Zillow Group(ZG) - 2025 Q2 - Quarterly Report

FORM 10-Q Filing Information This section provides details on the Quarterly Report on Form 10-Q for Zillow Group, Inc. for the period ended June 30, 2025 Filing Details This is a Quarterly Report on Form 10-Q for Zillow Group, Inc. for the period ended June 30, 2025. The registrant is a large accelerated filer and has filed all required reports and interactive data files - The report is a Quarterly Report on Form 10-Q for the period ended June 30, 2025[2] - Zillow Group, Inc. is a large accelerated filer[5] - As of July 30, 2025, 50,089,971 shares of Class A common stock, 6,217,447 shares of Class B common stock, and 185,964,745 shares of Class C capital stock were outstanding[5] Table of Contents This section provides an organized list of all chapters and sections within the Quarterly Report on Form 10-Q Glossary of Terms This section defines key abbreviations, acronyms, and common terms used throughout the Quarterly Report on Form 10-Q Definitions This section provides definitions for key abbreviations, acronyms, and common terms used throughout the Quarterly Report on Form 10-Q, such as Zillow Group, various convertible notes, and industry-specific terms like MLS, NAR, and TTV - The glossary defines terms such as 'Zillow Group', '2024 Notes', '2025 Notes', '2026 Notes', 'Board', 'Exchange Act', 'FASB', 'GAAP', 'IRLC', 'Lenders', 'MBS', 'MLS', 'NAR', 'Repurchase Authorizations', 'SEC', 'SOFR', and 'TTV'[13] Note Regarding Forward-Looking Statements This section cautions investors about forward-looking statements, which are subject to various risks and uncertainties Forward-Looking Statements and Risks This section highlights that the report contains forward-looking statements based on management's beliefs and assumptions, which are subject to various risks and uncertainties. These risks include economic and real estate industry health, ability to manage advertising and partner relationships, compliance with industry rules, innovation, mortgage operations, and litigation outcomes. Investors are cautioned not to unduly rely on these statements due to the competitive and rapidly changing environment - Forward-looking statements are identified by terms such as 'believe,' 'may,' 'will,' 'estimate,' 'continue,' 'anticipate,' 'intend,' 'could,' 'would,' 'project,' 'plan,' 'expect,' 'potential,' 'might' or their negatives[15] - Key risks include the health and stability of the economy and U.S. residential real estate industry, ability to manage advertising and partner relationships, compliance with NAR/MLS rules, ability to navigate industry changes (e.g., lawsuits), and ability to operate and grow Zillow Home Loans' mortgage operations[16] - The company operates in a very competitive and rapidly changing environment, and actual results could differ materially and adversely from forward-looking statements[17] Note Regarding Industry and Market Data This section clarifies that market and industry data in the report are based on internal estimates and third-party sources Data Sources and Verification This section clarifies that market and industry data in the report are based on internal estimates and third-party sources. The company has not independently verified third-party data or its underlying economic assumptions - Market and industry data are based on internal estimates and research, as well as independent industry publications and third-party statistical information[21] - The company has not independently verified any data from third-party sources nor validated their underlying economic assumptions[21] Where You Can Find More Information This section directs readers to Zillow Group's SEC filings and other public disclosure channels for additional information SEC Filings and Disclosure Channels Zillow Group's SEC filings are available on its investor relations website. The company also uses press releases, public conference calls, webcasts, and specific social media channels (X and LinkedIn) to disclose material financial information, advising investors to monitor these channels - SEC filings (10-K, 10-Q, 8-K) are available free of charge on the 'Investors' section of **www.zillowgroup.com**[23](index=23&type=chunk) - Zillow Group uses press releases, SEC filings, public conference calls, webcasts, its Investor Relations Site, Blog, X Account, and LinkedIn Account for disclosing material financial information[24][25] PART I – FINANCIAL INFORMATION This part contains Zillow Group's unaudited condensed consolidated financial statements and management's discussion and analysis Item 1. Financial Statements (unaudited) This section presents Zillow Group's unaudited condensed consolidated financial statements, including balance sheets, statements of operations, comprehensive income (loss), shareholders' equity, and cash flows, along with detailed notes explaining accounting policies, financial instruments, debt, share-based awards, and other financial commitments Condensed Consolidated Balance Sheets This table provides a snapshot of Zillow Group's assets, liabilities, and shareholders' equity at specific points in time | Metric | June 30, 2025 (in millions) | December 31, 2024 (in millions) | Change (in millions) | % Change | | :-------------------------------- | :-------------------------- | :------------------------------ | :------------------- | :------- | | Cash and cash equivalents | $587 | $1,082 | $(495) | -45.7% | | Total current assets | $1,821 | $2,334 | $(513) | -22.0% | | Total assets | $5,416 | $5,829 | $(413) | -7.1% | | Total current liabilities | $546 | $831 | $(285) | -34.3% | | Convertible senior notes | $— | $418 | $(418) | -100.0% | | Total liabilities | $670 | $981 | $(311) | -31.7% | | Total shareholders' equity | $4,746 | $4,848 | $(102) | -2.1% | Condensed Consolidated Statements of Operations This table presents Zillow Group's revenues, expenses, and net income (loss) over specific reporting periods | Metric | Three Months Ended June 30, 2025 (in millions) | Three Months Ended June 30, 2024 (in millions) | Change (in millions) | % Change | | :-------------------------- | :------------------------------------- | :------------------------------------- | :------------------- | :------- | | Total revenue | $655 | $572 | $83 | 14.5% | | Gross profit | $489 | $442 | $47 | 10.6% | | Loss from operations | $(11) | $(38) | $27 | 71.1% | | Net income (loss) | $2 | $(17) | $19 | 111.8% | | Basic EPS | $0.01 | $(0.07) | $0.08 | 114.3% | | Diluted EPS | $0.01 | $(0.07) | $0.08 | 114.3% | | Metric | Six Months Ended June 30, 2025 (in millions) | Six Months Ended June 30, 2024 (in millions) | Change (in millions) | % Change | | :-------------------------- | :------------------------------------ | :------------------------------------ | :------------------- | :------- | | Total revenue | $1,253 | $1,101 | $152 | 13.8% | | Gross profit | $948 | $848 | $100 | 11.8% | | Loss from operations | $(20) | $(83) | $63 | 75.9% | | Net income (loss) | $10 | $(40) | $50 | 125.0% | | Basic EPS | $0.04 | $(0.17) | $0.21 | 123.5% | | Diluted EPS | $0.04 | $(0.17) | $0.21 | 123.5% | Condensed Consolidated Statements of Comprehensive Income (Loss) This table details Zillow Group's net income (loss) and other comprehensive income (loss) components for the reporting periods | Metric | Three Months Ended June 30, 2025 (in millions) | Three Months Ended June 30, 2024 (in millions) | Change (in millions) | | :-------------------------------- | :------------------------------------- | :------------------------------------- | :------------------- | | Net income (loss) | $2 | $(17) | $19 | | Net unrealized gains (losses) on investments | $1 | $— | $1 | | Total other comprehensive income (loss) | $1 | $— | $1 | | Comprehensive income (loss) | $3 | $(17) | $20 | | Metric | Six Months Ended June 30, 2025 (in millions) | Six Months Ended June 30, 2024 (in millions) | Change (in millions) | | :-------------------------------- | :------------------------------------ | :------------------------------------ | :------------------- | | Net income (loss) | $10 | $(40) | $50 | | Net unrealized gains (losses) on investments | $4 | $(6) | $10 | | Total other comprehensive income (loss) | $4 | $(6) | $10 | | Comprehensive income (loss) | $14 | $(46) | $60 | Condensed Consolidated Statements of Shareholders' Equity This table outlines changes in Zillow Group's shareholders' equity, including additional paid-in capital and accumulated deficit | Metric | Balance at April 1, 2025 (in millions) | Balance at June 30, 2025 (in millions) | Change (in millions) | | :-------------------------- | :------------------------------------ | :------------------------------------ | :------------------- | | Additional Paid-In Capital | $6,628 | $6,617 | $(11) | | Accumulated Deficit | $(1,874) | $(1,872) | $2 | | Total Shareholders' Equity | $4,754 | $4,746 | $(8) | | Metric | Balance at January 1, 2025 (in millions) | Balance at June 30, 2025 (in millions) | Change (in millions) | | :-------------------------- | :------------------------------------ | :------------------------------------ | :------------------- | | Additional Paid-In Capital | $6,733 | $6,617 | $(116) | | Accumulated Deficit | $(1,882) | $(1,872) | $10 | | Total Shareholders' Equity | $4,848 | $4,746 | $(102) | Condensed Consolidated Statements of Cash Flows This table summarizes Zillow Group's cash inflows and outflows from operating, investing, and financing activities | Cash Flow Activity | Six Months Ended June 30, 2025 (in millions) | Six Months Ended June 30, 2024 (in millions) | Change (in millions) | | :-------------------------------- | :------------------------------------ | :------------------------------------ | :------------------- | | Net cash provided by operating activities | $191 | $135 | $56 | | Net cash provided by (used in) investing activities | $25 | $(207) | $232 | | Net cash used in financing activities | $(709) | $(240) | $(469) | | Net decrease in cash, cash equivalents and restricted cash | $(493) | $(312) | $(181) | | Cash, cash equivalents and restricted cash at end of period | $592 | $1,183 | $(591) | Notes to Condensed Consolidated Financial Statements This section provides detailed explanations and additional information supporting the condensed consolidated financial statements Note 1. Organization and Description of Business Zillow Group is a real estate technology company aiming to simplify home transactions. Its portfolio includes Zillow Premier Agent, Zillow Home Loans, Zillow Rentals, and marketing software solutions like ShowingTime+, Spruce, and Follow Up Boss. The company operates in a dynamic industry with significant risks including economic conditions, industry changes, and regulatory compliance - Zillow Group's core business is reimagining real estate through digital solutions, real estate professionals, and easier buying, selling, financing, and renting experiences[38] - Key brands and services include Zillow Premier Agent, Zillow Home Loans, Zillow Rentals, Trulia, StreetEasy, HotPads, Out East, ShowingTime+, Spruce, and Follow Up Boss[39] - Significant risks include the health of the U.S. residential real estate industry, changes due to lawsuits or government investigations, ability to manage advertising and partner relationships, and operating Zillow Home Loans[40] Note 2. Summary of Significant Accounting Policies The financial statements are prepared in conformity with GAAP and SEC interim reporting rules, consolidating Zillow Group and its subsidiaries. Management makes estimates and judgments that affect reported amounts, particularly in areas like revenue recognition, asset recoverability, and share-based compensation. The company is evaluating recently issued FASB guidance on income tax disclosures and cost/expense disclosures, with no material impact expected from the former - Condensed consolidated financial statements are prepared in conformity with GAAP and SEC rules for interim financial reporting[41] - Management's estimates include accounting for revenue, amortization of contract cost assets, recoverability of long-lived and intangible assets, share-based compensation, income taxes, and business combinations[43] - New FASB guidance on income tax rate reconciliation (effective after December 15, 2024) is expected to result in additional disclosures but no material impact on consolidated financial statements[44] Note 3. Financial Instruments This note details the fair value measurements for various financial instruments, including cash equivalents, short-term investments, restricted cash, mortgage loans held for sale, forward contracts, contingent consideration, and interest rate lock commitments (IRLCs). The company uses Level 1, Level 2, and Level 3 inputs for these measurements, with specific methodologies for contingent consideration and IRLCs - Fair value measurements for cash equivalents, short-term investments, restricted cash, mortgage loans held for sale, and forward contracts are primarily based on Level 1 or Level 2 inputs[46][47][48] - Contingent consideration (related to the Follow Up Boss acquisition) and IRLCs are valued using Level 3 inputs, with Monte Carlo simulation for contingent consideration and pull-through rates for IRLCs[49][52] IRLCs Activity (in millions) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Balance, beginning of period | $7 | $5 | $4 | $3 | | Issuances | $24 | $11 | $45 | $23 | | Transfers | $(22) | $(12) | $(40) | $(22) | | Balance, end of period | $9 | $4 | $9 | $4 | Fair Value of Assets and Liabilities (in millions) | Category | June 30, 2025 Estimated Fair Market Value | December 31, 2024 Estimated Fair Market Value | | :------------------------------------ | :---------------------------------------- | :------------------------------------------ | | Total assets measured at fair value | $1,422 | $2,025 | | Total liabilities measured at fair value | $64 | $91 | Note 4. Property and Equipment, Net This note details the composition of property and equipment, net, which primarily includes website development costs. The company capitalized significant website development costs and recorded associated amortization expense Property and Equipment, Net (in millions) | Category | June 30, 2025 | December 31, 2024 | | :-------------------------- | :------------ | :---------------- | | Website development costs | $597 | $564 | | Property and equipment, net | $373 | $360 | - Capitalized website development costs were $51 million for Q2 2025 (vs $54 million in Q2 2024) and $99 million for H1 2025 (vs $106 million in H1 2024)[58] - Amortization expense for website development costs was $42 million for Q2 2025 (vs $36 million in Q2 2024) and $83 million for H1 2025 (vs $69 million in H1 2024)[58] Note 5. Intangible Assets, Net This note provides a breakdown of intangible assets, net, which include customer relationships, software, developed technology, and trade names. A significant addition to customer relationships resulted from a partnership with Redfin. Amortization expense for intangible assets is also presented, along with estimated future amortization Intangible Assets, Net (in millions) | Category | June 30, 2025 Net | December 31, 2024 Net | | :-------------------------- | :---------------- | :-------------------- | | Customer relationships | $155 | $65 | | Software | $66 | $62 | | Developed technology | $38 | $51 | | Trade names and trademarks | $20 | $22 | | Purchased content | $6 | $7 | | Total | $285 | $207 | - On February 6, 2025, Zillow entered into a partnership with Redfin, becoming the exclusive provider of multifamily rental listings on Redfin's sites, involving a $100 million payment included in customer relationships[60] - Amortization expense for intangible assets was $22 million for Q2 2025 (vs $19 million in Q2 2024) and $42 million for H1 2025 (vs $38 million in H1 2024)[61] Estimated Future Amortization Expense for Intangible Assets (in millions) | Period | Amount | | :---------------- | :----- | | Remainder of 2025 | $42 | | 2026 | $70 | | 2027 | $59 | | 2028 | $35 | | 2029 | $28 | | Thereafter | $59 | | Total | $293 | Note 6. Debt This note outlines Zillow Group's debt, primarily consisting of master repurchase agreements for Zillow Home Loans and the settlement of convertible senior notes. The company increased its borrowing capacity and settled the 2025 Notes, significantly reducing its total debt Carrying Values of Debt (in millions) | Debt Type | June 30, 2025 | December 31, 2024 | | :-------------------------- | :------------ | :---------------- | | Total master repurchase agreements | $230 | $145 | | 2025 Notes | $— | $418 | | Total debt | $230 | $563 | - Zillow Home Loans amended its JPMorgan Chase Bank, N.A. master repurchase agreement to increase borrowing capacity to $200 million and extended maturity to April 28, 2026[65] - The 2025 Notes matured on May 15, 2025, with the remaining $419 million principal settled for $425 million in cash, including accrued interest[71] Interest Expense Related to Convertible Senior Notes (in millions) | Period | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Total Interest Expense | $1 | $7 | $5 | $15 | Note 7. Income Taxes This note discusses the impact of the recently enacted 'One Big Beautiful Bill' on U.S. tax law, which Zillow Group is currently evaluating. The company maintains a valuation allowance against its net deferred tax assets due to uncertainty of realization, despite having significant accumulated federal and state tax losses - The 'One Big Beautiful Bill' was enacted on July 4, 2025, providing significant U.S. tax law changes, including permanent 100% bonus depreciation and expensing of domestic research costs[75] - Zillow Group is evaluating the impact of the new tax bill on its financial statements[75] - A valuation allowance is provided against net deferred tax assets, with approximately $1.3 billion in accumulated federal tax losses and $66 million (tax effected) in state tax losses as of December 31, 2024[76] Note 8. Share Repurchase Authorizations The Board authorized an additional $1.0 billion for share repurchases on May 2, 2025, increasing the total cumulative authorization to $3.5 billion. The company actively repurchased Class A common stock and Class C capital stock during the period - On May 2, 2025, the Board authorized an additional $1.0 billion for repurchases of Class A common stock, Class C capital stock, or a combination, increasing total cumulative authorizations to $3.5 billion[78] - As of June 30, 2025, $981 million remained available for future repurchases[78] Share Repurchase Activity (in millions, except shares in thousands and per share amounts) | Period | Class A Common Stock Repurchased (shares) | Class C Capital Stock Repurchased (shares) | Weighted-Average Price Per Share (Class A) | Weighted-Average Price Per Share (Class C) | Total Purchase Price (Class A) | Total Purchase Price (Class C) | | :-------------------------- | :---------------------------------------- | :----------------------------------------- | :----------------------------------------- | :----------------------------------------- | :----------------------------- | :----------------------------- | | Three Months Ended June 30, 2025 | 1,784 | 522 | $65.04 | $65.03 | $116 | $34 | | Six Months Ended June 30, 2025 | 4,244 | 1,401 | $70.09 | $73.19 | $297 | $103 | Note 9. Share-Based Awards This note details the activity and unrecognized compensation costs for option awards and restricted stock units (RSUs). The company granted new awards and recognized significant share-based compensation expense during the period Option Award Activity (Six Months Ended June 30, 2025) | Metric | Number of Shares Subject to Existing Options (in thousands) | Weighted Average Exercise Price Per Share | | :-------------------------- | :------------------------------------------------ | :---------------------------------------- | | Outstanding at January 1, 2025 | 29,941 | $46.58 | | Granted | 2,183 | $75.95 | | Exercised | (1,320) | $41.47 | | Outstanding at June 30, 2025 | 30,491 | $48.86 | - As of June 30, 2025, there was $228 million in unrecognized compensation cost related to unvested option awards[81] Restricted Stock Units Activity (Six Months Ended June 30, 2025) | Metric | Restricted Stock Units (in thousands) | Weighted Average Grant Date Fair Value | | :-------------------------- | :------------------------------------ | :------------------------------------- | | Unvested outstanding at January 1, 2025 | 11,729 | $50.31 | | Granted | 4,302 | $75.73 | | Vested | (2,967) | $50.90 | | Unvested outstanding at June 30, 2025 | 12,458 | $58.82 | - As of June 30, 2025, there was $680 million in unrecognized compensation cost related to unvested restricted stock units[82] Share-Based Compensation Expense (in millions) | Period | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Total share-based compensation | $99 | $113 | $196 | $221 | Note 10. Net Income (Loss) Per Share This note provides the reconciliation of denominators used for basic and diluted net income (loss) per share calculations. It also lists Class C capital stock equivalents that were excluded from diluted EPS calculations because their effect would have been antidilutive Denominators for EPS Calculations (in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Denominator for basic calculation | 241,083 | 233,453 | 241,667 | 234,074 |\ | Denominator for dilutive calculation | 251,665 | 233,453 | 253,916 | 234,074 | Excluded Antidilutive Class C Capital Stock Equivalents (in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Total Class C capital stock equivalents | 10,573 | 66,378 | 10,974 | 67,408 | Note 11. Commitments and Contingencies This note details the company's purchase commitments and ongoing legal proceedings. Significant legal cases include patent infringement, federal securities class action, and shareholder derivative suits. While outcomes are uncertain, management does not believe they will have a material effect on financial position, results of operations, or cash flow Purchase Commitments (in millions) | Period | Purchase Obligations | | :---------------- | :------------------- | | Remainder of 2025 | $99 | | 2026 | $117 | | 2027 | $67 | | 2028 | $1 | | Total | $284 | - The company is involved in a patent infringement lawsuit with IBM, a federal securities class action lawsuit, and shareholder derivative suits, all of which are in various stages of litigation[87][88][89] - Management believes the outcomes of these legal proceedings will not have a material effect on the company's financial position, results of operations, or cash flow, and no material accruals have been recorded[86][90] Note 12. Revenue and Contract Balances This note explains the company's revenue recognition policy, which is based on satisfying performance obligations. It also provides details on contract assets and deferred revenue balances, including the amounts recognized as revenue during the periods - Revenue is recognized when performance obligations are satisfied by transferring control of products or services to customers[92] - Contract assets totaled $201 million as of June 30, 2025, up from $157 million as of December 31, 2024[93] - For Q2 2025, $53 million of the opening deferred revenue balance of $70 million was recognized as revenue[94] For H1 2025, $53 million of the opening deferred revenue balance of $62 million was recognized as revenue[95] Note 13. Segment Information This note presents a table of significant expense categories that impact the company's reported measure of segment profitability, providing a breakdown of costs relative to revenue and net income (loss) Significant Expense Categories (in millions) | Expense Category | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------ | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Revenue | $655 | $572 | $1,253 | $1,101 | | Headcount-related expenses (excl. share-based comp) | $298 | $272 | $586 | $536 | | Share-based compensation | $99 | $113 | $196 | $221 | | Depreciation and amortization | $67 | $59 | $132 | $115 | | Marketing and advertising costs | $64 | $58 | $107 | $88 | | Direct product and service costs | $73 | $44 | $123 | $87 | | Loss from operations | $(11) | $(38) | $(20) | $(83) | | Net income (loss) | $2 | $(17) | $10 | $(40) | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on Zillow Group's financial condition and results of operations, discussing business overview, market health, revenue categories, key performance metrics, and detailed analysis of revenue, expenses, and liquidity. It highlights the company's strategic focus on growth despite housing market uncertainties Overview of our Business Zillow Group aims to simplify real estate transactions through its digital solutions and professional connections. Its brand portfolio includes Zillow Premier Agent, Zillow Home Loans, Zillow Rentals, and various marketing software solutions. The company's employee count increased slightly since the end of 2024 - Zillow Group's mission is to reimagine real estate to make home a reality for more people, connecting them with digital solutions and real estate professionals[98] - The company's portfolio includes Zillow Premier Agent, Zillow Home Loans, Zillow Rentals, Trulia, StreetEasy, HotPads, Out East, ShowingTime+, Spruce, and Follow Up Boss[99] - As of June 30, 2025, Zillow Group had 6,944 employees, an increase from 6,856 employees as of December 31, 2024[100] Health of Housing Market The housing market's health, influenced by low inventory, volatile mortgage rates, and home price fluctuations, impacts Zillow Group's financial performance. Despite these challenges, the company's revenue growth outpaced the industry's Total Transaction Value (TTV) increase - Current market factors include low housing inventory, elevated and volatile mortgage interest rates, changes in rental inventory and occupancy rates, and home price fluctuations[101] - Total Transaction Value (TTV) increased 2% for Q2 2025 YoY and 4% for H1 2025 YoY[101] - Zillow Group's total revenue growth for Q2 and H1 2025 exceeded the industry's TTV performance for the same periods[101] Revenue Overview Zillow Group's revenue is categorized into Residential, Mortgages, Rentals, and Other. Residential revenue includes Premier Agent, new construction, and software solutions like ShowingTime+, StreetEasy, and Follow Up Boss. Mortgages revenue comes from originations and advertising. Rentals revenue is generated from advertising and applications, while Other revenue is primarily from display advertising - Revenue is classified into Residential, Mortgages, Rentals, and Other, with 'For Sale revenue' combining Residential and Mortgages[102] - Residential revenue sources include Premier Agent (market-based pricing and Flex model), new construction advertising, ShowingTime+ (Appointment Center, dotloop, Zillow Showcase), StreetEasy (Experts, subscriptions), and Follow Up Boss CRM[103][104][105][106][107][108] - Mortgages revenue is primarily from mortgage originations through Zillow Home Loans and advertising to mortgage professionals[109] - Rentals revenue is derived from advertising and tools for property managers and rental applications[110] Financial Overview Zillow Group reported a 15% increase in total revenue and an 11% increase in gross profit for the three months ended June 30, 2025, compared to the same period in the prior year. This growth was primarily driven by increases in Rentals and For Sale revenue Financial Overview (Three Months Ended June 30, in millions) | Metric | 2025 | 2024 | Change | % Change | | :----------- | :--- | :--- | :----- | :------- | | Total revenue | $655 | $572 | $83 | 14.5% | | Gross profit | $489 | $442 | $47 | 10.6% | - Rentals revenue increased by $42 million (36%) to $159 million[112] - Residential revenue increased by $25 million (6%) to $434 million, and Mortgages revenue increased by $14 million (41%) to $48 million[116] Key Metrics Management tracks visits, unique users, For Sale revenue per TTV, and loan origination volume as key indicators of financial condition and operational results. These metrics show positive trends, reflecting increased consumer engagement and successful mortgage operations Visits Visits to Zillow's mobile applications and websites increased by 4% for Q2 2025 and 3% for H1 2025 compared to the prior year. The company transitioned to an internal measurement tool for Zillow and StreetEasy visits to enhance data control and reduce reliance on third-party providers - Visits are defined as a group of interactions by users with Zillow, Trulia, and StreetEasy mobile applications and websites[117] Visits to Mobile Applications and Websites (in millions) | Period | June 30, 2025 | June 30, 2024 | % Change | | :---------------- | :------------ | :------------ | :------- | | Three Months Ended | 2,590 | 2,495 | 4% | | Six Months Ended | 4,944 | 4,811 | 3% | - Zillow and StreetEasy now measure visits using an internal measurement tool, moving away from Google's Universal Analytics for StreetEasy[118][119] Unique Users Average monthly unique users increased by 5% for both Q2 and H1 2025 compared to the prior year, indicating growing consumer traffic. Zillow, StreetEasy, and HotPads now use an internal measurement tool for unique users to improve data insight - A unique user is counted the first time an individual accesses one of the company's mobile applications or websites using a specific device/browser within a calendar month[121] Average Monthly Unique Users (in millions) | Period | June 30, 2025 | June 30, 2024 | % Change | | :---------------- | :------------ | :------------ | :------- | | Three Months Ended | 243 | 231 | 5% | | Six Months Ended | 235 | 224 | 5% | - Zillow, StreetEasy, and HotPads measure unique users using an internal measurement tool, transitioning from Google's Universal Analytics for StreetEasy and HotPads[122][124] For Sale Revenue Per Total Transaction Value For Sale revenue per TTV increased by 5% to 10.3 basis points for the twelve months ended June 30, 2025, reflecting the company's ability to connect and convert more buyers and sellers relative to the residential real estate industry's total transaction value - For Sale revenue per TTV measures the company's For Sale revenue performance relative to the residential real estate industry's total transaction value[125] For Sale Revenue Per Total Transaction Value (Twelve Months Ended June 30) | Metric | 2025 | 2024 | % Change | | :------------------------------------ | :--- | :--- | :------- | | For Sale revenue (in millions) | $1,812 | $1,624 | 12% | | Total Transaction Value (in trillions) | $1.8 | $1.6 | 6% | | For Sale revenue per TTV (in basis points) | 10.3 | 9.8 | 5% | Loan Origination Volume Total loan origination volume through Zillow Home Loans significantly increased by 48% for Q2 2025 and 41% for H1 2025 compared to the prior year, primarily driven by growth in purchase loan originations, aligning with strategic priorities - Loan origination volume measures the total value of mortgage loan originations closed through Zillow Home Loans[128] Loan Origination Volume (in millions) | Loan Type | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | % Change | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | % Change | | :-------------------------- | :------------------------------- | :------------------------------- | :------- | :------------------------------ | :------------------------------ | :------- | | Purchase loan origination volume | $1,116 | $756 | 48% | $1,907 | $1,357 | 41% | | Refinance loan origination volume | $10 | $3 | 233% | $15 | $8 | 88% | | Total loan origination volume | $1,126 | $759 | 48% | $1,922 | $1,365 | 41% | - The increase was primarily driven by continued growth in Zillow Home Loans purchase loan originations[129] Results of Operations This section provides a detailed analysis of Zillow Group's revenue, expenses, and profitability for the three and six months ended June 30, 2025, compared to the prior year. It highlights significant growth in Rentals and Mortgages revenue, alongside changes in operating costs and a shift to net income Revenue Total revenue increased by 15% for Q2 2025 and 14% for H1 2025. This growth was primarily fueled by a 36% increase in Rentals revenue and significant increases in Mortgages revenue (41% for Q2, 37% for H1), driven by higher loan origination volume and gain on sale margin Total Revenue by Category (in millions, except percentages) | Revenue Category | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | % Change | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | % Change | | :-------------------------- | :------------------------------- | :------------------------------- | :------- | :------------------------------ | :------------------------------ | :------- | | Residential | $434 | $409 | 6% | $851 | $802 | 6% | | Mortgages | $48 | $34 | 41% | $89 | $65 | 37% | | Total For Sale revenue | $482 | $443 | 9% | $940 | $867 | 8% | | Rentals | $159 | $117 | 36% | $288 | $214 | 35% | | Other | $14 | $12 | 17% | $25 | $20 | 25% | | Total revenue | $655 | $572 | 15% | $1,253 | $1,101 | 14% | - Rentals revenue increased due to a 21% increase in quarterly revenue per average monthly rentals unique visitor and a 13% increase in average monthly rentals unique visitors for Q2 2025[132] - Mortgages revenue increased primarily due to a 48% increase in total loan origination volume and a 5% increase in gain on sale margin for Q2 2025[136] Adjusted EBITDA Adjusted EBITDA increased by 16% for Q2 2025 and 19% for H1 2025, reflecting improved operating performance. The company provides a reconciliation to net income (loss) and outlines the limitations of Adjusted EBITDA as a non-GAAP measure Net Income (Loss) and Adjusted EBITDA (in millions, except percentages) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | % Change | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | % Change | | :-------------------------- | :------------------------------- | :------------------------------- | :------- | :------------------------------ | :------------------------------ | :------- | | Net income (loss) | $2 | $(17) | 112% | $10 | $(40) | 125% | | Adjusted EBITDA | $155 | $134 | 16% | $308 | $259 | 19% | - Adjusted EBITDA is a key metric used by management and the Board to measure operating performance and trends, excluding certain expenses like share-based compensation, depreciation, and interest[139][141] Reconciliation of Adjusted EBITDA to Net Income (Loss) (in millions) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Net income (loss) | $2 | $(17) | $10 | $(40) | | Income taxes | $— | $2 | $— | $4 | | Other income, net | $(18) | $(34) | $(40) | $(67) | | Depreciation and amortization | $67 | $59 | $132 | $115 | | Share-based compensation | $99 | $113 | $196 | $221 | | Impairment costs | $— | $— | $— | $6 | | Loss on extinguishment of debt | $— | $1 | $— | $1 | | Interest expense | $5 | $10 | $10 | $19 | | Adjusted EBITDA | $155 | $134 | $308 | $259 | Costs and Expenses, Gross Profit and Other Items This section provides a summary of changes in cost of revenue, gross profit, and operating expenses. Cost of revenue increased, leading to a slight decrease in gross margin, while total operating expenses saw a modest increase Costs and Expenses Summary (in millions, except percentages) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | % Change | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | % Change | | :-------------------------- | :------------------------------- | :------------------------------- | :------- | :------------------------------ | :------------------------------ | :------- | | Cost of revenue | $166 | $130 | 28% | $305 | $253 | 21% | | Gross profit | $489 | $442 | 11% | $948 | $848 | 12% | | Sales and marketing | $226 | $205 | 10% | $424 | $371 | 14% | | Technology and development | $153 | $144 | 6% | $302 | $291 | 4% | | General and administrative | $121 | $131 | -8% | $242 | $263 | -8% | | Total operating expenses | $500 | $480 | 4% | $968 | $931 | 4% | Cost of Revenue Cost of revenue increased by 28% for Q2 2025 and 21% for H1 2025, primarily driven by higher lead acquisition costs from the Redfin rentals partnership, increased depreciation and amortization of website development costs, and higher ad serving costs - Cost of revenue increased by $36 million (28%) for Q2 2025, primarily due to $20 million in lead acquisition costs (Redfin partnership), $5 million in depreciation and amortization, and $5 million in ad serving costs[147] - Cost of revenue increased by $52 million (21%) for H1 2025, primarily due to $25 million in lead acquisition costs (Redfin partnership), $13 million in depreciation and amortization, and $6 million in ad serving costs[148] - Cost of revenue includes expenses related to operating mobile applications/websites, headcount, revenue-sharing, depreciation, amortization of website development costs and intangible assets, credit card fees, and mortgage loan origination costs[146] Gross Profit Gross profit increased by 11% for Q2 2025 and 12% for H1 2025, driven by higher revenue. However, gross margin decreased slightly from 77% to 75% for Q2 and from 77% to 76% for H1, mainly due to increased lead acquisition costs from the Redfin rentals partnership - Gross profit increased by $47 million (11%) for Q2 2025 and $100 million (12%) for H1 2025, primarily due to increased revenue[150][151] - Gross margin decreased from 77% to 75% for Q2 2025 and from 77% to 76% for H1 2025, primarily due to increased lead acquisition costs associated with the Redfin rentals partnership[150][151] Sales and Marketing Sales and marketing expenses increased by 10% for Q2 2025 and 14% for H1 2025, driven by higher headcount-related expenses (including share-based compensation) and increased marketing and advertising costs, particularly for the rentals marketplace - Sales and marketing expenses increased by $21 million (10%) for Q2 2025, due to $12 million in headcount-related expenses and $6 million in marketing and advertising costs[153] - Sales and marketing expenses increased by $53 million (14%) for H1 2025, due to $28 million in headcount-related expenses and $18 million in marketing and advertising costs[154] - The increases reflect continued investment in human capital and growth of the rentals marketplace[153][154] Technology and Development Technology and development expenses increased by 6% for Q2 2025 and 4% for H1 2025, primarily due to increased headcount-related expenses (including share-based compensation) and higher software and hardware costs, reflecting ongoing investment in product development - Technology and development expenses increased by $9 million (6%) for Q2 2025, due to $6 million in headcount-related expenses and $2 million in software and hardware costs[156] - Technology and development expenses increased by $11 million (4%) for H1 2025, due to $6 million in headcount-related expenses and $4 million in software and hardware costs[157] - These increases are driven by continued investment in human capital to grow the business[156][157] General and Administrative General and administrative expenses decreased by 8% for both Q2 and H1 2025, primarily due to lower headcount-related expenses (influenced by prior equity award actions) and reduced third-party professional service fees, partially offset by increased software and hardware costs - General and administrative expenses decreased by $10 million (8%) for Q2 2025, due to $7 million in headcount-related expenses and $2 million in third-party professional service fees[159] - General and administrative expenses decreased by $21 million (8%) for H1 2025, due to $13 million in headcount-related expenses, $6 million in third-party professional service fees, and $3 million in facility expenses[160] - The decreases in headcount-related expenses were primarily influenced by equity award actions in August 2022[159][160] Other Income, net Other income, net, primarily consisting of interest income, decreased by $16 million for Q2 2025 and $27 million for H1 2025. This decline was mainly due to lower interest income on investments, resulting from a decrease in investment balances following the settlement of convertible senior notes - Other income, net, primarily interest income, decreased by $16 million for Q2 2025 and $27 million for H1 2025[161] - The decrease was driven by lower interest income on investments due to a decrease in investment balances after settling the 2024, 2025, and 2026 Notes[161] Interest Expense Interest expense decreased by $5 million for Q2 2025 and $9 million for H1 2025, primarily due to the settlement of the 2024, 2025, and 2026 convertible senior notes - Interest expense decreased by $5 million for Q2 2025 and $9 million for H1 2025[163] - The decrease was primarily due to the settlement of the 2024, 2025, and 2026 Notes[163] Income Taxes Income tax expense was not material for the periods presented. The company is evaluating the impact of the recently enacted 'One Big Beautiful Bill' on future tax provisions. A valuation allowance is maintained against net deferred tax assets due to uncertainty of realization, despite significant accumulated tax losses - Income tax expense was not material for the three and six months ended June 30, 2025 or 2024[166] - The company is evaluating the impact of the 'One Big Beautiful Bill' enacted on July 4, 2025, which includes significant U.S. tax law changes[164] - A valuation allowance is provided against net deferred tax assets, with approximately $1.3 billion in federal tax losses and $66 million (tax effected) in state tax losses as of December 31, 2024[165] Liquidity and Capital Resources Zillow Group's liquidity primarily comes from cash flows from operations, debt financing, and equity offerings, used for working capital, corporate needs, and mortgage originations. The company believes its current liquidity and capital resources are sufficient for at least the next 12 months, with longer-term needs met through a combination of cash flows, debt, and equity - Primary sources of liquidity are cash flows from operations, debt financing, and equity offerings[167] - Cash requirements include working capital, general corporate needs, and mortgage loan originations, with ongoing investments in technology, new products, and sales/marketing[167] - As of June 30, 2025, cash and cash equivalents, investments, and restricted cash totaled $1.2 billion, down from $1.9 billion at December 31, 2024[168] - Management believes current liquidity is sufficient for ongoing operating activities and capital requirements for at least the next 12 months[169] Summarized Cash Flow Information This section provides a summary of cash flows from operating, investing, and financing activities for the six months ended June 30, 2025 and 2024, showing a net decrease in cash for both periods Selected Cash Flow Data (in millions) | Cash Flow Data | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | | Net cash provided by operating activities | $191 | $135 | | Net cash provided by (used in) investing activities | $25 | $(207) | | Net cash used in financing activities | $(709) | $(240) | Cash Flows Provided By Operating Activities Net cash provided by operating activities increased to $191 million for H1 2025 from $135 million for H1 2024. This was driven by net income and non-cash adjustments, partially offset by increases in operating assets like mortgage loans held for sale and accounts receivable - Net cash provided by operating activities was $191 million for H1 2025, driven by net income of $10 million, adjusted by $196 million in share-based compensation and $132 million in depreciation and amortization[172] - Changes in operating assets and liabilities decreased net cash by $152 million in H1 2025, primarily due to increases in mortgage loans held for sale ($91 million), accounts receivable ($47 million), and prepaid expenses ($46 million)[172] - For H1 2024, net cash provided by operating activities was $135 million, adjusted by a net loss of $40 million, $221 million in share-based compensation, and $115 million in depreciation and amortization[173] Cash Flows Provided By (Used In) Investing Activities Net cash provided by investing activities was $25 million for H1 2025, a significant improvement from net cash used of $207 million in H1 2024. This shift was primarily due to net proceeds from investment maturities and sales, partially offset by purchases of property, equipment, and intangible assets, including a $100 million payment for the Redfin partnership - Net cash provided by investing activities was $25 million for H1 2025, primarily from $213 million in net proceeds from investment maturities and sales[175] - This was partially offset by **$188 million in purchases of property and equipment and intangi