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Zillow (ZG -1%) is trading roughly flat after reporting Q1 results last night. Zillow reported a decent EPS beat with revenue up 13% yr/yr to $598 mln, nicely above prior guidance of $575-590 mln. Adjusted EBITDA grew 22% yr/yr to $153 mln, well above the $125-140 mln prior guidance. Unfortunately, the mid-point of Q2 revenue guidance was below consensus, which is weighing on shares today.

• As a reminder, Zillow recently changed it reporting segments. It is now presenting revenue in two major categories: For Sale and Rentals. For Sale segment revenue was up 8% yr/yr to $458 mln. Residential revenue grew 6% yr/yr to $417 mln, outperforming its outlook. This was fueled by growth in Premier Agent, expansion of Zillow Showcase, as well as contributions from its new construction marketplace and Follow Up Boss. Also, within the For Sale category, mortgages revenue in Q1 grew a healthy 32% yr/yr to $41 mln, which was better than expected, as more buyers are choosing financing through Zillow Home Loans.
• In terms of its view on the housing market, Zillow says it has been challenged for a while and it expects it to continue to bounce along the bottom. This has been the environment since 2022 and Zillow expects more of the same in 2025. The company is pleased to report consistent double-digit revenue growth in the face of a really challenging housing market.
• On the Rentals side, revenue growth accelerated in Q1, increasing 33% yr/yr to $129 mln, this compares to +25% growth in Q4. Growth was driven primarily by multifamily revenue (25+ unit buildings), which grew 47% in Q1, up from 41% in Q4. Zillow increased the number of multifamily properties on its apps and sites by 38%, reaching an all-time high of 55,000 multifamily properties at of the end of Q1, up from 50,000 at the end of Q4.
• Recall that recently, Zillow announced a partnership with Redfin (RDFN), making Zillow the exclusive provider of multifamily rental listings on Redfin and its sites. Zillow is seeing stronger-than-expected benefits from this partnership, which went live at the end of April. In Q2, Zillow will begin paying Redfin for rentals leads and expects the partnership to be accretive to EBITDA in 2H25.

After some impressive recent quarters from Zillow, the last couple of quarters have been more modest. We suspect uncertainty around the election in Q4 and the macro/tariff issues in Q1 have cooled home buying interest. However, this does showcase why Zillow's aggressive move into Rentals was really smart and that is showing up in the numbers. That helps to offset some of the boom-bust nature of the housing market.