Zillow grows despite a declining housing market
- Q2 2026 revenue grew 18% to $772 million, driven by strong gains in Mortgages and Rentals.
- Residential revenue grew 7%, but its share of total revenue fell to 60% as newer segments expanded faster.
- Mortgages revenue jumped 75% year over year in Q2, with Zillow Home Loans reaching positive per-unit economics.
- The company cut 7% of its workforce to optimize costs and expects a slight decline in the overall housing market this year.
- Near-term financial friction from shifting to a success-based model could obscure underlying growth.
Growth outside agent ads
Zillow's bull case is that the company can grow even when the housing market shrinks. Q2 2026 backed that up. Revenue rose 18% to $772 million, despite management downgrading their view on the purchase mortgage market to a slight decline for the year.
The shift is clear in the mix. Residential, mostly agent advertising, remains the core. But Rentals and Mortgages are growing much faster. Rentals revenue rose 31% in Q2 2026, and Mortgages revenue jumped 75%. Zillow Home Loans achieved positive per-unit economics, validating the strategy to integrate the transaction.
The bear case centers on the messy transition to a preferred partner model. This shift delays revenue recognition by six to twelve months and transfers some revenue from Residential to Mortgages. These changes, plus persistent legal risks and a 7% workforce reduction, create near-term noise.
Finn's view remains mixed. Growth is the strongest part of the story, but recent performance and sentiment are weaker. The stock needs Zillow to prove the preferred model transition will pay off without dragging down profitability.
A housing traffic tollbooth
Zillow brings together people who want to buy, sell, rent, or finance a home. It then sells access, tools, and services to the professionals who want those customers. Those professionals include agents, lenders, landlords, and property managers.
The main money source is Residential. This segment relies on Premier Agent, where agents pay Zillow to reach home shoppers. Zillow is actively shifting from upfront advertising to a success-based preferred model, where partners pay only when they close a deal.
Rentals makes money from property manager ads, landlord tools, and renter application services. Mortgages generates revenue through Zillow Home Loans and lender advertising. Other revenue is mostly display advertising.
The model works best when Zillow has massive consumer traffic and professionals believe that traffic turns into closed transactions. It breaks if agent budgets fall, mortgage growth costs too much, legal limits change how leads are sold, or competitors pull renters and home shoppers away.
The pieces of the marketplace
Zillow consumer apps and sites
Zillow, Trulia, StreetEasy, HotPads, and Out East bring in home shoppers and renters. That traffic is the base for the rest of the business.
Premier Agent / Preferred Partners
Premier Agent sells advertising, leads, and technology to real estate agents. Zillow is shifting this to a success-based model.
Rentals Marketplace
This sells ads and software tools to landlords and property managers. Q2 2026 Rentals revenue grew 31%.
Zillow Home Loans
Zillow Home Loans originates mortgages for home buyers. Mortgages revenue jumped 75% in Q2 2026.
Mortgage Marketplace
Zillow also sells advertising services to other lenders. This gives Zillow another way to monetize shoppers who are close to buying a home.
Software & Listing Solutions
Tools like ShowingTime+, Spruce, and Follow Up Boss help real estate pros manage customer relationships and closing services.
Q2 2026 revenue mix
The mix comes from the three months ended June 30, 2026. Residential dropped to 60% of revenue as Zillow pushes its success-based transaction model.
What could go wrong
Transition noise masks growth
Medium impact · High oddsZillow is shifting to a preferred partner model. This creates a mechanical shift of revenue out of Residential and delays revenue recognition by six to twelve months.
Housing market deterioration
Medium impact · High oddsManagement revised their macro housing forecast to a low-to-mid single digit decline for 2026. A worsening market could strain agent budgets and slow origination volumes.
FTC trial and legal costs
High impact · Medium oddsManagement noted legal expenses as a headwind earlier in the year. If the FTC trial drags on or other cases emerge, profit margin expansion could fall short of targets.
Agent economics weaken
High impact · Medium oddsRecent industry settlements resulted in rule changes affecting how commissions are offered. If agent commissions fall meaningfully, agents may spend less on Zillow.
In one breath
How does Zillow make money?
Zillow makes most of its money by selling ads, leads, and software to real estate agents, landlords, property managers, and lenders. It also originates mortgages through Zillow Home Loans.
Why is Zillow growing if the housing market is slow?
The fast growth is coming from Rentals and Mortgages, not only from traditional agent ads. In Q2 2026, Rentals grew 31% and Mortgages grew 75% year over year.
What is the preferred partner model?
Zillow is shifting from upfront advertising to a success-based model. Preferred partners pay Zillow a portion of their commission when a transaction actually closes.
Is Zillow still mainly an agent advertising company?
Yes, for now. Residential was 60% of Q2 2026 revenue, but Rentals and Mortgages are taking a larger share because they are growing faster.
