Zillow heads into its third-quarter report with an unusual combination: profits that Wall Street expects to more than quadruple from a year ago, and revenue that is forecast to slip from the prior quarter. That tension frames the whole setup. Management has spent the past year arguing that its for-sale, mortgage and rental businesses can keep taking share in a housing market it describes as bouncing along the bottom. This quarter is the first real chance to see whether the cost pressures that clouded the first half begin to fade as promised.
Consensus calls for earnings of $0.26 per share on revenue of about $754.1 million. That would be a sharp jump from $0.06 a year earlier and an improvement on last quarter's $0.20, while revenue growth of roughly 11.6% marks solid but unspectacular progress. The sequential step down from $772.0 million last quarter likely reflects seasonal softness in housing activity. Still, an 11.6% pace sits below the mid-teens annual growth management has said it remains on track to deliver. Matching the forecast would keep the year intact; a meaningful shortfall would make that full-year target harder to defend in the fourth quarter.
The bigger story is margins. Management flagged a variable-cost headwind of more than 400 basis points in the first half, tied to adding rental sales staff and loan officers, plus a 100 to 200 basis point drag from legal expenses, including roughly $20 million of incremental cost in the second quarter linked to the FTC trial. Both were framed as temporary, with the hiring burden expected to moderate by year-end. The near-tripling of the EPS growth rate embedded in expectations assumes that relief is arriving. Evidence of stronger EBITDA margins and continued progress toward lower stock-based compensation would validate the narrative. Another quarter of elevated legal bills or stubbornly high variable costs would challenge it.
On the revenue side, mortgages have been the standout. Growth accelerated to 56% in the first quarter, well ahead of management's outlook, as purchase originations hit a record $1.5 billion. Holding growth near that level would show the loan officer investment paying off. Rentals deserve close scrutiny too, since growth is expected to cool to about 30% this year after 39% in 2025. A gentle deceleration would be acceptable; a steeper drop would raise questions about the multifamily push, which had grown to 76,000 properties. In residential, the share of connections in enhanced markets reached 49% against a target above 75%, and Showcase adoption was climbing. Further gains, alongside progress on the cumulative for-sale revenue goal of $1 billion, where Zillow said it was about a third of the way there, would support the share-gain thesis even without help from the housing market. Early traction for Zillow Preview, the Zillow Pro rollout and the broader AI Mode experience would add color, though these remain longer-term stories.
The market has leaned modestly positive. Shares have risen about 5.9% since the last report while the S&P 500 slipped, and sentiment has edged up from slightly bullish to marginally more so, a small shift rather than a surge of optimism. At $32.62 the stock sits in the upper half of its post-earnings range but well below its 200-day moving average near $39.83, and that range is notably lower than the prior quarter's. In other words, investors have not priced in a full recovery.
Ultimately, this report hinges on whether Zillow can show that its first-half spending was an investment rather than a permanent cost structure. If revenue holds near forecast and margins widen as legal and hiring pressures ease, the profit inflection story stays credible. If costs linger, the market may question how much operating leverage this business can generate in a flat housing environment.