Zillow (ZG) Q2 2026 Earnings Call Transcript

DATE

Wednesday, Aug. 5, 2026 at 5:00 p.m. ET

CALL PARTICIPANTS

• Investor Relations – Bradley Allen Berning
• Chief Executive Officer – Jeremy Wacksman
• Chief Operating Officer and Chief Financial Officer – Jeremy Hofmann

TAKEAWAYS

• Total Revenue — $772 million, representing 18% growth driven by performance in the rentals and mortgage segments.
• Adjusted EBITDA — $176 million, reflecting a 23% margin and exceeding management expectations for the period.
• Adjusted Net Income — $118 million, contributing to a diluted adjusted net income per share of $0.52.
• For Sale Revenue — $549 million, growing 14% year over year as the company transitions toward a preferred monetization model.
• Residential Revenue — $465 million, increasing 7% due to growth in software tools, new construction, and the preferred agent program.
• Mortgages Revenue — $84 million, rising 75% behind significant expansion in purchase loan origination volume.
• Purchase Loan Origination Volume — $2.2 billion, growing 95% year over year as the company increased its share of connections to the preferred program.
• Rentals Revenue — $209 million, growing 31% primarily driven by strong demand in the multifamily segment.
• Multifamily Revenue — grew 42% year over year, reflecting the compounding value of the company’s rental marketplace.
• Multifamily Properties — 79,000, representing a 23% increase in property count compared to the prior year.
• Follow-up Boss Monthly Active Users — 138,000, increasing 21% year over year as real estate teams adopt the CRM platform.
• Stock Repurchases — $200 million in Q2, with total repurchases reaching $826 million for the first half of 2026.
• Cash and Investments — $682 million, providing liquidity alongside a $500 million undrawn credit line.
• Share-Based Compensation — decreased 24% year over year during the quarter, aligning with expense management goals.
• Preferred Connection Mix — 61% of total connections, up from 27% in the same period last year.
• Zillow Showcase Penetration — 5% of all new listings, with penetration exceeding 10% in the company’s top 10 markets.
• Rich Media Listings — 11% of for-sale listings, including 3D home tours and interactive floor plans.
• Restructuring Impact — 7% reduction in headcount, expected to generate $75 million in annualized EBITDA cost savings.
• Q3 2026 Revenue Outlook — $745 million to $760 million, implying approximately 11% growth at the midpoint.
• Q3 2026 EBITDA Outlook — $180 million to $200 million, reflecting an anticipated 25% margin.
• FY 2026 Revenue Outlook — $2.92 billion to $2.96 billion, maintaining a mid-teens growth target for the full year.
• FY 2026 EBITDA Outlook — $730 million to $760 million, supported by expanded profit margins and cost discipline.
• Traffic and Engagement — 239 million average monthly unique users, representing a 2% decline amid rising mortgage rates.

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RISKS

• Hofmann stated, “We see continued pressure on affordability having a larger impact on mortgage buyers than the overall market, as interest rates have continued to rise since their lows in early March,” indicating a more conservative outlook for industry purchase originations.
• Hofmann warned that “the combination of seasonality and the timing of revenue recognition in Zillow Home Loans… [will] translate to 400 to 600-basis-points of headwind to for sale revenue” in the fourth quarter of 2026.

SUMMARY

Management at Zillow Group, Inc. (ZG -2.26%) reported that the company is accelerating its transition to an integrated transaction model, characterized by a shift from legacy lead-generation advertising toward a success-based referral system. The company outperformed its quarterly revenue and EBITDA guidance, led by double-digit growth in the rentals and mortgage segments. Management announced a restructuring of approximately 7% of its workforce to optimize cost structures and increase operational velocity. The company stated that it remains on track to hit its full-year goals, despite lowering its market-level forecast for industry purchase mortgage originations to a low to mid-single-digit decline. The strategic focus remains on the housing super app, combining AI-driven search, integrated financing through Zillow Home Loans, and premium software tools for real estate professionals.

• CEO Wacksman reported that users engaging with AI Mode spend more than three times as long on the platform and contact agents at nearly three times the rate of non-users.
• The company launched Zillow Pro, a premium membership giving agents access to predictive tools like “likely to list,” which uses AI to identify potential sellers in an agent’s database.
• CFO Hofmann noted that Zillow Home Loans unit economics are now positive across fixed and variable costs, with a path to achieving profit levels similar to agent referral fees.
• The company expanded its rentals reach by becoming the only real estate platform in the Google Gemini Connected Apps ecosystem this summer.
• Management accelerated the target for preferred connections to exceed 75% by the end of 2026, up from a previous trajectory.
• Wacksman noted that 30% of for-sale listings in top-10 markets now utilize 3D home tours, which the company expects to standardize further with the launch of smartphone-based instant floor plans.
• The transition to the preferred model is expected to shift approximately 700 to 800 basis points of revenue from the residential category to mortgages by the fourth quarter of 2026.

INDUSTRY GLOSSARY

• AI Mode: A generative AI-powered search experience that allows users to ask complex, conversational questions about real estate listings and financing.
• Zillow Showcase: A premium listing product that features high-resolution photography, 3D tours, and interactive floor plans to highlight properties.
• Follow-up Boss: A customer relationship management (CRM) software used by real estate teams to manage leads and client communication.
• Preferred Connection: A business model where Zillow connects consumers with selected agent partners who pay a referral fee upon closing a transaction.
• Zillow Preview: A product allowing sellers to test demand and build momentum for a listing before it officially hits the active market.
• MAU: Monthly Active Users, a metric measuring the number of unique individuals who engage with an application or site within a 30-day period.
• RPO: Remaining Performance Obligations, representing the total amount of contracted revenue that has not yet been recognized.

Full Conference Call Transcript

Operator: Hello, and welcome to Zillow Group’s second quarter 2026 financial Results Call. We ask that you please hold all questions until the completion of the formal remarks at which time you will be given instructions for the question and answer session. Also, as a reminder, this conference is being recorded today. If you have any objections, please disconnect at this time. Bradley, you may begin.

Bradley Allen Berning: Thank you. Good afternoon, and welcome to Zillow Group’s quarterly earnings call. Joining me today to discuss our results are Zillow Group CEO, Jeremy Wacksman; as well as COO and CFO, Jeremy Hofmann. During today’s call, we will make forward looking statements about our future performance and operating plans, based on current expectations and assumptions. These statements are subject to risks and uncertainties and we encourage you to consider the risk factors described in our SEC filings for additional information. We undertake no obligation to update these statements as a result of new information or future events except as required by law.

Please review the cautionary statement and additional information in our earnings release, which can be found on our investor Relations website. This call is being broadcast on the Internet and is available on our Investor Relations website. A recording of the call will be available later today. During the call, we will discuss GAAP and non GAAP measures, including adjusted net income, diluted adjusted net income per share, adjusted EBITDA, which we refer to as EBITDA, and adjusted free cash flow, which we refer to as free cash flow.

We encourage you to read our shareholder letter and earnings release, which can be found on our Investor Relations website as they contain important information about our GAAP and non GAAP results including reconciliations of historical non GAAP financial measures. We will open the call with remarks followed by live Q&A. And with that, I will now turn the call over to Jeremy Wacksman.

Jeremy Wacksman: Good afternoon, everyone, and thank you for joining us. Q2 was another quarter of strong results that demonstrate our consistent execution and the durability of our strategy. Zillow is the operating system for modern real estate, AI native, at the core of the transaction, empowering both consumers and professionals from end to end. We have earned consumers’ trust for many years now, by consistently showing up for them at every stage of the housing journey. that is why our brand and engagement are so strong. We have more than 2x as many daily active app users as our next closest competitor, and 80% of our traffic comes directly to our apps and sites.

According to Comscore, which tracks growth trends across the residential real estate category, Zillow’s average monthly unique visitors in Q2 outperform the category. Which saw a decline overall amid the rise in mortgage rates. Zillow is the only large company in the category to consistently expand its reach with the real estate audience over the past 7 quarters. In Q2, we delivered total revenue growth of 18%, above our outlook range. We once again outperformed the broader housing market, and even more so when looking at the purchase mortgage market which was flat this quarter compared to a year ago. EBITDA was above our expectations, and we reported a $118 million in adjusted net income.

We are on track toward our full year goals. In For Sale, revenue grew 14% year over year in Q2 to $549 million with 7% growth in residential revenue and 75% growth in mortgages revenue. In rentals, Q2 revenue was up 31% year over year, driven by 42% growth in multifamily revenue. Our consistently strong quarterly results brand equity, and direct relationship with our users come from 2 decades of keeping the consumer as our North Star. In for sale, we have built a platform where our interests align with the interests of buyers, sellers, and agents. Buyers want access to all available inventory, Sellers want to sell quickly and for the most money.

Agents want tools that help them serve their clients and win business. Zillow delivers on what matters most to consumers and their agents which is why we continue to grow our audience and revenue. For buyers, we have been investing in the depth of the experience, helping with each step from the first question to keys in hand. Buyers spend months on this decision, because buying a home is an exhaustive and complex process that is not the same as other consumer purchases online. This is the largest financial decision most people make. And they make it only a few times in their entire lives. It requires hours of deep research.

In fact, the average buyer who ends up transacting with a preferred agent partner visits Zillow nearly 100 times. Totaling 15 full hours of time using Zillow before they even reach out to connect with an agent. The deeper buyers engage on Zillow, the more that they teach us about their needs and wants. Which means Zillow gets more useful at every step of the journey. Recommending the right home at the right moment while also connecting consumers with a great local agent and financing options. Providing end to end support ultimately drives transactions through Zillow and helps people get home. Zillow’s AI Mode is starting to show us what is possible when consumers can engage differently from traditional search.

We are seeing them share more about their needs in AI Mode than they ever entered into the typical residential search query, not just what they are looking for in a home, but their time frame, their financial picture, the need to sell their current home, whether they need a fenced backyard for their pets, and other special circumstances that go into their decision. This is unique, personalized context we have not had access to before. And it comes with engagement we can measure. AI Mode is in early stages, but these are the signals we want to continue to see as we iterate. Consumers who use AI Mode spend more than 3x as long on Zillow.

View more than 2x as many homes, run nearly 3x as many searches, and contact an agent at nearly 3x the rate of consumers who do not use AI Mode. The same pattern holds in rentals. Where AI Mode renters request a tour at nearly 3x the rate and submit an application at nearly 2x the rate. Context from repeated engagement compounds into a proprietary data advantage that is difficult to replicate and differentiates us from horizontal LLMs and other real estate companies. Here is 1 real life scenario. A recent buyer came to Zillow looking for her next home, open to renting or buying, and 11 weeks later, she closed on a home purchase.

Over the course of more than 200 AI Mode prompts, she researched neighborhoods across multiple ZIP codes, compared properties, ran affordability scenarios across both renting and buying. At 1 point, she was looking at a rental listing and asked AI Mode what it will cost to buy instead. The kind of question she could explore instantly without starting a new search.

She submitted our form to contact a Zillow preferred agent partner and, meanwhile, kept using AI Mode to progressively narrow her search, until she spent an hour 1 night stress testing a single home, with questions like, what trade off should I consider when looking at this home? that is what Zillow’s AI Mode enables. it is the deliberation partner that can get a buyer from looking to connecting with an agent. It helps the buyer do the homework that makes the eventual agent conversation efficient so the agent gets a buyer who is ready to act. We are actively expanding what AI Mode can do, adding skills and evaluations that serve buyers, sellers, renters, and homeowners.

The opportunity in front of us is to deepen our engagement with our already broad audience across every stage in ways that were not possible before. Zillow’s AI Mode is now live for about 20% of signed-in users, we are scaling deliberately as we refine the experience. AI Mode captures the journey as it unfolds, Our new personalized moving hub organizes it. We launched the hub earlier this summer, and it guides buyers through every milestone from setting a budget to closing. This is the first time buyers have had a single organized place for their entire move on Zillow.

Which means we can identify high-intent buyers and surface products that meet their needs. it is a good example of what becomes possible when a buyer’s workflows are connected in Zillow’s end to end infrastructure. We are also differentiating Zillow Home Loans with the integration of preapproval directly into the home search. Shopping with a Zillow Home Loans verified preapproval lets buyers see in real time whether each listing fits their verified budget. Accounting for taxes, HOA fees, and current interest rates, not just the list price. It makes the shopping experience more grounded and more actionable. And it is a clear signal of serious buyer intent. We continue to deliver double-digit adoption of Zillow Home Loans in integrated experience.

Thanks to a strong value proposition convenience, and competitive lending terms when compared with other industry-leading mortgage lenders, Zillow Home Loans is now a top-25 purchase lender in the country. The average loan officer with Zillow Home Loans originates roughly 2x the industry average of purchased loans per month. And because buyers are already on Zillow, our customer acquisition costs are a fraction of what traditional mortgage lenders pay. A structural advantage that we expect to grow as we scale. Integrating our residential and Zillow Home Loans offerings is delivering a better buying experience. We have been expanding this integrated experience through our preferred partners, and it now accounts for 61% of our connections across Zillow.

Our investment in the buyer experience is also what makes our seller solutions so powerful. Because listing on Zillow means reaching a broad, deeply engaged audience. We continue to expand our suite of products designed to provide differentiated ways to market homes and achieve better outcomes. Zillow preview is 1 more way we are working with the industry to serve the needs of consumers and agents. Zillow Preview is a new product designed to help sellers who want to build demand and momentum before a home hits the active market. Preview gives sellers pre market exposure on the most visited real estate platform in America, so they can see useful real time early demand signals.

Views, saves, tour requests, from Zillow’s full buyer audience, Meanwhile, buyers get public, no cost to premarket inventory right in their regular Zillow search. And agents get a differentiated listing pitch that puts their clients’ interest first and reaches buyers early on an open marketplace. We now have more than 100 brokerage partnerships enabling Zillow preview and we are actively onboarding agents in those companies in addition to new brokerages. Later this summer, preview listings will also be syndicated to realtor.com. The second most visited real estate platform in the country.

And as MLSs give sellers, agents, and brokers more options and more flexibility in how long they can pre market a listing, we welcome those changes because they boost the value proposition of Zillow preview. After preview builds initial momentum and a listing goes active, sellers and their agents can choose our Zillow Showcase product to maximize impact. Showcase is now on about 5% of all new listings. And agents who use Showcase on the majority of their listings win 35% more listings than peers who do not. Our proprietary rich media, which includes 3D Home tours and interactive floor plans, is now on 11% of new for sale listings on Zillow.

In our top-10 markets, 30% of new for sale listings on Zillow have 3D Home tours. More than 10% have showcase. These markets are an early signal of what the future looks like. Later this year, we expect to launch instant floor plans, allowing photographers, sellers, and agents to capture a 3D floor plan right from their smartphone. We expect removing friction and lowering the cost will continue to expand the use of rich media, making it the future standard on every listing and providing a better buyer experience to drive engagement. Together, our preview and showcase products give sellers and their agents robust tools to launch a listing and market it actively.

Agents who use both are putting Showcase on nearly half of all preview listings when the listing goes live. Our 2-sided platform connects buyers and sellers with the industry professionals who help them get home. But Zillow’s value to agent goes far beyond a connection. Zillow powers many of the most successful agents in the industry. The tools and infrastructure we provide function as the operating system, for the modern real estate transaction. Follow-up Boss, is the CRM of choice for the majority of the highest volume real estate teams in the country. It had 138 thousand monthly-active users in Q2, up 21% year-over-year.

Smart messages, AI generated text and email drafts based on a buyer’s Zillow activity and prior conversations, get more than 4x the reply rate of manual outreach because it encourages the agent to follow-up when it is top of mind for the consumer. Any whether they advertise on Zillow or not, can access exclusive tools in Follow-up Boss through Zillow Pro, a premium membership we launched nationwide last month. A Zillow Pro membership gives agents a single connected system to manage all of their clients. Including those who originate outside the Zillow ecosystem. With a Zillow Pro membership, agents can invite any contact in their Follow-up Boss database.

A past client, a referral, a potential buyer they met at an open house, anyone, to collaborate with them on Zillow using a feature called My Agent. Once the client accepts the invitation, their trusted agent is right by their side throughout the Zillow experience, Easy messaging, tour booking, guidance at every step. And the agent gains real time visibility into what their client is actively looking for on Zillow, so they can show up to assist and foster the relationship into a transaction. Buyers with a My Agent relationship are 80% more likely to meet with their agent face to face.

And 50% more likely to progress through key home search stages compared with similar buyers without a My Agent relationship. Our early data shows that Zillow Pro agents who use My Agent are handling more transactions than similar agents who do not have a Zillow Pro membership. Zillow Pro also gives listing agents a meaningful edge through a new feature called likely to list. Which uses predictive AI signals from the unique context across our platform including from AI Mode, to flag contacts in an agent’s Follow-up Boss database whose homes are showing pre listing activity giving agents a reason to reconnect with past clients who may be ready to sell before they have raised their hand anywhere else.

Likely to list turns the CRM into an active opportunity engine. 70% of actual US buyers and sellers are already on Zillow. That creates an opportunity for agents to reconnect with past clients they have already built relationships with. When agents can see those signals and act on them, they can give consumers a more responsive, more personal experience. The quality of service we are enabling for agents exemplifies the shift we have made to our agent partnership offerings. Over the years, we have deliberately evolved from a top of funnel model where agents paid for leads to a success based model built around efficiently aggregating demand to connect high intent consumers with high performing agents.

Zillow preferred agent partners pay when they close. Which means Zillow wins when the agent and their client win. Zillow preferred is optimized for outcomes, not just activity, which is why it is generating 23% more revenue per connection than our legacy advertising model did. And 1 reason why our for sale revenue is growing faster than industry growth. Zillow is the only residential real estate company that is removing friction by integrating the end to end transaction experience at scale. Improving outcomes for buyers, for sellers, for agents, for loan officers, and for Zillow. We are making progress toward our $1 billion incremental revenue opportunity in for sale.

Since the beginning of 2025, we have added an incremental $287 million of for sale nearly a third of our goal. Now turning to rentals. Nearly every buyer starts out as a renter, and for millions of people, renting is not a stepping stone but where they are for the long term. In recent years, 3x as many movers have been looking to rent than to buy or sell. Many consumers are looking at buying or renting options at the same time, and Zillow is uniquely positioned to help them with both.

The same thesis that drives for sale is behind our rental strategy: a streamlined operating system that modernizes the transaction experience, on top of the largest and most varied inventory from single family homes to large apartment communities. In Q2, we had 2.8 million average monthly active rental listings, and reached an all time high of 79 thousand multi-family properties. Rentals revenue was up 31% year over year in Q2, with multifamily revenue up 42%. Growth that reflects the compounding value of what we have built on both sides of the marketplace. Property managers tell us Zillow delivers the highest return on marketing investment in our category.

Compared not just with other rental platforms, but with other digital marketing options available to them, including search and social media. They keep renewing and upgrading their presence on Zillow as a result, and we see a significant opportunity to capture more of the marketing dollars currently being spent elsewhere. We are also bringing Zillow’s inventory and booking infrastructure to other platforms potential renters may be on. This summer, Zillow Rentals became the only real estate platform in Google’s Gemini Connected Apps ecosystem. If a renter asked Gemini to find them available apartments, Zillow powers what happens next. The real time availability, the tour scheduling, the booking confirmation.

Wherever consumers begin their move, we are helping them complete it with our partners and our real estate operating system. Rentals is 1 of our most compelling growth opportunities with a clear path to a $1 billion and beyond in annual rentals revenue. Before I turn it over to our COO and CFO, Jeremy Hofmann I want to put our results in context. Zillow has consistently outperformed industry total transaction volume for 3 long years. While the housing market has basically stood still We have grown revenue by mid teens or better each year even as industry growth has been essentially flat.

We keep reaching more of the real estate audience while others in our category do not. it is been a noisy year, but that has not changed what we see in our business. Zillow has continued to execute and our results show it. We consistently perform well because Zillow supports the needs of both sides of the marketplace. We have rapidly built the modern real estate operating system professionals rely on every day to run their businesses. And consumers trust and return to Zillow throughout a months long journey no matter where that journey began. Our direct brand and audience engagement put us in a position of strength as we drive forward and expand our business.

To position Zillow for the path ahead, yesterday, we restructured parts of our organization and eliminated some roles. We made this decision to ensure we can move faster, operate more efficiently including a more sustainable cost structure. We are grateful to every person who is leaving for their contributions through the years. Today, we also announced changes to our executive leadership team. We have appointed Jeremy Hofmann to an expanded role as chief operating officer and chief financial officer. Jeremy has been 1 of the key architects of Zillow’s current business strategy, a driving force in the vision and execution of the housing super app.

His deep command of our strategy and financial architecture, combined with the strength of the teams he has developed over 9 years here, position Zillow to move with greater coordination and speed. Jun Choo, who has served as chief operating officer since 2024 is stepping down to focus on his health, and will serve in an advisory capacity through the end of the year. Jun has been an invaluable part of Zillow’s growth over the decade-plus tenure he is had here. And his contributions to the operational foundation of his company are immeasurable. We wish him all the best. We are also welcoming Sandy Knight to serve in a new role as chief legal and policy officer.

Sandy joins us from Google, where she served as vice president of litigation and discovery. She brings more than 20 years of experience in complex litigation, and operational leadership across technology and financial services including at Google, PayPal, and Morgan Stanley. Her appointment reflects our continued investment in building the leadership team that Zillow needs to support our future growth. The strength of our team and the strategy we are executing gives us every confidence in what comes next. The Zillow experience gets people from curiosity to closing. The dreaming and decision-making, the tour for renters and buyers, the application or preapproval, the financing, the agent relationship, the offer, and the lease or close increasingly run through Zillow.

We support the whole transaction, and our ability to do so compounds as more of the transaction uses our infrastructure. Our focus is on serving consumers, and helping professionals grow their businesses, because that is what drives our results. We are on track toward our full year goals. We are in control of our own path, and we are building toward a future where getting home through the integrated experience on Zillow is the standard. For renters, for buyers, for sellers, for the industry professionals who guide them through it. With that, I will turn the call over to Jeremy.

Jeremy Hofmann: Thanks, Jeremy, and good afternoon, everyone. We delivered excellent results in Q2 and are well positioned to deliver strong performance as we execute on our strategy in 2020 and beyond. In Q2, we generated revenue of $772 million, up 18% year over year and EBITDA of $176 million resulting in an EBITDA margin of 23%. Both revenue and EBITDA were above the high end of our outlook range. We reported a net loss of $4 million and adjusted net income of $118 million Share based compensation, expense was down 24% year over year during the quarter. Diluted adjusted net income per share was $0.52, compared to $0.40 in Q2 a year ago.

Year to date, we have generated $223 million of free cash flow, a 19% increase compared with the same period a year ago. Now, let me take you through the details of the quarter. Our for sale revenue grew 14% year over year in Q2 to $549 million. Within the for sale revenue category, residential revenue of $465 million was up 7% year over year. Above our outlook. The majority of the increase in residential revenue was due to growth in Zillow preferred, primarily driven by the expansion of connections in the fully integrated experience. Zillow Showcase, new construction, and our suite of agent software tools were also contributors to residential revenue growth.

These increases were partially offset by a decrease in market-based pricing revenue as we continue to shift more connections to preferred. Within the for sale revenue category, mortgages revenue accelerated to 75% year over year growth in Q2 to $84 million. Above our outlook. Purchase loan origination volume which was the main driver of our mortgage’s revenue growth, grew 95% year over year in Q2, as we saw continued growth from expanding our share of connections to our preferred program and better than expected conversion rates from customers in our pipeline. With double digit customer adoption rates, our results continue to demonstrate that Zillow Home Loans has an attractive value proposition for buyers.

Our 14% year over year for sale revenue growth in Q2 outperformed the estimated flat industry purchase mortgage origination volume. Our for sale revenue growth also outperformed the 6% real estate total transaction value growth despite the 600-basis-point headwind from the purchase mortgage industry. We call out mortgage industry growth because a majority of Zillow buyers purchase their home with a mortgage. Affordability challenges continue to have a larger impact on mortgage buyers than cash buyers. Turning to rentals. Q2 revenue was $209 million, growing 31% year over year. This was primarily driven by our multifamily revenue, Which was up 42% year over year in Q2.

Our value proposition continues to attract new multifamily property managers with total properties growing to 79 thousand in Q2. Up 23% from a year ago. Additionally, our superior ROI is winning more wallet share as we attract new properties and existing property managers upgrade their subscription packages with us. Q2 EBITDA expenses were $596 million, which exclude the $10 million of Sitzer litigation expenses. We reported $36 million of restructuring costs in Q2 related to cost management actions we announced yesterday, that are also not included in EBITDA expenses. I will discuss these cost management actions in more detail shortly. We ended the quarter with cash and investment of $682 million, down from $783 million at the end of Q1.

We repurchased $200 million of our stock during Q2, as we continue to demonstrate our conviction in the long term value of the business and our commitment to returning capital when the opportunity is compelling. Year to date, we have repurchased $826 million in shares. Our total outstanding shares declined to 225 million at the end of Q2 from 240 million at the beginning of 2024. As of the end of June, we have approximately $1.1 billion remaining for future share purchases under our existing authorizations. Combining our $682 million cash and investments with our $500 million undrawn line of credit, we have total liquidity of approximately $1.2 billion.

This strong liquidity position gives us flexibility on our financial priorities to invest in driving growth, maintain an adequate risk based capital reserve, support flexibility for potential M&A, and continue to be opportunistic with share buybacks. Next, I want to take some time to discuss how our preferred modernization model is working. Why we have decided to accelerate the transition of our connections to preferred, and the near term implications for revenue across both our residential and mortgages categories included in our for sale revenue. First and foremost, the preferred monetization model enables us to better serve customers by offering them our integrated transaction experience. Which drives more for sale revenue per connection than our legacy advertising model.

As a result, we are accelerating to more than 75% of our connections in preferred by the end of 2026, up from 44% at the end of 2025 and 21% at the end of 2024. We expect that nearly all connections will be serviced by preferred partners over time. The preferred agent partner base is made up of some of the most productive agents in the country and is a group of people who are highly motivated to serve Zillow’s customers well. By partnering closely with this talented group of real estate agents, we are able to build technology and services that allow them to be more productive, win more business, and convert our shared customers better.

And the results for Zillow have been excellent. The increase in our revenue per connection generated from our integrated experience demonstrates our execution. This is calculated as a combination of total preferred revenue, revenue from preferred agent partners using Follow-up Boss and Showcase, and revenue generated from the integrated transactions where consumers choose to use Zillow Home Loans. We compare that combination of revenue to revenue from our legacy advertising model and revenue generated from agents in that model who use Follow-up Boss. and Showcase. In 2025, we generated 23% higher revenue per connection compared to our legacy advertising model.

By the end of 2026, we expect to accelerate to 35% more revenue per connection, driven by improved conversion across our preferred agent partner base and greater adoption of Zillow products and services from consumers. Seeing these results gives us a lot of confidence to move faster to the future and move more connections to preferred so we can serve our customers and partners better, while generating more revenue and revenue per connection along the way. Another critical data point for us has been the steady improvement in Zillow Home Loans profitability. Across fixed and variable costs, our per mortgage unit economics are positive today.

And in the future, we believe Zillow Home Loans economics will generate profits similar to profits we earn from preferred agent partner referral fees. We believe this acceleration is clearly the right decision for our go forward business, but there are 3 important nuances for investors to understand as we progress. 1 is a shift in revenue from residential to mortgages within for sale. The second is the timing of revenue recognition associated with Zillow Home Loans originations and the value we realize over the life of a connection. And the third is a different seasonal pattern in preferred revenue than our legacy advertising model. First is the shift in revenue from residential to mortgage within our for sale category.

Under the legacy advertising model, both agent advertising and lender co marketing revenue was earned and recognized in the residential revenue category as connections were delivered. Once we earned that revenue, the customer’s transaction moved off platform. With the integrated transaction model, customers choose to stay on our platform past the agent connection where they can work with an agent using Zillow’s suite of agent products, and choose their own service providers, including Zillow Home Loans. As this happens, an increasing share of for sale revenue is recognized in mortgages. Because of the transition to preferred, there has been a consistent shift from residential revenue to mortgages revenue. In 2025, this was a 300-basis-point impact to residential revenue.

In the first half of 26, this was a 500-basis-point impact to residential revenue, as we accelerated more connections into preferred. We expect this impact to accelerate in the second half of 2026 and continue in the first half of 2027 before moderating in the second half of 2027. Second, this transition to preferred results in a difference in the timing of revenue recognition. And the value we realize over the life of a connection. This difference is because Zillow Home Loans revenue is generally recognized near the time a loan is originated. Which is 6 to 12 months after a connection is delivered.

This difference has created a consistent 200-basis-point headwind to for-sale revenue as we have moved more and more connections into preferred. We expect this headwind to moderate throughout 2027. The third of the 3 factors important to understand is the different seasonal pattern in preferred revenue compared to our legacy advertising model. Because of seasonality, historically, our connection volumes have declined in the range of 20% to 25% sequentially, from Q3 to Q4. And then increased in Q1 compared to Q4. Zillow preferred revenue follows this seasonality trend more closely versus our legacy advertising model.

Because we are planning to accelerate to more than 75% of our connections in preferred by the end of the year, we expect the seasonality impact to result in a 200 to 300-basis-point headwind to our year over year for sale revenue growth in Q4. We expect this seasonality trend to reverse in Q1 2027. We have included an accompanying chart in this quarter shareholder letter to illustrate the quarter by quarter impacts of these factors. The most important takeaway is that the integrated transaction strategy is working, and we are accelerating the transition to preferred going forward. We see better outcomes for customers and partners.

We see more total revenue and revenue per connection for Zillow, and we are growing EBITDA per connection with a path to more profits as Zillow Home Loan scales. And, of course, despite the moving pieces through this transition, for sale revenue has grown 13% year-to-date, compared to a purchase mortgage market that is roughly flat. Now I will provide some additional details on our cost management actions. Yesterday, we announced a restructuring, which included eliminating approximately 7% of employees as we continue to scale our integrated strategy and drive efficiencies.

As a result, we expect to generate $75 million of annualized EBITDA cost savings from Q2 run rates, and an aggregate of $140 million when including reductions from previously planned headcount growth. We recorded $36 million of restructuring costs in Q2, and we expect to record an additional $23 million to $28 million of restructuring costs in Q3 associated with these actions. Turning to our outlook for Q3 2026. We expect total revenue of $745 million to $760 million, implying year over year growth of approximately 11% at the midpoint of our outlook range.

We expect for sale revenue growth to be between 5% and 7%, which includes an assumption of 200 to 300-basis-points headwind from the difference in timing of revenue recognition and Zillow Home Loans and the value we realize over the life of the connection. With in for sale, we expect residential revenue to be flat year over year. Which includes an assumption of 600 to 700-basis-points shifting from our residential revenue category to our mortgages revenue category over time. For mortgages revenue, we continue to see a strong pipeline. Which we expect puts us on track for growth of over 50% year-over-year. Our revenue outlook includes our expectation for a decline in year over year purchase industry mortgage originations.

Down from our prior expectation of flat. We see continued pressure on affordability having a larger impact on mortgage buyers than the overall market, as interest rates have continued to rise since their lows in early Mark. In rentals, we expect Q3 revenue growth in the high 20% range year over year. In Q3, we expect EBITDA expenses $560 million to $565 million and EBITDA $180 million to $200 million implying 25% EBITDA margins at the midpoint. Turning to our full year outlook for 2026, we continue to expect to deliver mid-teens total revenue growth with a range of $2.92 billion to $2.96 billion We continue to expect approximately 30% growth in rentals revenue.

For the rest of 2026 and the full year, we are assuming the purchase mortgage originations market will be down low to mid single digits. From our prior view of flat. In Q4, we are planning to further accelerate our transition to our preferred monetization model. We expect to end the year with more than 75% of connections going to preferred partners. We expect the combination of seasonality and the timing of revenue recognition in Zillow Home Loans and the value of the life of the connection to translate to 400 to 600-basis-points of headwind to for sale revenue. Within for sale, we expect residential revenue to be in line with purchase mortgage industry growth.

Which includes an assumption of 700 to 800-basis-points shifting from our residential revenue category to our mortgages revenue category over time. Additionally, we expect higher mortgage rates to have an impact on conversion rates for Zillow Home Loans in Q4. Now turning to EBITDA. For the full year 2026, we expect continued EBITDA margin expansion. Translating to EBITDA $730 million to $760 million. Of note, our full year outlook implies year over year EBITDA cost growth in Q4 to be in the mid single digits, which sets us up well to deliver year-over-year margin expansion in Q4 and in 2027. Last, we continue to expect full year share based compensation expense to be down more than 15% year over year.

To close, we are buoyed by the continued strength in our business and excited to accelerate our integrated transaction strategy. We are on track to hit our 2026 and mid cycle targets, underpinned by a strong growth strategy and a disciplined cost structure that allows us to grow profits faster than revenue. With that, operator, we will open the line for questions.

Operator: Thank you. At this time, if you would like to ask a question, please click on the raise hand button, which can be found on the black bar at the bottom of your screen. When it is your turn, you will receive a message on your screen from the host allowing you to talk, and then you will hear your name called. Please then accept, unmute your audio and ask your question. We will wait 1 moment to assemble the queue. Our first question will come from Ryan McKeveny with Zelman. You may now unmute your audio and ask your question.

Ryan McKeveny: Great. Thank you for all the detail and thanks for taking the questions. I will start with a couple higher-level strategy ones for you guys. So on the leadership changes and particularly Jeremy H. taking on both CFO and COO, I guess, does this signal any broader strategy change, any change in the go to market approach across the various businesses? And, you know, Jeremy H., I am sure you can give some color on that, but maybe also Jeremy Wacksman, can you maybe add some color as to why Jeremy H. is the right person for the COO role in addition to CFO as opposed to having those positions separated. Thank you.

Jeremy Wacksman: Yep. Ryan, this is Jeremy Wacksman. I will take that 1. No change in strategy. This is really about strengthening the leadership team and setting us up for the road ahead. I mean, I think as you heard from the prepared remarks and you see in the results, our business is growing. We are scaling the housing super app. We are navigating an increasingly complex environment. And we are doing so in a way that builds consumer trust. And having Jeremy, who is 1 of our most capable operationally focused leaders, who over the past 9 years has really been at the heart of developing our strategy and building a lot of the cross company operations to execute it.

Having him put strategy and operations closer together is a huge boon for the company. We obviously wish Jun all the best as he steps back to focus on his health. he is been a valued part of Zillow these past 11 years. But this is really about setting us up for the future, and we are tremendously excited about having Jeremy take on this expanded role.

Ryan McKeveny: Got it. Right?

Jeremy Hofmann: Ryan, I will just chime in for the congrats. I am really excited to step into the expanded role. I have been– Jeremy said it, but I have been intimately involved with the strategy, the operations, and the financials for 9 years now. And I have worked really closely with the leadership team throughout. So I am expecting a seamless transition. And obviously looking for ways to ensure we can keep moving faster and that the organization is set up well to deliver on the growth and profits we see into the future.

Ryan McKeveny: that is great. Thank you. And maybe along similar lines on kind of moving fast and efficiency. So on the elimination of roles, any additional color you can share on kind of why now, You know, also anything on the type of roles impacted. Like, obviously, you know, you have got strong growth in rentals. Purchase shares is really expanding. You know, a lot going on, obviously, on the for sale side of things and with preferred. So, you know, it seems as though the, you know, strategy across the board is really pushing forward. So just curious why now for that action? Thank you.

Jeremy Hofmann: I could take that 1 as well. To start, we do not expect any impact to our growth bets as part of these actions. So you are right. The strategy is working well. We are accelerating in a variety of places. And do not expect the restructuring to have any impact there. We really restructured parts of the organization and eliminated roles because we saw opportunities to move faster, and we saw opportunities for continued cost discipline. that is what the changes were about. Let’s ensure that we have a disciplined cost structure Let’s get leaner as an organization, and let’s look to move faster and operate with more efficiency.

But not, you know, get in the way of any of the growth bets.

Ryan McKeveny: Got it. Thank you, guys.

Operator: Our next question will come from Daniel Kurnos with Stonex. Please unmute yourself and ask your question.

Dan Kurnos: Great. Thanks. Good afternoon. Again, I want to also echo, appreciate the thorough, covering of all of the details, and all of the moving pieces here. As if you guys do not have enough on your plate, internally, you have a whole bunch of noise outside. So I will ask the sort of requisite questions. 1, we got a whole bunch of noise from Google, and want to just see if you guys are seeing any impact from that. And then 2, on the legal front, you guys have had a few things settled. You have got a date coming up. I think FTC later this month, so there is a lot coming in here.

You have had a couple of things dismissed. So just how are you thinking about the overall legal picture and any kind of strategic thoughts? Thanks.

Jeremy Wacksman: Yeah. Thanks, Dan. On Google, I assume you mean their local service advertising product that they have expanded into real estate. Yeah. I mean, the short– the short answer is not seeing any impact. I mean, they ran it as a test for a while, and in the markets they ran as a test, we saw no impact to our traffic or metrics. And we have seen no impact as they have expanded it. I think the big reason for why we do not see impact you heard it a bunch in our prepared remarks, The brand commands a direct audience because it is a differentiated experience. Right? 80% of our traffic comes directly to us.

Single digit share of traffic comes from things like paid search, so we are just not right to feel impact for changes in that channel. And then the reason that traffic comes direct to us is we provide this full stack infrastructure for the real estate transaction, and buyers and sellers and renters are choosing our products and services and that is what they reengage with, tell their friends about, install the apps on phone, and use for. I mean, the comment I made earlier, a buyer who hires a preferred agent they are on Zillow more than 100 times. Right? And they are coming back to us of their own volition.

And because we offer products and services that no 1 else does. So, you know, there is always going to be changes in the category. there is always gonna be changes in the platform, but the unique and differentiated strategy and product offering is why we have been so successful to date, and it is why we expect to continue to be successful. And, you know, that is some of the answer to your second question on legal– you know, legal cases, those are not impacting our business either, and you can see that in our Q2 results.

And the reason for that is because we are focused on delivering the products and services that renters, buyers, and sellers want and that industry professionals want who serve them And when you put the consumer as your North Star, that is how you build products and make decisions, you see that play out in favorable results. I think the sort of most recent case that was challenging our for sale business is a good example, We are very thoughtful about how we build our product experiences and all the allegations against our product experience were loudly dismissed in a court ruling to show that.

And so you have heard from us for a while now, these things are things we will have to knock out and deal with, but they are not going impact the business or the team or our operations. And I think you see that in our continued results. Got it. Thank you, Jeremy.

Operator: Our next question comes from Bradley Erickson with RBC Capital Markets. Please unmute yourself and ask your question.

Bradley Erickson: Hey, guys. Can you hear me? Yep. We got you, Bradley. Alright. Oh, cool. Sorry. Yeah. So 2 for me. 1 easy 1 and then 1 not as easy 1. The easy 1 is rentals growth. The guidance looks like maybe tracking like, the mid twenties and back half. Just, you know, you are lapping the Redfin deal here. Talk about what is allowing you to kind of sustain those higher growth levels. And then second, just on this whole revenue and timing shift, etcetera, I recognize there is higher monetization per transaction but can you talk about kind of the like for like profit comparison?

Because, like, for example, the you know, the co marketing revenue you used to get on MBP represents essentially getting paid for leads for third party mortgages, whereas it seems like you need ZHL to close here in order to capture that higher revenue per transaction. So in that sense, it kind of sounds dilutive, but can you unpack that or correct that if you can? Thanks.

Jeremy Wacksman: Yeah. Bradley, maybe I will take rentals, and, Hof, maybe you can take modeling and revenue and margin composition. You are right. We are really pleased with our rentals growth, Bradley. And even as we are lapping the Redfin partnership, you are still seeing really strong growth rates now and into the future. And the reason for that is the strategy is differentiated. The platform that we are building we are really the only place to assemble the most inventory that you can find.

2.8 million average monthly listings in Q2, And yes, that is the big multifamily apartment buildings and the advertisers, a record 79 thousand of those choosing to advertise their audience, but they come because we solve that renter experience, because we have the single family, we have the long tail, We have this integrated transaction platform where you can have a portable application custom leases, and make your payments happen. So the all in 1 experience with the most inventory is why the audience is here. We have the biggest audience. that is the ROI. Right? that is what an advertiser wants.

And that is why you are seeing the advertising growth, it is why they also tell us where their highest ROI channel where they are regularly telling us we are not just their highest ROI source among other apartment focused sites, but we are their highest ROI across search and social as well. And so you are seeing more budgets come to our platform because we deliver great ROI for them, because we have this unique offering that delivers high intent customers. So that is been working for a while now, and Redfin was a great booster shot to that strategy, the same way the realtor.com deal was, but growth was happening before, and it is happening now.

And it is also why we are so confident in the billion dollar plus revenue target that is in front of us.

Jeremy Hofmann: Yep. And then, Bradley, I will take your next 1. I think, we are moving towards this preferred integrated transaction strategy more aggressively because the growth opportunity is far beyond what we saw as possible in the ad– in the ad model. And you are seeing that in the revenue per connection uplift in 2025 and 2026 that I highlighted. We grew revenue per connection in the experience 23% in 2025. We expect it to grow 35% in 2026. And the SAM is just expanding pretty substantially because of this move. We have the ability to better grow transactions, better grow adjacent services, better grow our suite of software and our listing marketing tools by doing this.

And all of that opportunity is driven by really building these great products and services for consumers and agents. And that preferred agent base is such a critical input because they are the folks that work closest with our shared customers. So that is why we are doing it. We are seeing the results work through. there is obviously a number of moving pieces that I walked through in the prepared and we have plenty of time as a team to walk you all through the modeling components But we feel really good about pressing the gas.

With respect to the margin trade off, what I would say there is earlier in the enhanced markets rollout, we were definitely investing in ZHL. Which put pressure on pressure on margins versus the lender co marketing dollars that we got in that legacy ad model. Now ZHL unit economics are across both variable and fixed are profitable. And we see a path to dollars per loan at the same level as preferred agent referral fees. So the atomic dollar opportunity feels quite large to us and the growth opportunity feels quite large, And then obviously, we have been growing EBITDA overall through that investment in ZHL. We have been able to drive margins, off fixed cost leverage.

We expect to continue to do that, and ZHL is now at a spot where it can grow profitably. And the last thing I think I would say is just to keep in mind the mid cycle targets of 45% EBITDA margins and 25% net income both contemplate all that we are doing right now. And both have a healthy mix of ZHL included in those targets. Because we do see a really substantial growth and profit opportunity as we get that business to scale.

Bradley Erickson: Super helpful. Thanks, guys.

Operator: Our next question will come from Ronald Josey with Citi. Please unmute your line and ask your question.

Ronald Josey: Hopefully, you can hear me okay. Yep. We got you on. Oh, perfect. Okay. Wonderful. 2 questions. First 1 is preferred. I think we are understood getting to 75% by end of 26 and the benefits of accelerating it. We are already at 61%, I believe, if I read that correctly. And so walk us through just the impact again to seasonality and the revenues. And when do you think is it you know, do we start 2027 just on a clean slate? And be a lot easier to sort of maybe not have compares, but at least going forward?

I just wanna make sure a lot of moving pieces here, so I just wanted to walk through seasonality, and we are already starting from a pretty high bar to begin with at 61%. that is point 1. And then on 5% of all new listings. We are seeing the benefits here for agencies. you know, talk to us about the adoption rate here. Going forward. I would have thought maybe we would have seen greater penetration. Thank you.

Jeremy Hofmann: Yep. Ron, I will take the first 1, and then, Jeremy, maybe you take the second 1. Yep. There are– yeah. There are definitely moving pieces with this move towards preferred. So let me talk you through those, and, obviously, we will have plenty more time And I think the shareholder letter does a nice job of laying it out too. But the 3 key nuances to understand first is the legacy ad model monetize both agents and lenders in our residential category? Okay. In the preferred model, some of that revenue shifts from residential to our mortgages category with ZHL revenue.

So that is why we have been you know, pointing you all to for-sale, as the right place to look at the business because that is how we manage the business. So for sale revenue growth as a result. That shift was 300-basis-points of shift in 2025 out of residential that shows up in mortgages over time. And then 500-basis-points of shift in the first half of 26 out of residential that will show up in mortgages over time. As we continue to accelerate Q3, we expect 600 to 700-basis-points of shift. And then in Q4, 700 to 800-basis-points of shift. So that is a that is pretty substantial as we are accelerating.

And I would point you to looking at year over year rather than sequential in this time last year, we were at 27% of connections in preferred, and now we are at 61%. We will be at 75% plus the end of this year. We were at 44% last year. So the magnitude has just continued to accelerate. That moderates in the second half of 27 as we lap the transition this year. So that is the first the first component that is moving is the shift from residential revenue to mortgages revenue underneath for sale. The second is a lag when that revenue is recognized in ZHL.

And because we realize the value of a connection over time in preferred versus upfront in the legacy ad model. So it takes 6 to 12 months after a connection for a loan to actually be originated, whereas the legacy ad model, we got paid upfront. So there is a lag there. that is been a consistent 1. And a consistent headwind to for sale of about 200-basis-points. That gets a little bit worse as we accelerate, in Q3 and Q4 to the tune of 200 to 300-basis-points of headwind. But we will get through that and that starts to moderate as we get to the end of this of this shift from the legacy ad model to preferred.

So first is the shift from, residential to mortgage. Second is a lag when that revenue shows up. The third is a different seasonal pattern because connections are typically 20 to 25% lower in Q4 than Q3. And the preferred model just more tracks that seasonality, that trend reverses in Q1. So that is just a seasonal pattern that will reverse, by Q1. But will create a headwind in Q4 as well. When we step back, like I said earlier, we really like what we are seeing from the experience, what we are seeing from revenue per connection, what we are seeing from Zillow Home Loans, and what we are seeing from our partner satisfaction.

So we are very happy to do it, but there are obviously some moving pieces, and we are gonna walk you all through those. But the at the end of the day, it feels like real offense for us to continue to push forward in this experience given all the addressable market we get to go after in a different way than we were before.

Jeremy Wacksman: Yep. And then on showcase, 5% of all new listings is a great initial milestone for us. And we think it is doing great. It was only 2.5% a year ago. We are gonna continue to drive adoption. Given the reception, and you have seen us consistently test ways to drive further adoption across both teams and 10 markets, we are at north of 10% share of new listings. And more importantly, we have our media components, both showcase and non showcase, on 30% on new listings. So the flywheel is really starting to spin with this listing content, and you are continuing to see through all of this scale the benefit for the listing agent is still there. Right?

Agents who are using it winning 35% more listings than those who are not. That was true in the early days of the product, and that is true in this of early majority period of the adoption curve. So, we are nowhere near done. We have always talked about we think this can become the standard listing experience and this, you know, 5% up from 2.5% a year ago, is a great mile marker for us on our road to that.

Ronald Josey: that is great. Thanks for the thanks for the color, guys. Appreciate it.

Operator: Our next question will come from Nick Jones with BNP Paribas. Please unmute your line and ask your question.

Nicholas Jones: Great. Thanks. Thanks for taking the questions. I guess, can you guys speak to, your feature and, like, product velocity? You are introducing a lot of new AI features for both the consumer, for agents, and follow-up boss. How are you balancing kind of product and feature velocity versus the cost associated with the deploying AI models to kind of make sure you are keeping your internal costs on plan? Thanks.

Jeremy Wacksman: Yep. Maybe, Hof, why do not I start on product roadmap velocity, and you can talk about cost we are shipping faster now than we have in a long time, I think, is the short way to answer that. And you are seeing that in the product road maps and announcements we have given this year. You saw our summer launch. You are seeing that in our AI Mode progress, which is now live to 20% of new users. And it is 1 of those things where as our teams are able to make better use of these tools, we are able to ship code more code at the same quality.

We are checking in 30 to 40% more, and we are not seeing any degradation. In fact, we are seeing the same quality as we measure kind of as we measure how that quality plays out. And that is a really good indication that the teams are getting The teams are getting more efficient. So you see it in the products we announced and the features we announced, but you also see it in the and the software that our agents and our loan officers are using. And do not expect that to slow down. I mean, AI Mode is a great example of that. We just launched that earlier this year.

We are now at, you know, 1-fifth of our signed in users, and we are still adding to the and evaluations to make sure that is giving great answers for more and more of the composition. We are tremendously excited about it. I talked a bunch about the correlated data there that is showing our engaged users are really finding it and using it and liking it.

And we can still do a far better job with it. there is still more things we want it to be able to do well. there is still more parts of the surface areas of Zillow we wanna be able to hook up to and give you all your answers, but we are already seeing the hunger from our users to use it in more ways. So we are tremendously excited about the progress with AI Mode, with our software road map, and with the pace and velocity And I think that is why you heard Jeremy say, the restructuring changes it is about cost management. About ensuring we can be leaner going forward.

Is not about sacrificing our growth bets and our profile. it is really about getting to the future faster.

Jeremy Hofmann: Yeah. And then from a cost perspective, we feel quite comfortable with managing the cost structure around AI. You know, I will use AI Mode as an example. We route queries to the right model for the right task rather than running every interaction through the highest cost model. And then we are seeing it you know, allow people to be more productive. We are seeing, you know, part of where we are really pleased with the ZHL continued improvement is coming from AI initiatives we put in place there to manufacture loans more efficiently.

So really across the both the employee base and then also what we have been able to do for the operators across both mortgage and agents seeing really good progress, and then we can manage costs appropriately just given the way that we have set up controls around how we scale things.

Operator: Our next question will come from Lloyd Walmsley with Mizuho Securities.

Lloyd Walmsley: Great. Thank you. Wanted to just go back to unpacking this shift from residential to mortgage. A little bit more. it is been very, helpful so far, but if we look at sort of the historical business model, how meaningful in that mix was the mortgage co advertising? And then when you look at the lift in revenue per connection, how does that sort of break down between changing economics, you know, for better or worse on the agent referral side. Versus changing economics on the mortgage side? Any anything you can help us with? And then I think there was reference to some other products too.

You know, are any of those material So that is that is sort of a little more detailed, broad first question. And then there is just second related to that would just be, you said that by year-end, you target 35% premium in terms of the revenue per referral. Where do you think that can go, you know, over the next few years in, a blue sky scenario?

Jeremy Hofmann: Yep. Lloyd, I will take the first– take that 1. So thinking about the shift, it is really preferred revenue plus Zillow Home Loans revenue that comes off of, folks that were that consumers that choose Zillow Home Loans and work with their preferred agent. And then there is also the folks that are preferred agents that are using Follow-up Boss and using Showcase. that is how we get to the combined revenue per connection. And we compare that against what we were getting in market-based pricing, and what were those agents using, Follow-up Boss using Showcase for comparability.

And we see higher and higher revenue per connection that is coming from more Zillow Home Loans, more showcase listings, more and more folks using Follow-up Boss as well. So that is how we do the compare. And that is where we feel like we are just opening up more and more addressable market. You know, Zillow Home Loan is a good example. We are now a top 25 lender. We feel very happy about the fact that we have been able to do that.

But we are still basis points of share and we have a lot of you know, potential buyers on our sites and apps and we have designs to be 1 of the biggest purchase lenders in the country. That would not be possible in the legacy ad model, for example. The ability to continue to grow, showcase the ability to continue to grow follow-up boss, Zillow Pro, so much of that hinges on the back of that preferred base just getting stronger and stronger. So that is why we are so excited to keep moving forward on that.

Jeremy Wacksman: And, Jeremy, anything else you wanna No. I think that is that is all well said. I mean, if you just zoom out to why we are doing this, Jeremy hit it earlier, it is a better customer experience which is why it is a better and bigger business profile for us over time. This is the integrated transaction. The thing we have talked to you all about, the buyer and the seller, using Zillow using all the transaction services, working with an agent on our platform, working with Alonos on our platform, all inside the Zillow app, and Zillow participating more in that transaction and driving more of those transactions, it all comes off preferred.

So we are so excited to have gotten to this point where we feel confident to accelerate to the end, and we see the business profile and the margin profile of mortgages to get there. Understand you have to model timing and seasonal, lags here as you work through your models, but us, the billion dollars in internal for sale revenue comes from delivering this better customer experience to go get more customers and go participate in more revenue with them, which all comes off of preferred.

Lloyd Walmsley: Okay. And then apologies if I am being slow. Can you can you just explain how the how Showcase and Follow-up Boss are connected to the shift in how you are sort of handling the leads for the preferred?

Jeremy Hofmann: Yeah. The easiest way to describe it, Lloyd, is there is higher incidence of usage with preferred owners. When we are closer together with them, they are using our products more often. You know, in preferred, for example, nearly all, if not all, of our preferred partners are using Follow-up Boss. Yep.

Analyst: Yep.

Lloyd Walmsley: Okay. I think I get it. Thank you.

Jeremy Hofmann: Yep.

Operator: Our last question will come from Nikhil Divanani with Bernstein. Please unmute your line and ask your question.

Nikhil Devnani: Hi, thanks for taking the question. I want to just clarify, I guess, the perspective on residential revenue growth. Think last quarter, we had talked about a framework of mid-single-digit growth. I understand that maybe some of this revenue recognition trend is accelerating, but I think even by your own math, was about 6 points in Q2 So it is been around for some time as a factor. And so I am wondering sort of what is changed to drive resi growth from mid singles to now flat And if anything else, is worth calling out in terms of market share trends or conversion rates that are worth keeping top of mind? Thank you.

Jeremy Hofmann: Yeah. Thanks, Nikhil. I will take that 1 as well. The 2 changes are 1, macro has slowed. So we thought the purchase mortgage market was going to be going into this year, and we plan for it that way. We actually now think it is gonna be down mid to sing low to mid single digits, for the second half of the year. That has had an impact. And then, the– the acceleration in the move to preferred creates that shift dynamic that I was talking about that will just accelerate to a point that it is you know, 600 to 700 basis point, shift out of residential in Q3, and we think 700 to 800-basis-points in Q4.

You know, again, that will moderate as we get into next year, but that is really the 2 things that have changed.

Nikhil Devnani: Got it. Thank you.

Operator: This completes the allotted time for questions.

Jeremy Wacksman: I will now turn the call back over to Jeremy Wacksman for any closing remarks. Great. Thank you all for joining us today. We appreciate your continued support. We are really excited for what is ahead, and we look forward to speaking with you next quarter. Thanks all.

Operator: Thank you for joining Zillow Group’s second quarter 2026 financial results call. This concludes today’s conference call. You may now disconnect.