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Zillow (ZG -18%) is trading sharply lower after the online real estate company missed slightly on adjusted EPS. Revenue rose a healthy 18.1% yr/yr to $654 mln, landing at the higher end of prior guidance of $645--655 mln. However, after topping guidance in Q3, results were viewed as a modest disappointment. Adjusted EBITDA grew 33% yr/yr to $149 mln, in line with prior guidance of $145--155 mln, but again did not replicate the upside surprise delivered in Q3. The biggest bright spot was Q1 revenue guidance of $700--710 mln, well above analyst expectations and signaling optimism for a solid spring selling season.

• For Sale segment revenue grew 11% yr/yr to $475 mln, exceeding prior guidance of high single-digit growth. Residential revenue increased 8% yr/yr to $418 mln, benefiting from growth in agent and software offerings as well as strength in the New Construction marketplace. Mortgages revenue jumped 39% yr/yr to $57 mln, well above prior guidance of +20%, driven by a 67% surge in purchase loan origination volume to $1.5 bln.
• Rentals segment revenue climbed 45% yr/yr to $168 mln, primarily fueled by 63% growth in multifamily revenue, although this came in slightly below guidance of "more than 45%" growth.
• Zillow continues to focus on creating a more connected experience across search, touring, financing, and agent collaboration. The company's strategy centers on reducing friction and uncertainty by enabling all participants in a transaction to work together more efficiently.
• Looking ahead to FY26, Zillow expects mid-teens revenue growth overall. Within Rentals, the company forecasts approximately 30% revenue growth, following 39% growth in 2025 and 27% growth in 2024, reflecting continued confidence in the segment despite moderating expansion.
• Management expects the For Sale environment to continue "bouncing along the bottom," but sees improving affordability as a reason for cautious optimism. The share of median household income required to purchase a newly bought home declined to 32% in December, down from a peak of 38% in 2023. Further improvement in affordability could help support a broader housing recovery over time.

Briefing.com Analyst Insight:

While Zillow's Q4 results were solid, the lack of upside relative to guidance after a strong Q3 print likely explains the muted reaction. Encouragingly, Q1 revenue guidance points to accelerating momentum heading into the key spring selling season, and Mortgage growth remains a standout contributor. Rentals continues to deliver robust expansion, though growth is expected to moderate in FY26 as the segment gets larger. We see Zillow as executing well operationally, but near-term performance remains tethered to housing market conditions. Sustained improvement in affordability and transaction volumes will be critical to unlocking further upside.