Why Is Zillow (ZG) Down 1.7% Since Last Earnings Report?

Core Viewpoint - Zillow Group reported mixed Q4 2025 results, with revenues exceeding expectations but adjusted earnings falling short [2][3] Financial Performance - The company achieved a GAAP net income of $3 million (1 cent per share), a significant improvement from a net loss of $52 million (22 cents per share) in the previous year [3] - Non-GAAP net income for Q4 2025 was $98 million (39 cents per share), up from $68 million (27 cents per share) year-over-year, but missed the consensus estimate of 42 cents per share [3] - Quarterly revenues rose to $654 million from $554 million in the prior year, surpassing the Zacks Consensus Estimate of $650 million [5] - For the full year 2025, revenues increased to $2.58 billion from $2.24 billion in 2024 [5] Segment Performance - Residential revenues grew 8% to $418 million, driven by strong growth in agent and software offerings [5] - The Mortgages segment generated $57 million in revenues, up from $41 million, primarily due to a 67% increase in purchase loan origination [6] - Rental revenues surged 45% to $168 million, largely due to a 63% year-over-year growth in multifamily revenues [6] Profitability Metrics - Gross profit for the quarter was $476 million, with margins of 73%, compared to $420 million and 76% in the prior year [7] - Adjusted EBITDA was $149 million, up from $112 million a year ago, with respective margins of 23% and 20% [7] Cash Flow and Liquidity - In Q4, Zillow generated $72 million in cash from operations, down from $122 million in the previous year [8] - For 2025, cash from operating activities was $368 million, compared to $428 million in 2024 [9] - As of December 31, 2025, the company had $768 million in cash and cash equivalents [9] Future Outlook - For Q1 2026, Zillow expects total revenues between $700 million and $710 million, with adjusted EBITDA projected at $160 million to $175 million [10] - The company anticipates a 40% year-over-year growth in Mortgages revenues and high single-digit growth in residential revenues, while rental revenues are expected to rise over 40% [10] - For 2026, Zillow forecasts mid-teens revenue growth, with rental revenues projected to increase approximately 30% year-over-year [11] Estimate Trends - Recent estimates for Zillow have trended downward, with a consensus estimate shift of -6.25% [12] - The stock currently holds a Zacks Rank 3 (Hold), indicating an expectation of in-line returns in the coming months [14]