 bps
YoY (76.8% to 73.3%). The compression is a structural mix effect -- revenue is shifting toward
lower-margin Rentals and Mortgages, the two fastest-growing lines. This is the single blemish capping
the score; underlying For Sale economics remain intact and Adjusted EBITDA margin is expanding.
Annual Financial Summary (FY ends December)
| Metric | FY2021 | FY2022 | FY2023 | FY2024 | FY2025 |
|---|---|---|---|---|---|
| Total Revenue ($M) | $8,147M | $1,958M | $1,945M | $2,236M | $2,583M |
| Rev YoY (ex-2021 iBuying) | — | — | -0.7% | +15.0% | +15.5% |
| Gross Profit ($M) | $1,753M | $1,591M | $1,524M | $1,709M | $1,915M |
| Gross Margin (%) | 21.5% | 81.3% | 78.4% | 76.4% | 74.1% |
| Op Income GAAP ($M) | ($328M) | ($93M) | ($270M) | ($197M) | ($34M) |
| Adj EBITDA ($M) | $195M | $514M | $391M | $498M | $622M |
| Net Income ($M) | ($528M) | ($101M) | ($158M) | ($112M) | $23M |
| Adj FCF ($M) | — | — | — | — | $420M |
| Total Debt ($M) | $4,840M | $1,697M | $1,700M | $563M | ~$230M |
Note: FY2021 revenue of $8,147M includes the discontinued iBuying (Zillow Offers) segment; continuing-ops
revenue base is ~$1.9B. The FY2022 optical "decline" reflects that exit, not operational deterioration --
hence YoY is shown ex-2021 iBuying.
Key trends
- Revenue re-accelerating on continuing operations: From ~$1.9B (post-iBuying, 2022) to $2,583M (2025), now +18.4% YoY in Q1'26 -- five straight quarters of accelerating growth
- GAAP profitability inflection: Operating losses narrowed every year (-$328M 2021 to -$34M 2025) and turned positive in 2026Q1; net income crossed positive in FY2025 (+$23M)
- Adjusted EBITDA compounding: $391M (2023) to $622M (2025), margin expanding ~180bps to 24.1%
- Deleveraged to net cash: Total debt cut from $4,840M (2021) to ~$230M (2025); ended FY25 net cash ~$1.3B after retiring $419M of convertibles
Segment Revenue ($M, Quarterly)
The growth engines (Rentals ~+42%, Mortgages ~+56%) are the lower-margin lines.
That mix shift is exactly what compresses consolidated gross margin even as gross-profit dollars grow
double-digit -- the trade-off is deliberate and value-accretive at the EBITDA level.
Profitability Inflection -- GAAP Operating Income ($M, Quarterly)
GAAP operating income turned positive in 2026Q1 (+$36M, +5.1% margin) for the first time in years
-- a ~1,360bps YoY swing from -8.5% a year earlier. Losses narrowed steadily through 2025; the Q1'26
crossover is the clearest evidence of the worse-to-better inflection. It remains thin and one quarter
old, which is why the score is 7 rather than 9.
Adjusted EBITDA & FCF ($M, Quarterly)
Share Count ($ diluted shares, M, Quarterly)
- Now declining YoY on buybacks: 239.6M in Q1'26 vs 256.2M in Q1'25 = -6.5% YoY, funded by a $626M Q1'26 repurchase
- Multi-year arc still roughly flat-to-up: shares remain above the 234.7M 2024Q1 base -- the buyback trend is genuine but recent, not yet a structural multi-year reduction
Blemishes / Watch Items
| Watch Item | Detail | Penalty |
|---|---|---|
| Gross-Margin Compression | Consolidated gross margin down ~350bps YoY (76.8% to 73.3%) on structural mix shift to lower-margin Rentals/Mortgages; caps the score at 7 | None |
| Thin / New GAAP Profitability | GAAP operating profit is one quarter old (+$36M, +5.1% margin) and thin; durability not yet proven | None |
| Declining Traffic | Users 220M, -3% YoY -- growth is monetization-led against a shrinking audience, placing all weight on monetization durability | None |
No penalty modifiers trigger. FCF is positive and growing,
shares are declining YoY, operating income is improving, and debt is declining (net cash). The blemishes
are rating considerations that cap the base case at 7, not modifier penalties.
Score Rationale
Score of 7/10. Three of four pillars -- revenue acceleration, share reduction, FCF growth, and operating-margin expansion -- point to a 9. The structural gross-margin compression (~350bps YoY on mix shift to Rentals/Mortgages) and the one-quarter-old, thin GAAP profitability pull the base to 7. No penalty modifiers trigger.
Supports the base case:
- Revenue accelerating five straight quarters (+13.0% to +18.4% YoY) in a flat housing market -- monetization-led
- GAAP operating income turned positive in 2026Q1 (+$36M, +5.1%), a ~1,360bps YoY swing
- Adjusted FCF positive and growing (FY25 $420M, +36% YoY); Adj EBITDA $391M to $622M over two years
- Diluted share count declining -6.5% YoY on a $626M Q1'26 buyback
- Deleveraged from $4,840M (2021) to ~$230M (2025); net cash ~$1.3B
Caps at 7 (no penalty):
- Consolidated gross margin compressing ~350bps YoY on Rentals/Mortgages mix -- deliberate, value-accretive at EBITDA level
- GAAP profitability brand-new and thin -- durability unproven
- Declining traffic (users -3% YoY) -- all weight on monetization durability
Composite quality gate -- positiveGrowingFcf: YES. Adjusted FCF positive and rising ($107M Q3'25 to $127M Q1'26; FY25 $420M).
Data sourced from Daloopa (company_id 226) and FMP (price/market cap). Fiscal year ends December 31. All financials in USD.