Zillow misses on revenue in Q3, bets on Preferred program 

While revenue didn't meet investor expectations, Zillow's CEO remains confident that the company's strategy will lead to continued growth through a very difficult market.

Zillow's revenue totaled $724 million in the third quarter, up 7% compared to a year ago but below forecasts of around $753 million and down significantly from $772 million in Q2. The results end a 10-quarter streak of double-digit year-over-year revenue growth.

In a phone interview with Real Estate News, CEO Jeremy Wacksman said the fast rise in mortgage rates over the summer weakened the housing market, resulting in revenue that was "a little softer than expectations." 

"It's really the velocity of the rate change that caused the contraction in the market," Wacksman said. "Volatility matters a lot more than the level of rates, so [a lack of] affordability pushed a lot of would-be buyers to keep renting."

After rising nearly 10% earlier in the day, Zillow shares fell to $29 — nearly a 15% drop — in after-hours trading following the third quarter results. In January, the portal's stock was trading at around $68 a share.

What Zillow had to say

All in on Preferred: The company is continuing to bet on its Preferred agent partnership program, formerly known as Flex, which has grown from one-third of its connections a year ago to two-thirds in the third quarter. Zillow expects that share to reach 100% by the first half of 2027.

Agents in the Preferred program pay Zillow a referral fee after the transaction closes. The company's earlier Premier Agent model required agents to pay for advertising upfront.

"The next era of real estate is taking shape and Zillow is leading the way," Wacksman said in an earnings call with investors.

Rentals, mortgages remain bright spots: Despite the industry-wide slowdown, Wacksman said the company's ability to hit EBITDA targets while continuing to grow "really shows the durability and the consistency of our strategy."

The rentals vertical remains a strong growth engine and now makes up 30% of total revenue at $220 million. Multifamily was the main driver of Q3 rentals growth and "is going to be the continued accelerator," CFO and COO Jeremy Hofmann told investors. "Partners tell us we have the best ROI in the category, which enables us to capture more of the multifamily advertising." 

Despite the anemic homebuying market, mortgage revenue rose 32% to $70 million. Growth was slower than some investors were expecting, which Hofmann blamed on macroeconomic conditions.

Wacksman noted that 80% of buyers need both a mortgage and an agent, so once the market improves, "they want that as a one-stop shop. When we can offer that as an integrated experience, that's what they're choosing."

What's next? It's hard to predict what will happen in 2027, Wacksman said, but "we expect to outgrow whatever the industry is doing going forward." 

"So while the housing market is clearly softening, we think it's prudent to not assume it gets better. We'll control what we can control on the cost side and we'll grow the company and take share as a result."

Wacksman also commented on the new Open Real Estate platform, calling it "encouraging" given the transparency it aims to provide for consumers.

Key numbers

Revenue: $724 million in Q3, up 7% year-over-year but down from $772 million in Q2. Residential revenue was down 4% year-over-year to $419 million, while rentals was up 26% and mortgages grew 32%.

Cash and investments: $707 million in Q3, up from $682 million in Q2.

Net income/loss: A net loss of $158 million for the quarter, with a net loss margin of 22%, compared to a net gain of $10 million in Q3 2025. In Q2 the net loss was $4 million. 

Adjusted net income: $124 million in Q3, up from $118 million in Q2.

Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization): $182 million in Q3, up from $165 million a year ago and up from $176 million in Q2.

Traffic and visits: 215 million average monthly unique users, down 3% year-over-year. In Q2, the company had 239 million average monthly unique users across all Zillow Group websites and apps.

Notable moves

Promotions and cuts: CFO Jeremy Hofmann added COO to his title in August, taking over for Jun Chu, a longtime employee who'd held the COO role since 2024. Another Zillow veteran, VP of Industry Engagement Sara Bonert, also left the company in August. Both moves appeared to be tied to layoffs announced at the beginning of the month. 

Lawsuits: Zillow was busy with litigation in the third quarter, settling with the FTC over its Redfin rentals syndication deal and settling an investor lawsuit for $212.5 million. "We're pleased to have resolved a few matters this year, especially ones that had outsized one-time costs," Wacksman told investors, adding that it has not impacted the company's ability to grow. He expects legal costs to be more normalized going forward.

Zillow Pro: On the tech front, Zillow went nationwide with its "Pro" offering in Q3, a product designed to give real estate agents more insight into a consumer's readiness to buy or sell a home. The company also launched a new connector for Claude, allowing buyers to search for homes within the Anthropic chatbot.

Zillow Preview: In September, Realtor.com began displaying Zillow's pre-market listings on its website, and the portal also added RealScout as a Preview partner.