Zillow (ZG, Financial) saw a significant 23% rise in its stock after releasing its Q3 results. The company reported a robust EPS beat and a 17.1% year-over-year revenue increase to $581 million, exceeding prior guidance of $545-560 million. This marks Zillow's strongest revenue growth since Q1 2022. Adjusted EBITDA also rose 19% year-over-year to $127 million, surpassing the $95-110 million guidance. The Q3 results reflect the first full quarter under new CEO Jeremy Wacksman.
Key Highlights:
- Residential Segment: Revenue increased 12% year-over-year to $405 million, outpacing the $375-385 million guidance. Growth was supported by improved conversion rates with Zillow agent partners and strong performance in Zillow Showcase. The New Construction marketplace and software from ShowingTime+ and Follow Up Boss also contributed to the positive results.
- Rentals: Revenue surged 24% year-over-year to $123 million, driven by a 38% increase in multifamily revenue. Zillow expanded its multifamily properties on apps and sites by 34%, reaching a record 47,000 properties. A national ad campaign boosted brand awareness, positioning Zillow Rentals as a potential $1+ billion revenue opportunity.
- Mortgages: Revenue jumped 63% year-over-year to $39 million, with purchase loan origination volume growing 80%.
- Q4 Outlook: Zillow anticipates Q4 revenue of $525-540 million and adjusted EBITDA of $90-105 million. The company expects modest year-over-year growth, considering the current housing market conditions and affordability challenges.
Zillow's Q3 performance was impressive, with notable acceleration in all operating segments compared to Q2. While traditionally known for home sales, the company's expansion into Rentals and Mortgages has proven advantageous. Rentals now account for over 20% of total revenue. The complementary nature of sales and rentals helps balance the impact of fluctuating interest rates. Recent rate hikes may affect the spring selling season, warranting close observation.
