Zillow’s (NASDAQ:ZG) Q1: Beats On Revenue But Stock Drops

Online real estate marketplace Zillow (NASDAQ: ZG) reported Q1 CY2025 results topping the market’s revenue expectations, with sales up 13% year on year to $598 million. Its GAAP profit of $0.03 per share was significantly above analysts’ consensus estimates.

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Company Overview

Founded by Expedia co-founders Lloyd Frink and Rich Barton, Zillow (NASDAQ: ZG) is the leading U.S. online real estate marketplace.

Sales Growth

A company’s long-term sales performance is one signal of its overall quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Over the last five years, Zillow’s demand was weak and its revenue declined by 7.6% per year. This was below our standards and suggests it’s a lower quality business.

We at StockStory place the most emphasis on long-term growth, but within consumer discretionary, a stretched historical view may miss a company riding a successful new product or trend. Zillow’s annualized revenue growth of 10.4% over the last two years is above its five-year trend, but we were still disappointed by the results.

This quarter, Zillow reported year-on-year revenue growth of 13%, and its $598 million of revenue exceeded Wall Street’s estimates by 1.4%.

Looking ahead, sell-side analysts expect revenue to grow 14.4% over the next 12 months, an improvement versus the last two years. This projection is above average for the sector and suggests its newer products and services will spur better top-line performance.

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Operating Margin

Zillow’s operating margin has been trending up over the last 12 months, but it still averaged negative 10% over the last two years. This is due to its large expense base and inefficient cost structure.

Zillow’s operating margin was negative 1.5% this quarter. The company's consistent lack of profits raise a flag.

Earnings Per Share

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Although Zillow’s full-year earnings are still negative, it reduced its losses and improved its EPS by 28.9% annually over the last five years. The next few quarters will be critical for assessing its long-term profitability.

In Q1, Zillow reported EPS at $0.03, up from negative $0.10 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street is optimistic. Analysts forecast Zillow’s full-year EPS of negative $0.34 will reach break even.

Key Takeaways from Zillow’s Q1 Results

We were impressed by how significantly Zillow blew past analysts’ EPS and EBITDA expectations this quarter. We were also happy its revenue outperformed Wall Street’s estimates. On the other hand, its EBITDA guidance for next quarter (disclosed on the earnings call) missed. Zooming out, we think this quarter featured some important positives, but the outlook is driving the move. Shares traded down 5.1% to $62.96 after reporting.

Big picture, is Zillow a buy here and now? When making that decision, it’s important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it’s free.