Zillow Q3 2026 Earnings: Rentals and Mortgages Drive 7% Revenue Growth

Zillow Group (NASDAQ: Z and ZG) reported Q3 2026 revenue of $724 million, up 7% year over year, while GAAP diluted EPS swung to a loss of $0.70 from income of $0.04 in Q3 2025. Rentals and Mortgages drove the revenue increase, but a $165 million Zillow Offers securities class action settlement contributed to a $158 million GAAP net loss even as adjusted earnings increased.

Key Financial Results

For the three months ended September 30, 2026, gross profit increased to $516 million, but gross margin contracted by two percentage points to 71%. Adjusted EBITDA and adjusted net income rose, creating a substantial difference between Zillow’s GAAP and non-GAAP results.

Cash generation was also mixed: operating cash flow improved, while adjusted free cash flow declined sharply.

Adjusted net income, adjusted EPS, adjusted EBITDA and adjusted free cash flow are non-GAAP measures. Zillow’s adjusted earnings exclude items including share-based compensation, impairment and restructuring costs, specified litigation expenses, the securities settlement and income taxes.

Business and Segment Performance

Zillow’s revenue mix showed clear divergence. Rentals and Mortgages expanded rapidly, while the larger Residential business declined as elevated mortgage rates pressured housing transaction volume.

Mortgages growth primarily reflected a 55% increase in purchase loan origination volume to $2.0 billion. Rentals benefited from 35% growth in multifamily revenue. Together, these businesses offset the Residential decline and allowed total revenue to grow faster than the 1% increase Zillow cited for the broader residential real estate category.

Audience metrics were less favorable. Average monthly unique users declined 3% to 215 million, while visits fell 5% to 2.3 billion. Zillow nevertheless attracted 77% of average monthly unique visitors in the real estate category, according to Comscore.

The $165 Million Settlement Widened the GAAP and Adjusted Earnings Gap

The largest item separating Zillow’s GAAP loss from its adjusted profit was the $165 million Zillow Offers securities class action settlement, net of expected insurance recoveries. The settlement relates to Zillow Offers, a business that has been wound down, and Zillow excluded the charge from adjusted net income and adjusted EBITDA because it does not consider the item representative of ongoing operations.

Other Q3 adjustments included $74 million of share-based compensation, $32 million of impairment and restructuring costs, and $8 million of litigation costs associated with the Federal Trade Commission matter. Zillow began excluding the FTC-related costs from its adjusted measures in Q2 2026 and began excluding the securities settlement in Q3, making the scope of its non-GAAP adjustments important when comparing reported and underlying profitability.

Operating Cash Flow Rose, While Adjusted Free Cash Flow Fell

Net cash provided by operating activities increased to $162 million from $105 million. However, adjusted free cash flow fell to $46 million because the calculation included $73 million of net repayments on master repurchase agreements, compared with $42 million of net borrowings in the prior-year quarter—an approximately $115 million unfavorable swing.

Purchases of property and equipment totaled $34 million, while intangible-asset purchases were $9 million. Zillow ended the quarter with $707 million in cash and investments.

Management’s View

CEO Jeremy Wacksman characterized the quarter as evidence of Zillow’s durability in a difficult housing market. Management attributed the company’s relative revenue resilience to its brand, audience engagement, partner value and growth across a diversified set of businesses, while continuing to focus on a more integrated experience for renters, buyers and sellers.

Risks Investors Need to Watch

• Housing-market sensitivity: Higher mortgage rates already reduced Residential revenue by 4% by pressuring transaction volume. Zillow also estimated that industry purchase mortgage originations declined 4% during the quarter.
• Declining traffic: Monthly unique users and visits both fell year over year. Continued audience contraction could make it harder to sustain engagement and value for Zillow’s real estate partners.
• Margin pressure: Gross margin declined from 73% to 71% despite revenue growth. Further contraction would limit how effectively top-line gains translate into profit.
• Legal and reporting-basis risk: The securities settlement, FTC litigation costs and expanded non-GAAP exclusions created a wide gap between GAAP and adjusted earnings. Investors will need to track both the underlying legal exposure and the consistency of adjusted metrics.
• Uneven cash conversion: Stronger operating cash flow did not translate into higher adjusted free cash flow because of mortgage-funding and repurchase-agreement movements, which can produce substantial quarterly volatility.

Summary

Zillow’s Q3 2026 revenue growth was supported by Rentals and Mortgages despite continued pressure on housing transactions and Residential revenue. Adjusted profitability improved, but the securities settlement produced a large GAAP loss, gross margin narrowed and adjusted free cash flow declined. Future operating progress will depend on housing activity, audience trends, margin stability and the conversion of operating performance into cash flow.