LZ Q2 Deep Dive: Subscriptions and AI Partnerships Fuel Growth Amid Evolving Strategy

Online legal service provider LegalZoom (NASDAQ:LZ) beat Wall Street’s revenue expectations in Q2 CY2025, with sales up 8.5% year on year to $192.5 million. On top of that, next quarter’s revenue guidance ($183 million at the midpoint) was surprisingly good and 3.3% above what analysts were expecting. Its non-GAAP profit of $0.15 per share was in line with analysts’ consensus estimates.

Is now the time to buy LZ? Find out in our full research report (it’s free).

StockStory’s Take

LegalZoom’s second quarter was marked by significant progress in its core subscription business and operational discipline, prompting a positive reaction from the market. Management attributed the performance to strong adoption of new compliance-focused offerings and enhancements to its bundled subscription tiers. CEO Jeffrey Stibel emphasized that the company’s “subscription strategy is working,” with improvements in product packaging, pricing, and personalization leading to higher engagement and retention, particularly in compliance-related services.

Looking ahead, LegalZoom’s updated outlook is built on the expectation that its premium subscription offerings and AI-augmented service model will drive more predictable and resilient growth. Management indicated that partnerships with leading AI companies and continued focus on cross-sell and upsell opportunities are expected to boost long-term customer value. Stibel noted, “AI is incredibly critical to what we’re going to be doing going forward,” highlighting investments in automation, customer engagement, and product innovation as central to LegalZoom’s growth trajectory.

Key Insights from Management’s Remarks

Management highlighted the successful execution of its subscription optimization strategy, the launch of new compliance and concierge products, and the integration of its Formation Nation acquisition as key contributors to the quarter’s results.

• Subscription model acceleration: Subscription units grew significantly, driven by enhancements in packaging, pricing, and the launch of bundled premium tiers. Management cited the Compliance Concierge offering as a major contributor to early engagement and improved first-year retention within the core compliance business.
• AI-driven product innovation: AI capabilities were integrated into the service delivery model, enabling faster fulfillment and more personalized customer experiences. The company’s focus on “do-it-for-me” solutions leverages AI and human expertise to address the “last mile” of legal service delivery, setting LegalZoom apart from traditional providers.
• Go-to-market strategy refinement: A new brand campaign focused on LegalZoom as a trusted legal companion was launched across digital and traditional channels, resulting in sequential improvements in site traffic and customer engagement. Management emphasized disciplined marketing investments with a healthy return on ad spend.
• Formation Nation acquisition: The integration of Formation Nation expanded LegalZoom’s sales and service capabilities. The acquisition enabled cross-sell and upsell opportunities, particularly for higher-value compliance and DIFM products, and allowed LegalZoom to target both premium and discount segments more effectively.
• Strategic partnerships: Collaborations with AI leaders such as Perplexity and OpenAI were announced, allowing LegalZoom’s legal resources to be accessed through advanced AI agents. Management believes these partnerships will expand the company’s reach and create new customer acquisition channels.

Drivers of Future Performance

LegalZoom’s management expects continued growth to be driven by its premium subscription offerings, expanded AI partnerships, and investments in customer engagement and automation.

• Premium subscriptions and DIFM expansion: The company is doubling down on premium, do-it-for-me (DIFM) offerings, which are expected to increase average customer value and retention. Management sees these services as central to shifting LegalZoom toward a more stable, recurring revenue base.
• AI partnerships and automation: Ongoing investment in AI is expected to enable more efficient service delivery and enhance product differentiation. Collaborations with OpenAI and Perplexity are designed to reach new user segments and increase engagement, with management viewing AI as a major long-term market expander.
• Operational efficiency and margin discipline: While new investments are being made in product innovation and marketing, LegalZoom is focused on maintaining margin improvements through automation and scale. Management reiterated its commitment to margin targets and noted that efficiency gains are offsetting increased spending in growth areas.

Catalysts in Upcoming Quarters

In the coming quarters, the StockStory team will be monitoring (1) adoption rates and retention within new premium and DIFM subscription offerings, (2) the impact of AI-enabled partnerships on customer acquisition and engagement, and (3) ongoing integration and monetization of the Formation Nation business. Execution on these fronts, along with operational efficiency gains, will be important barometers for LegalZoom’s ability to sustain growth and profitability.

LegalZoom currently trades at $11.07, up from $8.38 just before the earnings. At this price, is it a buy or sell? The answer lies in our full research report (it’s free).

High Quality Stocks for All Market Conditions

Trump’s April 2025 tariff bombshell triggered a massive market selloff, but stocks have since staged an impressive recovery, leaving those who panic sold on the sidelines.

Take advantage of the rebound by checking out our Top 6 Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).

Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-small-cap company Exlservice (+354% five-year return). Find your next big winner with StockStory today.

StockStory is growing and hiring equity analyst and marketing roles. Are you a 0 to 1 builder passionate about the markets and AI? See the open roles here.