Zillow (ZG +19%) surged after reporting impressive Q2 results. The company posted its largest EPS beat since Q2 2023. Revenue increased 13% year-over-year to $572 million, surpassing the prior guidance of $525-540 million. Adjusted EBITDA rose 21% year-over-year to $134 million, well above the $85-100 million guidance. Zillow also provided in-line Q3 revenue guidance. Additionally, Zillow announced the promotion of COO Jeremy Wacksman to CEO.
Earnings Highlights: The Residential segment revenue grew 8% year-over-year to $409 million, exceeding the $375-385 million guidance. Premier Agent revenue benefited from investments in top- and mid-funnel experiences, improving overall connection and conversion rates.
Touring Technology: Zillow's integration of touring technology into its buyer flow process has been well-received. The company reported that touring connections convert at three times the rate of other actions on Zillow. Zillow nearly doubled the number of markets with Real Time Touring last month.
Rentals Segment: Zillow is expanding into rentals and mortgages. The Rentals segment, now 20% of total revenue, grew 29% year-over-year to $117 million, driven by a 44% increase in multifamily revenue. Active Rentals listings rose 16% year-over-year to 1.9 million in June.
Mortgages Segment: Mortgages revenue grew 42% year-over-year to $34 million, with purchase mortgage origination volume up 125% year-over-year, despite a challenging mortgage-rate environment.
New CEO: Jeremy Wacksman, promoted from COO to CEO, succeeds co-founder Rich Barton, who becomes co-executive chair alongside co-founder Lloyd Frink. Wacksman, who joined Zillow from Microsoft in 2009, has overseen product, marketing, and operations as COO for the past three years.
Overall, Zillow delivered strong Q2 performance with a notable EPS and revenue beat, coupled with solid guidance. The company's expansion into Rentals and Mortgages has proven to be a strategic move, particularly with Rentals now making up 20% of revenue. This diversification is beneficial as higher mortgage rates have reduced home sales, boosting rental demand. As rates eventually fall, the balance between sales and rentals will continue to complement each other.
Investors are optimistic about the new CEO, Jeremy Wacksman, bringing fresh leadership and deep knowledge of Zillow's operations. While founders have unique skills and perspectives, transitioning leadership as a company grows can be advantageous.
