ZG Q2 Deep Dive: Rentals Acceleration and Enhanced Platform Drive Growth Amid Market Headwinds

Online real estate marketplace Zillow (NASDAQ:ZG) reported revenue ahead of Wall Street’s expectations in Q2 CY2025, with sales up 14.5% year on year to $655 million. The company expects next quarter’s revenue to be around $668 million, close to analysts’ estimates. Its non-GAAP profit of $0.40 per share was 3.2% below analysts’ consensus estimates.

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StockStory’s Take

Zillow’s second quarter performance saw revenue exceed Wall Street expectations, supported by robust growth in both its For Sale and Rentals businesses. Management credited the company’s strategy of integrating digital tools—such as BuyAbility and AI-powered agent support—with cost discipline as key drivers of the quarter. CEO Jeremy Wacksman emphasized Zillow’s continued market share gains, noting that “we are gaining share in For Sale and Rentals, and we’re doing it while maintaining cost discipline.” The Rentals segment, in particular, benefited from multifamily expansion and increased engagement with large property managers, while the For Sale category outpaced broader industry trends, aided by new product features and expanded market coverage.

Looking ahead, management’s guidance is influenced by ongoing strength in the Rentals business, continued investment in technology, and expectations for a largely flat housing market. CFO Jeremy Hofmann highlighted that “challenging housing market conditions and macro uncertainty will continue,” with growth strategies centered on scaling the company’s multifamily offerings and expanding enhanced market experiences. The integration of new AI features and partnerships with platforms such as Redfin are expected to further increase reach and efficiency. Management remains focused on executing its strategy to drive mid-teens revenue growth while maintaining margin expansion, despite external market headwinds.

Key Insights from Management’s Remarks

Management attributed revenue gains to accelerating Rentals growth, enhanced digital offerings, and disciplined investments, while cost control supported improved margins.

• Rentals momentum accelerating: Accelerated growth in the Rentals segment was driven by multifamily partnerships and expanded inventory, with 2.4 million active listings and a 45% increase in multifamily properties, leading to higher advertiser engagement and wallet share.
• Enhanced Markets rollout progressing: The expansion of Zillow’s Enhanced Markets, which offer integrated agent and loan services, contributed to outperformance in the For Sale segment. 27% of connections now occur through these enhanced experiences, with a long-term goal of 75%.
• AI and product innovation: New AI-powered tools, including Smart Messages for agents and the SkyTour virtual touring feature, improved both consumer and agent experiences, increasing engagement and operational efficiency.
• Redfin and Realtor.com partnerships: Strategic collaborations expanded the reach of rental listings, providing greater value to property managers and boosting lead generation, which management expects to be accretive to EBITDA in the second half of the year.
• Cost discipline and share repurchases: Improved operating margins were attributed to tight cost controls, with fixed costs growing modestly and share repurchases offsetting stock-based compensation, allowing for continued investment in growth areas such as Rentals and Zillow Home Loans.

Drivers of Future Performance

Management expects continued Rentals momentum, technology investment, and flat housing conditions to shape results through the rest of the year.

• Rentals growth strategies: Management is focusing on scaling multifamily listings, deepening advertiser relationships, and leveraging partnerships to reach a broader audience. The company anticipates that rentals revenue growth will remain above 40% for the full year, underpinned by both supply expansion and increased wallet share from property managers.
• Continued technology innovation: Ongoing product enhancements—such as expanded AI features in agent tools and new virtual touring options—are designed to improve user engagement and conversion, while supporting the rollout of the Enhanced Markets model to a larger share of transactions.
• Persistent macro headwinds: Management acknowledged that the broader housing market remains challenged by supply constraints and affordability issues, which are expected to persist. The company’s guidance assumes limited near-term relief from these headwinds, focusing instead on outperformance through market share gains and operational improvements.

Catalysts in Upcoming Quarters

In the coming quarters, StockStory analysts are monitoring (1) the pace of Rentals revenue growth and multifamily property additions, (2) expansion of Enhanced Markets and the rollout of associated technology tools, and (3) the impact of AI-driven solutions on agent adoption and consumer engagement. Progress on partnerships and continued cost discipline will also be key indicators of execution.

Zillow currently trades at $76.30, down from $81.51 just before the earnings. In the wake of this quarter, is it a buy or sell? See for yourself in our full research report (it’s free).

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