Zillow Class C Aktie

Welcome, everybody. We have the Zillow fireside chat at the Goldman Sachs Communacopia and Technology Session -- Technology Conference. My name is Mike Ng, and I cover Zillow here at the firm. It's my absolute privilege to introduce Jeremy Hofmann, who is the Chief Financial Officer and Chief Operating Officer at Zillow. First and foremost, thank you so much for being here, Jeremy. I really appreciate you coming out here again.

Yes. Thanks for having me.

Awesome. To start things off, I would just love to ask a big picture strategic question. Zillow, clearly a household name, the primary digital front door for real estate discovery, diligence in the United States, an incredible amount of reach as measured by unique users. So to kick things off, could you just walk through some of the core operational pillars of the Zillow ecosystem and how the strategy has evolved over time?

Sure. Yes. So we've been in existence for about 20 years now. I'd say the first 15 years were really around building what I'd call the dream and shop layer for our business. So what most people know us for today is you go on Zillow and you dream and shop. That has yielded great benefit to us. So our brand is quite strong. We're anywhere from 70% to 75% of category share in real estate online.

We are -- the term Zillow is more often Googled than the term real estate and 80% of our traffic is direct to us. That comes from great product and innovation and really building that dream and shop layer. And it comes from having more content than anyone else across existing homes for sale, rentals and new construction. So the shopping experience is more robust than you'll find anywhere else. That was, I'd say, the first 15 years and the mission around really building a big consumer brand. Over the last 5 years, we've been building out as fast as we can a transactional layer and underlying operating system for real estate.

And I'll click into each of those because I think they're important. They're the things that are driving the revenue growth, but probably less understood to a day-to-day consumer. So on the underlying operating system front, we now power 90% of all tours in the country with Zillow through ShowingTime. dotloop sees 50% of all offers in the country, another piece of software that we own. Our rich media, which is proprietary technology that we built and developed around floor plans and 3D media virtual walk-throughs, that's on more than 10% of all listings in the country today. And in our biggest markets, it's upwards of 30%.

Last but not least is Follow Up Boss, which is a CRM that we bought now about 3 years ago. That is the CRM for the most productive real estate agents in the country. That is the first thing they log into on a day-to-day basis. We have about 138,000 active users of that on a monthly basis, which is up over 20% year-over-year. And within the most productive real estate agents, the folks that we work with, that we call Preferred agents who really work with our consumers, pretty much all of those Preferred agents who are the most productive agents in the country use Follow Up Boss. So that's the -- we have the dream and shop layer. We have the operating system layer, and then we have the transactional layer.

That transactional layer has been the big set of bets that we've made over the past few years. It's really been around move the brand from just dream and shop to buy, sell, rent and finance. And underlying those words has been really good growth. Zillow Home Loans has become a top 25 lender in the country. We continue to take share both in buy-side and sell-side transactions with Preferred. And we are rapidly growing our Rentals business on the back of that strategy as well. So that's been the strategic evolution, started with dream and shop, moved into operating system for real estate professionals and a transactional layer.

The biggest challenge we've had in the category and the biggest challenge with our real estate -- with the real estate category online is it is a long shopping cycle. It is an infrequent purchase and a lot of it still happens offline. Now we fast forward to today, AI gives us the opportunity to really accelerate and reinforce all 3 of those layers and give people so much more advice than we were able to do when it was solely map-based search. So in each of those layers, dream and shop, we are now able to marry a really comprehensive and good visual search with a conversational assistant to learn more about what you're doing from a dreaming and shopping perspective than we were ever able to do before. We can answer so many more questions with AI and having an assistant guides you through that process.

On the operating system layer, we are great builders of software. We have made the products better with AI, and we are the most capable technologists in the real estate space. So the software strength that we have from those assets I highlighted earlier, get only stronger with AI. And last but not least, the transactional layer, there are just so much -- there's so much more advice we can give people using AI in the transactional layer than we were ever able to do when it was solely map-based search. So we look at today and say, in the way that we've built the business and the underlying layers that we now have, AI becomes a reinforcement mechanism and an accelerant.

And to finish all that off, we've been executing quite well through this period of time as we've been on this strategy. The company has grown revenue 29% annually since being public on a 29% CAGR. Last few years, we've grown revenue mid-teens in the housing market that's been as challenged as it's ever been. We're growing profits faster than revenue. We're growing net income faster than both EBITDA and revenue. And we've shrunk the share count by, call it, 10% over that period -- over the last, call it, 3 or 4 years as well.

Great. Yes. And to your point, the results in many ways speak for themselves in terms of the revenue growth that you've been able to deliver in what's been a very sideways real estate market. Yes. I was wondering if you could talk a little bit about how unifying the CFO role and the COO role positions Zillow allows you, right, to execute with a higher level of speed and effectiveness.

Yes, it's been a pretty seamless transition. We -- I stepped into the role about a month ago alongside our last earnings call. And I've been at the company for almost a decade now. I've been heavily involved in the strategy and operations of the company through that period of time, know the leaders well, have worked with the management team. And I think combining the roles, what I look forward to and what I've enjoyed even in the first month since has just been, can we move with more speed? Like are we able to -- the strategy feels pretty well set. The growth -- kind of structural growth algorithm is intact. And now it's how fast can we go and capture that. And going back to the first question, how much can AI really accelerate the business strategy as well.

Great. Moving to some of the revenue lines within the financial model. Maybe we can start with for-sale revenue. That line grew 13% year-over-year. Looking now into the second half of 2026, an increasing portion of for-sale monetization moves from residential into mortgage. It's a little bit harder, I think, to tease out what's happening as it relates to the underlying growth of the business just because of some of that movement. But maybe you can just shed some light in terms of what's happening there in that residential to mortgage transition and how we should think about just the underlying growth of the business?

Yes. For those of you that may not be as familiar with Zillow, what we're doing is we are moving the primary monetization model with real estate agents from a pay-upfront ad-based model to a success-based model when a transaction closes. So that is the move from market-based pricing to Preferred, which Mike just called out. That has -- that is a better business model for us because it allows us to more tightly integrate with the real estate agents that are working with our customers. It allows us to be more directive on the software and tooling that they use in service of those consumers. And then it allows us to better integrate services like Zillow Home Loans because we are working with the real estate agents in a more tightly integrated manner.

So that's the reason why we're doing it. What it means is that our residential -- some of our residential revenue actually shifts into the mortgages category. And as a result, there are some moving pieces that we outlined over the course of the next few quarters. When we get past that transition, why did we do this? Why do we want to do it? It is to accelerate our transaction layer, basically. Having a tightly integrated set of partners who work really closely with us and are incentivized the same -- like all of us being incentivized the same way, which is basically happy customer, right? A consumer moves, agent gets paid, we get paid. That's a great mechanism to build a transaction strategy on top of. And we see our revenue per connection actually increasing as a result.

So in the Preferred model in 2025, that grew 23% more than the legacy ad-based model. And we expect that to be roughly 35% more growth in 2026. So it's a better business model. It's a bigger opportunity because we can touch more transactions. And then it's coupled with our Home Loans business getting profitable, so we can profitably scale that as well. That's why we're doing it. That's why we're so excited and the moving pieces between residential and mortgages is just mechanically what we have to do as we accelerate, and we want to make sure folks understood that, but the underlying growth drivers feel well intact for us.

Great. Zillow has also made a lot of progress monetizing the sell side of the transaction, which I guess hasn't always been the case. But maybe we can talk a little bit about Zillow Showcase, which has scaled to 5% of all listings nationwide. How is the expansion of listing products like Zillow Showcase and agent software packages like Zillow Pro helping with your relationships with listing agents and brokerages? And then from a strategic standpoint, do you view some of the stand-alone software subscriptions evolving into distinct high-margin recurring revenue streams beyond just the transactional-based nature that some of your other revenue streams are based off?

Yes. So what I talked about Preferred is basically how we come to market with buyers looking to buy a home, right? It's integrating agents and integrating Home Loans and then ultimately, other adjacent services as well, doing more and more of that online. What Mike is asking about is now what are we doing on the sellers, the folks that are looking to sell a home now. We've been able to grow our share there fairly rapidly over the last few years, primarily on the back of a product we call Zillow Showcase, which is a souped-up listing. It's basically you get higher-quality photo, all digital walk-through of the property and integrated floor plan, so you really understand where you are.

And that's all built on our technology that we've been developing over the last, call it, 10 or so years. It's a place -- so the seller, that's been great, like we've been happy to grow the way that we have. I think seller continues to be an opportunity that is far bigger than even what we've been able to do. And that's where I get really excited about some of that conversational assistant stuff we were talking about earlier, where before we had an AI mode, there's only so much you can put on a pixel, right? There's only -- sorry, there's only so much you can put on a screen, right? It's like contact an agent, get prequalified, take a tour. It's about as much as the consumer can handle on a [indiscernible] listing.

In a conversational way, there are so many more ways in which we can interact with consumers. And on the sell side, nothing to share today, but there's a lot of exciting ideas around the ability to be more impactful in helping people thinking about listing, potentially listing their home and on and on. And we can pair that with best-in-class real estate agents to help guide them through, but there's so much more we can do online than we were ever able to think about pre having this really rich conversation back and forth with prospective sellers.

So buy side feels well intact. Sell side, there's a lot of growth to come on the back of what we've already seeded plus the ability to use AI to make a seller even more thoughtful in what they do. And then you couple that with the software that we've either built or acquired over the years. To your question there, what we're trying to do is make a real estate agent's life easier and make them more productive. So we invest heavily to go do that. There are -- the software business for us, the software line item is already like decently sizable. It's part of the reason why residential has grown the way that it has.

But most important in the software is to really help facilitate transactions. And then yes, there's high-margin business on top of that, but the bigger opportunity is around transactions. And with the software that we have, we want it really for adoption, and we'll make money on top of that, but it's really around adoption such that the transaction strategy is even further accelerated.

Perfect. If we could turn to rentals. This is a business where Zillow certainly hasn't achieved their fair share yet. And I think that speaks to some of the very strong growth that you realized in that business to date. I think you have guidance for high 20% year-over-year revenue growth for the upcoming quarter, 30% for full year 2026. So I was just wondering if you could walk through some of the levers that are driving that high-growth trajectory within rentals and any moving pieces that you would call out just as we think about the full year outlook?

Yes. And then just to level it up, the stuff I've been talking about to date has all been on the for-sale part of our business. We have 2 main lines of business. It's for-sale, which is residential and mortgages and then rentals. So as you think about how to think about the growth in Zillow, it's -- there's for-sale, there's rentals, there's total company, and we've been able to grow those quite nicely because the business has diversified more than it was maybe 5 and 10 years ago.

The big driver of that has been the rentals business. And the strategy there is to be the place that has all the rental inventory available. It is single-family homes for rent and apartment buildings for rent. That has -- that's like a labor of love. We've been after it for a long time, but we're now at a point where more than 70% of all single-family homes for rent in the country are on Zillow, and the majority of those are unique to us. So that drives traffic advantage. And as we've been able to do that, we've been able to rapidly grow our multifamily apartment buildings on the site as well. And that's been the big driver of revenue growth over the past 3 or 4 years.

Going forward, the goal is to get more and more of that inventory. And then with multifamily specifically, it is continue to grow properties and to continue to have the advertisers that advertise on Zillow spend more with us by upgrading their packages. So it's been a pretty tried and true strategy over the last 3 or 4 years. The business has grown quite well. And we think we have a real right to win in multifamily because our ROI is best-in-class.

Great. I guess related to rentals, I wanted to ask about the Redfin partnership. There was a recent settlement reached with the FTC and Zillow as it relates to the Redfin partnership. I was just wondering if you could lay the foundation for what the partnership was, what the settlement is and if there are any changes that come on the back of that?

Yes. So this would have been early 2025. We did a partnership with Redfin, which basically had us distributing our multifamily content to Redfin sites and apps. And Redfin drives more and more traffic to their sites and apps, which provides value to the Zillow advertising product. So a property management company who is the buyer of this advertising before the Redfin partnership, when we went and sold to them, we would say, hey, you're going to get great exposure on Zillow, Trulia, HotPads, Realtor.com. That was another partnership we did.

Fast forward to post doing the Redfin partnership, we could walk into those folks' offices and say, and by the way, now you're getting Redfin, Rent.com and ApartmentGuide. So this is expanding our network, expanding our reach. And for us, it's a win because it allows us to give even more value to the property managers. That's been -- that's allowed us to really grow that property count. For Redfin, it was a win because they were getting more content than they had previously. So that helps their traffic. And then for consumers, it's a win because consumers are now seeing more properties on more parts of the Internet. So it was a pretty clear win-win-win, which is when you get into these partnerships, the only way they work is everybody has to be happy. Otherwise, one side doesn't invest.

So that's where we went. FTC had some questions about that. We got to a settlement probably about a month ago or so at this point, maybe a little bit less than that. And we're pleased with the settlement. The partnership stays intact. So the way that we sell today will be the way we continue to sell. And then there will be potential SKUs of Redfin-only and Zillow-only ad products. So that adds potential ad products to the marketplace. But the most attractive advertising to these property management companies will continue to be what we are offering today. So there's not a lot of change to the business as a result.

Nobody would willingly reduce their reach, I suppose, but...

That's -- yes, when you put yourself in the persona of each person, it's like a consumer wants to see more in more places, a property management company wants to advertise in more places and both we and Redfin are incentivized to grow the pie.

Great. Very clear. If I could jump back to the for-sale piece, just to talk about mortgages since we haven't gone into a deep dive on that. Just given some of the macro softness across the residential lending industry, how does Zillow view the sustainability of mortgage revenue growth? How does the company balance scaling originations and profitability, particularly given that mortgage rates likely will remain elevated for the rest of the year?

Yes. So I'll take it in pieces. From an overall opportunity perspective, we are only scratching the surface in mortgage. We basically started with a standing start in 2022. Fast forward to today, we have 10x the amount of loans that we've been able to underwrite. That makes us a top 25 lender in the country. It is still quite small versus what we think the opportunity is. We think the opportunity for us in mortgage is to be one of the top 1, 2 or 3 purchase lenders in the country because we have a great consumer-friendly product. We have a set of real estate agents in Preferred who are amongst the best in the country, and that tends to be distribution.

And we have a great brand where a lot of the prospective buyers are already on Zillow when they're thinking about getting a mortgage. So that's like the high level, why are we in the mortgage business? Why do we think it's the right consumer experience? And what do we think the potential growth opportunity is? We have been able to structurally grow well beyond the market. So as rates fluctuate, we have 10x the business over 4 years, and I think mortgage originations are probably flat over that period of time, if not down. So that gives you a sense for like the opportunity in front of us regardless of what rates do.

On the margin month-to-month, will there be fluctuations in conversion rates as a result of rising interest rates? Sure. But the long-term structural opportunity is to be far bigger than we are today, and we have the underlying building blocks in place. With respect to the speed of that, it is a business we have to be really thoughtful in how we roll out because you really only get one shot with a consumer and you only get one shot with a real estate agent to provide a good mortgage experience. So it's just not one of these things you go and blitzscale, like we have grown it quite nicely.

But when it is a consumer looking to get into a home and saying, hey, Zillow Home Loans, are you delivering such that I can close that home? That is not an A/B test, like, you have to get that right. So we have grown it, I'd say, quickly but methodically, and we will continue to do that, one, because the consumer experience and agent experience has to be great. But two, the opportunity in front of us feels so substantial, like stubbing our toes, trying to move too quickly doesn't feel like the right answer, particularly given even the top player today has 5% market share. So it's a really fragmented market, and we have a real right to win. Combine that with we are now at a place where it is profitable on a variable indirect basis so that scaling mechanism feels even more interesting as you get to profitability in that line.

Great. At the onset of the conversation, you talked a little bit about AI mode. And I was just wondering if you could spend a minute and talk about how AI impacts Zillow. How are you using AI for some of your consumer-facing features? And what are some of the proprietary data sets or things that Zillow has to make a differentiated product using AI for real estate that others may have a harder time doing?

Yes. I think it comes back to those kind of 3 layers I talked about earlier, which is dream and shop, the operating system and the transaction layer, and they all kind of reinforce each other with AI mode. So I'll give you some examples. Right now, it is on -- AI mode is on 20% of all logged-in users. So we are being methodical because we need the experience to be really good. It's not just that search layer. It's supposed to be an assistant all the way through the transaction. So we are methodically scaling.

Early days, the promise of it is good. Like we're seeing far more engagement in -- for those that use AI mode than those that don't. That's the first thing you want to see. The conversations are richer. The types of questions we can answer are so much more than when we were just in kind of map-based search and trying to put as many facts and figures on a mobile screen. So that all feels really good early days. What it ultimately should do for us over time is make the dream and shop experience better because we can answer more questions about neighborhoods and commutes and schools and all sorts of stuff that we otherwise really couldn't do pre this conversational assistant, beyond other topics as well.

We can also start to infuse smarter and smarter data about consumer search behaviors writ large. So you as a consumer say, hey, is this market hot or cold? That question by a human being is pretty hard to answer. That question when you have all of Zillow's consumer data flowing through is a lot easier to answer. So that would be an example of like why is it better? And there are many more as we go on this journey. On the software side, we are highly capable technologists, particularly in the real estate space. It is fairly clear. You talk to a real estate agent, they say who's the best technology company in the space? It's us.

And we can make the software products better and stickier and make the software products allow agents to be more productive. So we're doing that already in a variety of ways, but AI really infuses there or really helps there. The other thing to think about with our software is now we can start to marry Zillow data with the software. So Zillow Pro is a good example of this where a real estate agent gets into Follow Up Boss, works Zillow consumers that way, but also has a network of people that just sit in their CRM that sit fairly dormant.

We are now marrying Zillow consumer behavior so long as that consumer opts in into Follow Up Boss so that the real estate agent who hadn't talked to you in 6 months gets the ping that says, oh, Mike is actually searching in these areas, you should probably reach out to them. That's not replicable. You have to have Zillow data and Follow Up Boss. So that's a good example of like where AI can really help us as well. And then on the transactional layer, it is making the transaction more efficient, of course, and AI will, of course, do that.

But really important, too, is the richness of the conversations we're having with prospective buyers and sellers allow us to offer more to them and introduce them to Zillow Home Loans or a Preferred agent in way different ways because it's not just 3 potential clicks. Before it was contact an agent, get prequalified, take a tour. Now it's like the questions are infinite and the way in which we can introduce these people is way more conversational and persistent than solely those 3 sets of pixels.

So all of that is like you can probably tell, I'm pretty excited about, and I'm getting even more excited about being in the COO role and seeing this stuff way more deeply than I probably was just in the CFO role. But it's fairly early days today, and the signs are quite positive. And then it's like how much can we innovate from there. We consistently over the course of our history as a company, cross technology chasms quite well, and we expect to do so here, too.

Great. If I can ask a nearer-term financial question, I just wanted to ask about the guidance. You have revenue guidance for this year of mid-teens year-over-year growth. For the third quarter, you guys did call out some impacts from the mortgage market as well as the transition timing because of the Preferred agent program. So could you reiterate the guidance today? Is there anything that you would provide texture-wise to just help us understand why the guidance is set the way it is?

Yes. Guidance, I would reiterate today, the moving pieces in how we guided for Q3 and Q4 were 2 main factors. One was we were accelerating Preferred. So there are some moving pieces on the way in which we get revenue between our Residential segment and our Mortgages segment. There's a shift in that. And then there are a few things that are headwinds. One is a seasonal -- basically like a seasonal impact where the old model did better in Q4 than Preferred does and then Preferred does better in Q1 than the old model did. So that's just a quarterly thing, but it's a headwind for Q4.

And the other is just the time it takes for a loan to actually become revenue. That's slower than an advertising-based model. That -- so that was like the stuff that was in our control as we accelerated Preferred. The other thing that we called out and we're seeing play out is just softer macro. We had thought macro was going to be about flat for the year. And now we think it's down. And we incorporated that into the guide and thought about that as we thought about Q3 and full year 2026.

Great. I wanted to ask about the mid-cycle targets. Zillow has mid-cycle targets of $5 billion of total revenue, 45% EBITDA margins. It is anchored around a macro assumption of 6 million units existing home sales sold annually. I was just wondering if you could talk about some of the drivers to reach those mid-cycle targets. How much of it is contingent on macro? What can you do without macro conditions improving? I think it would be helpful just to talk about how much is actually in your control.

Yes. There's a bunch in our control. And for context, 6 million home sales today, we're talking about 4 million home sales. So we are nowhere close to normal. And that 4 million home sales has been pretty consistent over the last 4 years at this point. I think 2023, '24, '25 and '26 will all be about 4 million home sales. So we're in a particularly depressed time in a cyclical market. We've been able to -- we, Zillow, have been able to grow right through that. We expect to be able to continue to grow right through that.

And I would use history as mechanism to think about how we think about the go forward, which is we expect to significantly outgrow the real estate market, and we've grown in the mid-teens pretty consistently through that housing market downdraft. And we've grown EBITDA faster than revenue. We've gotten to GAAP profitability. We're growing net income faster than both revenue and EBITDA. And our expectation is we continue to do that regardless of the housing market. So our expectation is we grow quite nicely through a challenged housing market. And when the housing market comes back, that's an obvious accelerant to the business, but we're not waiting for it.

Great. In the last few minutes here, I wanted to ask 2 more. One is just around listing access standards, right? Like lots of things happening in listing access standards, Zillow Preview, premarketing. I was just wondering if you could provide an update of the state of premarketing today. Is it an opportunity? Is it a threat? How do you guys think about it?

Yes. So the question here is really around will marketing your home privately become more of a standard? The real estate market has always had some small portion of listings be private, right? If you think about ultra-luxury, divorces, death, you name those types of things. That's always been around, I don't know, 1% to 2% of all the available inventory in the country. Regardless of the rhetoric that has been thrown out, that number has been stubbornly the same.

So the amount of noise has ticked up substantially over the last few years. The amount of private listings has stayed basically the same, like somewhere between 5,000 and 10,000 listings at any given time. 5,000 or 10,000 listings on the back of 1.1 million active listings in the country. So this is just kind of a ridiculous set of conversations regardless of why they exist. I can't totally figure that out. But the consumer behavior is you're going to sell the most important asset you own for most people, you want the most eyeballs on it.

That's like the most obvious statement on the planet. It's like trying to argue whether the sky is blue. And lo and behold, 98% to 99% of the country continues to market their homes that way because it makes sense for the vast, vast majority of people. That has been the case. That will continue to be the case. We do not see how limiting the amount of eyeballs people are able to put on a home results in a higher price for a seller. So that's the private listings. With respect to the coming soon, like do you preview your home on the market before you go and sell it more broadly?

There are markets where that can make some sense, and we have a product called Zillow Preview to initiate that, but still not even close to the norm. Our Zillow Preview is quite small and any other coming soons are quite small as well. So we expect that to -- based on consumer behavior we see, we don't expect that to become the norm. But if it is, we think Preview is better positioned than anything else.

Yes. In the last minute we have, I would just love for you to tie it all together for us and maybe talk about some of the things that you're looking forward to the most over the next 1 to 2 years, execution-wise, milestone-wise that you would call out?

Yes. I'd say a lot of it you all have heard today, but the structural growth levers across for-sale and rentals are intact, and we see growth opportunity well into the future, not to even mention all the things that we will invent from there. But the structural growth levers that you've seen be able to grow as nicely as we have over the last few years, we see intact going forward. And our job is to do that while growing EBITDA and net income faster than revenue. And we think we're well positioned to do that with a lot of internal excitement about what AI mode is going to do on top of that and whatever we invent around generative AI from here.

Great. That's a great way to wrap it up. Jeremy, thank you so much for participating in our conference. It's been a privilege to have you on stage here with us.

Thanks for having me.

Hello, and welcome to Zillow Group's Second Quarter 2026 Financial Results Call. [Operator Instructions] Also, as a reminder, this conference is being recorded today. If you have any objections, please disconnect at this time.

Brad, you may begin.

Thank you. Good afternoon, and welcome to Zillow Group's quarterly earnings call. Joining me today to discuss our results are Zillow Group's 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.

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 naive at the core of the transaction, empowering both consumers and professionals from end to end. We've earned consumers' trust for many years now by consistently showing up for them at every stage of the housing journey. That's why our brand and engagement are so strong. We have more than twice 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 outperformed 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 $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've built a platform where our interests align with the interest 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've 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's 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 visit 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 AI mode is starting to show us what's possible when consumers can engage differently from traditional search. We're seeing them share more about their needs in AI mode than they ever entered into the typical residential search query not just what they're looking for in a home, but their time frame, their financial picture, they need to sell their current home, whether they need a fence backyard for their pets and other special circumstances that go into their decision. This is unique, personalized context we haven't 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 twice as many homes, run nearly 3x as many searches and contact an agent at nearly 3x the rate of consumers who don't use AI mode.

The same pattern holds in rentals, where AI mode renters request a tour at nearly 3x the rate and submitted application at nearly twice 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 one 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 and rent affordability scenarios across both renting and buying. At one 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 on night stress testing a single home with questions like what trade-off should I consider when looking at this home. That's what Zillow AI mode enables. It's 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 weren't possible before. Zillow AI mode is now live for about 20% of signed end users, and 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 service products that meet their needs. It's a good example of what becomes possible when a buyer's workflows are connected in Zillow's end-to-end infrastructure.

We're also differentiating Zillow Home Loans with the integration of preapproval directly into the home search, shopping with a Zillow Home Loans verified preapproval let's 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's a clear signal of serious buyer intent.

We continue to deliver double-digit adoption of Zillow Home Loans in the integrated experience. Thanks to a strong value proposition, convenience and competitive lending terms when compared with other industry-leading mortgage originators. Zillow Home Loans is now a top 25 purchase lender in the country. The average loan officer at Zillow Home Loans, originates roughly twice the industry average of purchase 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've 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 one more way we're 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 premarket 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 access 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 and how long they can premarket 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 don't.

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 and 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 138,000 monthly active users in Q2, up 21% year-over-year. Smart messages AI generated text and e-mail 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's top of mind for the consumer. Any agent whether they advertise on Zillow or not can access exclusive tools and 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 made it 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 the 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 don't 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've raised their hand anywhere else.

Likely to List turns the CRM into an active opportunity engine, 70% of actual U.S. buyers and sellers are already on Zillow. That creates an opportunity for agents to reconnect with past clients, they've 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're enabling for agents exemplifies the shift we've 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's generating 23% more revenue per connection than our legacy advertising model did, and one 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 revenue, nearly 1/3 of our goal.

Now turning to rentals. Nearly every buyer starts out as a renter. And for millions of people renting is in a stepping stone, it's 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 79,000 multifamily 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've 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're 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're helping them complete it with our partners and our real estate operating system. Rentals is one of our most compelling growth opportunities with a clear path to $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 don't.

It's 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've rapidly built the modern real estate operating system and 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 and operate more efficiently, including a more sustainable cost structure. We're grateful to every person who is leaving for their contributions through the years.

Today, we also announced changes to our executive leadership team. We've appointed Jeremy Hofmann to an expanded role as Chief Operating Officer and Chief Financial Officer. Jeremy has been one 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 team 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. June has been an invaluable part of Zillow's growth over the decade plus tenure he's had here and his contributions to the operational foundation of this company are measurable. We wish him all the best.

We are also welcoming Sandi 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 and building the leadership team that Zillow needs to support our future growth. The strength of our team and the strategy we're executing gives us every confidence in One Cubs 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's 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 and for the industry professionals who guide them through it.

With that, I'll turn the call over to Jeremy.

Thanks, Jeremy, and good afternoon, everyone.

We delivered excellent results in Q2 and are well positioned to continue delivering strong performance as we execute on our strategy in 2026 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 are 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 and 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 mortgages 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 is up 42% year-over-year in Q2. Our value proposition continues to attract new multifamily property managers with total properties growing to 79,000 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 FTC matter 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 investments 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 2026. 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 of 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. One 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 mortgages within our For Sale category. Under the legacy advertising model, both agent advertising and lender comarketing revenue was earned and recognized in the residential revenue category as connections were delivered. Once we earn 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 2026, 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 2021.

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.

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 the 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's 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 Loans 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'll 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 approximately $75 million of annualized EBITDA cost savings from Q2 run rates and an aggregate of $140 million when including reductions from previously planned head count 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% to 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.

Within 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 March.

In rentals, we expect Q3 revenue growth in the high 20% range year-over-year. In Q3, we expect EBITDA expenses of $560 million to $565 million and EBITDA of $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 our 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 of $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 Instructions] Our first question will come from Ryan McKeveny with Zelman.

Great. I'll start with a couple of 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 Jeremy H, I'm 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?

Yes. Ryan, this is Jeremy Wacksman. I'll take that one. 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're scaling the housing super app. We're navigating an increasingly complex environment. And we're doing so in a way that builds consumer trust.

And having Jeremy, who is one 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 boom for the company. We obviously wish Jun all the best as he steps back to focus on his health. He's been a value part of Zillow's past 11 years. But this is really about setting us up for the future, and we're tremendously excited about having Jeremy take on this expanded role.

Ryan, I'll just chime in. Thanks for the congrats. I mean I'm really excited to step into the expanded role. I've been -- Jeremy said it, but I've been intimately involved with the strategy of the operations and the financials for 9 years now, and I've worked really closely with the leadership team throughout. So I'm expecting a seamless transition and obviously looking for ways to ensure we can keep moving faster and that the organizations set up well to deliver on the growth and profits we see into the future.

That's great. And maybe along similar lines on kind of moving fast and efficiencies. So on the elimination of roles, any additional color you can share on kind of why now -- also anything on the type of rules impacted? Like obviously, you've got strong growth in rentals, purchase shares is really expanding, a lot going on obviously on the For Sale side of things and with preferred. So it seems as though the strategy across the board is really pushing forward. So just curious why now for that action?

I can take that one as well. To start, we don't expect any impact to our growth bets as part of these actions. So you're right, the strategy is working well. we are accelerating in a variety of places and don't 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's 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 get in the way of any of the growth bets.

Our next question will come from Dan Kurnos with StoneX.

Great. Thanks. Again, I want to also echo appreciate the thorough covering of all of the details and all of the moving pieces here. Of course, as if you guys don't have enough on your plate internally, you have a whole bunch of noise outside.

So I'll ask the -- 2 sort of requisite questions. One, we got a whole bunch of noise from Google and I want to just see if you guys are seeing any impact from that. And then two, on the legal front, you guys have had a few things settled. You've got a court date coming up with the FTC later this month. So there's a lot coming in here. You've had a couple of things dismissed. So just how are you thinking about the overall legal picture and any kind of strategic thoughts?

Yes. Thanks, Dan. On Google, I assume you mean their local service advertising product that they've expanded into real estate. I mean the short answer is we're not seeing any impact. I mean they ran it as a test for a while and the markets they ran as a test, we saw no impact to our traffic or metrics, and we've assume no impact as they've expanded it.

I think the big reason for why we don't see impact, you heard it a bunch in our prepared remarks, the brand commands a direct audience because it's 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're just not ripe 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, real estate transaction and buyers and sellers and renters are choosing our products and services, and that's what they reengage with and tell their friends about install the apps on their phone and used for.

I mean the comment I made earlier a buyer who hires a Preferred agent, they're on Zillow more than 100 times, right? And they're coming back to us of their own volition and because we offer products and services that no one else does. So there's always going to be changes in the category. There's always going to be changes in the platform. But the unique and differentiated strategy and product offering is why we've been so successful to date, and that's why we expect to continue to be successful.

And that's some of the answer to your second question on legal cases. Those aren't 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, and that's 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're 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've heard from us for a while now, these things are things we'll have to knock out and deal with, but they're not going to impact the business or the team or our operations. And I think you see that in our continued results.

Our next question comes from Brad Erickson with RBC Capital Markets.

Guys, can you hear me?

Yes. We got you, Brad.

Cool. Sorry. Yes. So two for me, one easy one and then one not as easy one. The easy one is rentals growth. The guidance looks like maybe tracking like the mid-20s in back half, just you're 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 full revenue and timing shift, et cetera. I recognize there's higher monetization per transaction. But can you talk about kind of a like-for-like profit comparison? Because like, for example, the co-marketing revenue used to get on MVP represents essentially getting paid per 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?

Yes. Brad, maybe I'll take rentals and Hof, maybe you can take modeling and revenue and margin composition. You're right. We're really pleased with our rentals growth, Brad. And even as we're lapping the Redfin partnership, you're 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's the big multifamily apartment buildings and the advertisers, a record 79,000 of those choosing to advertise our 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-one experience with the most inventory is why the audience is here. We have the biggest audience. That's the ROI, right? That's what an advertiser wants and that's why you're seeing the advertising growth. It's why they also tell us where their highest ROI channel, where they are regularly telling us we're not just their highest ROI source among other apartment-focused sites, but we're their highest ROI across search and social as well.

And so you're 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's 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 that growth was happening before, and it's happening now. And it's also why we're so confident in the $1 billion-plus revenue target that's in front of us.

Yes. And then Brad, I'll take your next one. I think we're moving towards this preferred integrated transaction strategy more aggressively because the growth opportunity is far beyond what we saw as possible in the ad model. And you're seeing that in the revenue per connection uplift in 2025 and 2026 that I highlighted, we grew revenue per connection in the experienced 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's why we're doing it. We're seeing the results work through.

There's obviously a number of moving pieces that I walked through in the prepared remarks, 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'd say there is earlier in the enhanced markets rollout we were definitely investing in ZHL, which put 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 -- quite large to us and the growth opportunity feels quite large. And then obviously, we've been growing EBITDA overall through that investment in ZHL, and we've been able to drive margins of 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'd say is just to keep in mind, the mid-cycle targets of 45% EBITDA margins and 25% net income both contemplate all that we're 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.

Our next question will come from Ron Josey with Citi.

Hopefully, you can hear me okay.

Yes, we got you, Ron.

Perfect. Okay. Wonderful. Two questions. First on just preferred. I think we're understood getting to 75% by end of; 26 and the benefits of accelerating it. We're already at 61%, I believe, if I read that correctly. And so walk us through just the impact again to seasonality in the revenues? And when do you think -- is it -- do we start '27 just on a clean slate and be a lot easier to sort of maybe not have compares, but at least going forward. I just want to make surethere's a lot of moving pieces here. So I just wanted to walk through seasonality, and we're already starting from a pretty high bar to begin with 61%, that's point one.

And then on Zillow Showcase, we're at 5% of all new listings. We're seeing the benefits here for agencies. Talk to us about the adoption rate here going forward. I would have thought maybe we would have seen greater penetration.

Yes, Ron, I'll take the first one, and then Jeremy, maybe you take the second one. There are -- yes, 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 categories. Okay? In the Preferred model, some of that revenue shifts from residential to our mortgages category with ZHL revenue. So that's why we've been pointing you all to For Sale as the right place to look at the business because that's 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 2026 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's pretty substantial as we're accelerating.

And I'd 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're at 61%. We'll be at 75% plus by 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 2027 as we lap the transition this year. So that's the first component that's moving is the shift from residential revenue to mortgages revenue underneath For Sale.

The second is a lag in when that revenue is recognized in ZHL and because we realized 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 in the legacy ad model, we got paid upfront. So there's a lag there. That's been a consistent one 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'll get through that, and that starts to moderate as we get to the end 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're seeing from the experience, what we're seeing from revenue per connection, what we're seeing from Zillow Home Loans and what we're seeing from our partner satisfaction. So we're very happy to do it, but there are obviously some moving pieces, and we're going to walk you all through those. But 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.

Yes. And then on showcase, 5% of all new listings is a great initial milestone for us, and we think it's doing great. It was only 2.5% a year ago. We're going to continue to drive adoption given the reception and you've seen us consistently test ways to drive further adoption across both teams and brokerages.

The stat, I think I gave in my prepared remarks, in our top 10 markets, we're at north of 10% share of new listings and more importantly, we have our media components, both Showcase and non-Showcase on 30% of new listings. So the flywheel is really starting to spin with this listing content. And you're continuing to see through all of this scale, the benefit for the listing agent is still there, right? Agents who are using it are winning 35% more listings than those who aren't. And that was true in the early days of the product, and that's true in this kind of early majority period of the adoption curve.

So we're nowhere near done. We've always talked about we think this can become the standard listing experience. And this 5% up from 2.5% a year ago is a great mile marker for us on our road to that.

That's great. Appreciate it.

Our next question will come from Nick Jones with BNP Paribas.

Great. I guess, can you guys speak to your feature and like product velocity 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 costs associated with deploying AI model to kind of make sure you're keeping your internal cost on plan?

Yes. Maybe Hof, why don't I start on product robot velocity, and you can talk about costs.

We're shipping faster now than we have in a long time. I think is the short way to answer that. And you're seeing that in the product road maps and announcements we've given this year, you saw our summer launch. You're seeing that in our AI mode progress, which is now live at 20% of new users.

And it is one of those things where as our teams are able to make better use of these tools, we're able to ship code more code at the same quality. We're checking in 30% to 40% more, and we're not seeing any degradation. In fact, we're seeing the same quality as we measure kind of -- as we measure how that quality plays out. And that's a really good indication that the teams are getting faster. 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 workflows and the software that our agents and our loan officers are using. And we don't expect that to slow down. I mean the AI mode is a great example of that. We just launched that earlier this year. We're now at 1/5 of our signed-in users, and we're still adding to the skills and evaluations to make sure that's giving great answers for more and more of the composition.

We're tremendously excited about it. I talked a bunch about the correlated data there that's 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's still more things we want it to be able to do well. There's still more parts of the surface areas of Zillow we want to be able to hook up to and give you all your answers. But we're already seeing the hunger from our users to use it in more ways.

So we're tremendously excited about the progress with AI mode with our software road map and with the pace and velocity. And I think that's why you heard Jeremy say, the restructuring changes, it is about cost management. It's about ensuring we can be leaner going forward. It is not about sacrificing our growth, that's in our profile. It's really about getting to the future faster.

Yes. And then from a cost perspective, we feel quite comfortable with managing the cost structure around AI. I'll 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're seeing it allow people to be more productive. We're seeing part of where we're -- 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've 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've set up controls around how we scale things.

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

Great. I wanted to just go back to unpacking the shift from residential to mortgage a little bit more. It's 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 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, are any of those material. So that's sort of a little more detailed broad first question.

And then 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 over the next few years in like a blue sky scenario?

Yes. Lloyd, I'll take the first take that one. So thinking about the shift, it's really preferred revenue plus Zillow Home Loans revenue that comes off of folks that work -- the consumers that choose Zillow Home Loans and work with their preferred agent. And then there's also the folks that are preferred agents that are using Follow Up Boss and using Showcase. That's 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 and using Showcase for comparability. And we see higher and higher revenue per connection. That's coming from more Zillow Home Loans, more showcase listings and more and more folks using Follow Up Boss as well. So that's how we do the compare and that's where we feel like we are just opening up more and more addressable market.

Zillow Home Loan is a good example. We are now a top 25 lender. We feel very happy about the fact that we've been able to do that, but we're still basis points of share. And we have a lot of potential buyers on our sites and apps, and we have designs to be one of the biggest purchase lenders in the country. So 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's why we're so excited to keep moving forward on that. Jeremy, anything else you want to hit?

No, I think that's all well said. I mean if you just zoom out to why we're doing this, Jeremy hit it earlier, it's a better customer experience which is why it's a better and bigger business profile for us over time. This is the integrated transaction. The thing we've 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 alone 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. We understand you have to model timing and seasonal lags here as you work through your models. But to us, the $1 billion in [indiscernible] For Sale revenue comes from delivering this better customer experience to go get more customers and go participate more revenue with them, which all comes off of preferred.

Okay. And then apologies if I'm being slow. Can you just explain how Showcase and Follow Up Boss are connected to the shift in how you're sort of handling the leads for -- in the preferred?

Yes. The easiest way to describe it, Lloyd, is there's higher incidence of usage with preferred -- when we're closer together with them, they're using our products more often and preferred, for example, nearly all, if not all, of our preferred partners are using Follow Up Boss.

Our last question will come from Nikhil Devnani with Bernstein.

I wanted to just clarify, I guess, the perspective on residential revenue growth. I 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, it was about 6 points in Q2. So it's been around for some time as a factor.

And so I'm wondering sort of what's changed to drive resi growth for 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?

Yes. Thanks, Nikhil. I'll take that one as well. The 2 changes are One macro has slowed. So we thought the purchase mortgage market was going to be flat going into this year, and we planned for it that way. We actually now think it's going to be down mid to single -- low to mid-single digits. So for the second half of the year, that has had an impact.

And then 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's 600 to 700 basis point shift out of residential in Q3, and we think 700 to 800 basis points in Q4. Again, that will moderate as we get into next year, but that's really the 2 things that have changed.

This completes the allotted time for questions. 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's ahead, and we look forward to speaking with you next quarter. Thanks all.

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

Hello, and welcome to the 2026 Zillow Group, Inc. Annual Meeting of Shareholders. Please note that today's meeting is being recorded. After the business portion of the meeting has adjourned, we will have a brief question-and-answer session. [Operator Instructions].

It is now my pleasure to turn today's meeting over to Zillow Group's CEO, Jeremy Wacksman. Mr. Wacksman, the floor is yours.

Good afternoon, and welcome to our 2026 Zillow Group Annual Meeting of Shareholders. I am Jeremy Wacksman, CEO of Zillow Group and a member of the company's Board of Directors. I'm joined today by Brad Owens, our General Counsel and Corporate Secretary; and Brad Berning, our Vice President, Strategic Affairs and Investor Relations.

I will serve as Chair of this meeting, and Brad Owens will serve as Secretary. I would also like to acknowledge the other Zillow Group directors and officers who are present at this virtual meeting. Brad Owens will cover the business portion of the meeting, after which we will have an opportunity for a brief Q&A.

But first, a few logistics. As Chair of the meeting, I have adopted an agenda that will govern the order of business and the rules of conduct for the meeting, which are available on the virtual meeting site.

The rules of conduct will also govern the Q&A session. If you are a shareholder and want to ask a question, you can submit one at any time on the virtual meeting website. The polls are open and will close in a few moments shortly after the presentation of the matters for shareholder consideration.

We are ready to begin the business of our shareholder meeting, and I will now formally open the meeting to order and hand it over to Brad Owens.

Thank you, Jeremy. Before I walk us through the business of the meeting, I have a few more introductions to make. Tom Cooper of Computershare has been appointed Inspector of Elections for this meeting.

And here with us today are Neil Touche and Chris Weber, representing Deloitte & Touche, our independent auditors. The notice of the meeting and Internet availability of the proxy materials were mailed beginning April 15, 2026, and went to all voting shareholders of record as of March 24, 2026.

As a result, this meeting is being held pursuant to proper notice. A list of shareholders of record as of March 24, 2026, is available for your review on the virtual meeting website. In addition, more than a majority of the votes entitled to cast, to be cast at the meeting as of March 24, 2026, are represented today, either virtually or by proxy. This means we have a quorum present.

Today, we have two proposals for you to consider. They were each described in the proxy statement for today's meeting. The first is the election of three directors, each nominated by the Board of Directors to serve until the 2029 Annual Meeting of Shareholders. Amy C. Bohutinsky, Jay C. Hoag and Gregory B. Maffei. The Board recommends a vote for each of them.

The second item is to ratify the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2026. The Board recommends a vote in favor of that proposal.

That concludes the presentation of matters to be voted on today. I will be closing the polls momentarily. If any shareholder has not already voted or wants to change his or her vote, please do so at this time. I will pause for a brief moment to allow any last votes to be submitted.

Now that everyone has had the opportunity to vote, the polls are now closed. I will now hand it over to Tom Cooper to share the preliminary voting results. Tom?

Thank you, Brad. The preliminary report of the Inspector of Election indicates that concerning: Proposal 1, each of the 3 directors nominated for election has been reelected by receipt of the largest number of votes cast as required by Zillow Group's bylaws; Concerning Proposal 2, the advisory vote to ratify the appointment of Deloitte & Touche LLP as Zillow Group's independent registered public accounting firm for the fiscal year ending December 31, 2026.

The number of votes cast for the proposal exceeded the number of votes cast against the proposal. Proposal 2 has passed. This completes the report. I'll now pass it back to Brad.

Thank you, Tom. Please prepare a final report of the votes that will become a part of the record of this meeting. We will report the final voting results in a Form 8-K filed with the SEC within 4 business days.

And with that, we have completed the formal portion of the meeting, and the meeting is now adjourned. Let me hand it over to our Vice President of Strategic Affairs and Investor Relations, Brad Berning for any Q&A.

Thank you, Brad. Jeremy. I am showing no questions, and we'll turn it over to you for concluding remarks.

Thank you all very much for attending. We appreciate your continued support of Zillow Group.

This concludes the meeting. You may now disconnect.

Hello, and welcome to Zillow Group's First Quarter 2026 Financial Results Call. [Operator Instructions] Also as a reminder, this conference call is being recorded today. If you have any objections, please disconnect at this time. Brad, you may begin.

Thank you. Good afternoon, and welcome to Zillow Group's quarterly earnings call. Joining me today to discuss our results are Zillow Group's CEO, Jeremy Wacksman; and CFO, Jeremy Hofmann.

During today's call, we will make cooking 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. Recording of the call will be available later today. During the call, we will discuss GAAP and non-GAAP measures, including 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.

Good afternoon, everyone, and thank you for joining us. Q1 was another quarter of consistent execution and continued momentum across our business. We delivered revenue near the high end of our outlook range and EBITDA above our outlook, putting us on track toward achieving our full year goals. That consistency reflects a winning strategy and a platform that is built to grow.

Our strategy is straightforward, make moving easier by connecting the entire housing journey into 1 integrated experience supporting both consumers and the professionals who serve them. And for sale, that encompasses shopping, touring, financing, agent collaboration and closing for consumers, as well as a suite of agent software tools to make them more efficient at serving clients. And in rentals, it spans search, tours, applications, leases and payments.

This integration is what drives better outcomes for everyone involved and fuels our growth. Roughly 80% of our traffic comes directly to us, and we have more than twice the daily active app users of our next closest competitor. Buyers, sellers, renters and professionals choose Zillow because we build experiences that they trust and come back to.

Our Q1 results reflect continued execution and progress across the business. Total revenue increased 18% year-over-year in the first quarter, near the high end of our outlook range. We once again outperformed the broader housing market, which stayed essentially flat amid worse-than-expected weather and interest rate volatility. EBITDA exceeded our outlook, driven by lower cost than planned, and we reported $46 million of net income.

We made further progress on margin expansion with net income margin up more than 500 basis points year-over-year. In for sale, revenue grew 12% year-over-year in Q1 to $514 million, with 8% growth in residential revenue and 56% growth in mortgages revenue. Our for-sale performance outpaced industry transaction trends, which were roughly flat and reflects our ability to convert more high-intent movers as we improve outcomes for consumers through a more integrated experience.

In Rentals, Q1 revenue was up 42% year-over-year, driven by 57% growth in multifamily revenue. We are gaining wallet share for broad-based marketing spend with multifamily property managers as they continue to see strong ROI we are providing to their businesses. Our results this quarter reflect our ability to innovate and grow the business while delivering sustainable profitability regardless of macro conditions.

Before I give more detailed updates on what's driving our results in both for sale and rentals, I want to spend a moment on our company strategy and on how we're using AI to accelerate it. We laid out our thinking on this at our AI Investor Summit in March, and I'll reiterate it here. We have been building advanced technology and residential real estate for 20 years. From this estimate to the mobile revolution to computer vision and beyond. We are now in the next chapter of that arc, and we believe Zillow is uniquely positioned to lead real estate in this chapter as well, thanks to 3 advantages: content, context and integration.

These advantages are difficult to replicate and differentiate us from horizontal LLMs and from other real estate companies.

First, content. We have the most comprehensive and increasingly differentiated housing inventory in the country across existing for-sale homes, new construction homes and rentals. Content that is elevated by proprietary rich media, Zillow 3D home tours, interactive floor plans, virtual staging and Sky tour. More than 10% of new for-sale listings on Zillow today include Zillow 3D home tours and interactive floor plans. And we expect rich media to become the standard that buyers and sellers demand for every listing. That substantial growing coverage is already making the consumer experience better. And over time, it will help make our AI more capable.

Our second advantage is context. 70% of everyone who buys or sells a home in America uses Zillow during the process, spending an average of 2 to 3 hours a week over 5 months. They are not just browsing. They're saving homes, their booking tours, they're determining their viability range, messaging with their agents and loan officers and preparing to make offers. That activity spanning every point in the transaction is sustained, deep, intent that Zillow uniquely sees and understands and it is the context that compounds into a unique scale data advantage.

Zillow doesn't just see the search or the first question. We see the homes someone returns to every day, the affordability calculations, the conversations with loan officers, the deals closed. That full Vantage is what allows us to do more than answer generic listing questions. We can answer personalized questions, anticipate what a consumer needs to do next and actually help them take that action.

This leads to our third advantage, integration. For buyers and sellers, we connect marketing, search, touring, financing and closing into a single coherent experience interwoven with agent workflows. Tools that operate only at the top of the funnel can only answer service level questions, summarizing listings, providing market data, setting a search filter. But Zillow operates at the core of the transaction, not around the edges of it. We handle the complexity, understand the full picture and help consumers and professionals take action. That's what Zillow is delivering.

A buyer can understand whether they can afford a home through viability, see available times and book a tour through showing time, receive a preapproved loan scenario from Zillow Home Loans and connect with the Zillow preferred agent who already knows their search history and preferences through our robust CRM system, follow-up boss, all within a single continuous experience.

These 3 advantages are built on something that matters just as much as the technology itself, 2 decades of operating in one of the most regulated and complex transaction categories. Structural complexity in housing shapes what AI can do and what it takes to do it well. Transactions are high dollar, high stakes, highly personal. And for most people, they have been only a handful of times over their entire lifetime. There are hundreds of thousands of brokers working across several hundred MLSs, powering 1.5 million real estate agents.

We've spent 20 years navigating this landscape, putting in place the industry relationships and the infrastructure to provide products and services directly for the transaction, not just observe it from the outside. Our long history of innovation and investment enable us to deliver value that only increases as AI capabilities grow. At our AI Summit last month, we also debuted Zillow's new consumer-facing AI mode experience. This new way of engaging throughout our site is live for about 5% of our audience so far which equates to availability for millions of users, and we plan to expand access this year as we continue to test, learn and refine the experience, consistent with how we approach all major product rollouts.

Early signals are encouraging. Zillow users and AI mode are having deeper, more substantive conversations than they do in traditional search, and we are seeing more actionable engagement as a result. As just one of many examples of how users are engaging throughout the transaction life cycle, a recent AI mode user had 16 conversations across 10 days researching neighborhoods in Sonoma County, California, comparing areas, tracking sold properties, asking for shareable maps to discuss with a partner and referencing their agent in Santa Rosa. They are now under contract to buy one of the homes they found through this robust experience.

That is the arc Zillow covers, guiding the consumer from the very first question to Keys in hand. We are also empowering the professional at every step embedding AI throughout the agent and loan officer experience to help them better serve customers and work more efficiently. This makes our platform increasingly indispensable to the professionals who drive the most volume in this industry. Consider what a high-performing agents day looks like, juggling multiple active clients while simultaneously running a pipeline of hundreds, prospecting for new listings, negotiating offers and having the key conversations that move deals forward.

Follow Up Boss, which top agents in the country rely on to manage their businesses, PAUSE is becoming an AI-powered workflow engine that handles coordination, prioritization and outreach. So agents can stay focused on the judgment, advocacy, trust and human relationships that get deals done.

The result is that great agents become, in effect, super agents who can take on more actions at higher quality without more hours, all enabled by Zillow. Just as AI is making our 2-sided marketplace work smarter on both sides and for sale, the same is true in rentals. For renters, it's powering more personalized search and helping surface the right next step, whether that's scheduling a tour, submitting an application or understanding financial readiness for a future home purchase.

For property managers using AI assist, it's streamlining lead management, application screening and lease coordination, reducing friction at every step of the transaction. Our commitment to AI field efficiency doesn't stop at our consumer and professional products, it runs all the way through how Zillow itself operates. We are rapidly becoming an AI-native company. And internally, we're already seeing what that means in practice.

Our engineers are shipping 40% more code per engineer at the same or higher quality. Product and design teams are prototyping faster and taking features from concept to launch in a matter of days. And our employees are using AI to reinvent and streamline their workflows. We are investing to make AI a foundational capability for our employee base, channeling productivity gains directly back into building more and building faster, so the benefits compound over time.

We have spent 2 decades building the content, the context and the integration that differentiate Zillow from others in our category. Now we are powered by AI across every layer of our company in our products, and our professional tools and in how we build. All that depth of capability positions Zillow to lead real estate in the AI era.

Now I'll walk you through more details on how our strategy is coming to life in each area of our business, starting with for sale. Our thesis is straightforward. Integration improves outcomes. When marketing, search, touring, financing and agent collaboration work together, every participant in the transaction gets a better result. Buyers and sellers move forward with confidence agents close more deals and Zillow captures more of the opportunity already flowing through our funnel.

Here's how that thesis continues to prove out for buyers, sellers and their real estate agents. For buyers, the integrated experience begins the moment they start shopping. Viability, a tool from Zillow Home Loans that helps buyers understand what they can realistically afford before they tour or make an offer, has enrolled 4.3 million users as of the end of Q1, up from $3.6 million at the end of 2025. Buyers see real value in Zillow Home Loans affordability tools, competitive rates, free appraisals for eligible buyers and fast load officer response times. Purchase loan origination volume grew by 96% year-over-year to a record $1.5 billion in Q1. And Zillow Home Loans is now a top 25 purchase lender.

Zillow Home Loans averages double-digit adoption rates across our enhanced markets, PAUSE where the integrated transaction experience is most fully realized as we help agents and loan officers better serve buyers. Enhanced markets accounted for 49% of our connections in Q1, up from 44% in Q4 and well on our way to our target of at least 75%. Our new shop with pre-approval feature, which is now available across our entire platform, takes the integration a step further. Buyers who have a Zillow Home Loans verified preapproval on hand now get a clearer view of the monthly cost of ownership and whether a listing is within their preapproval budget.

It makes the shopping experience more grounded and actionable signals to us and agents that a buyer is higher intent, and it is one of the clearest expressions yet of what our integrated platform can do to help a buyer shop with confidence. Shop with preapproval is unique to Zillow, and it works in concert with our tool called My Agent, which lets buyers designate the agent they're working with, regardless of whether they're a Zillow preferred agents and shop alongside them, making a buyer's whole team present and accessible as they use Zillow, messaging on the Zillow app then threads it all together by letting a buyer, agent and load officer communicate in 1 place.

We're also bringing co shoppers into a cohesive integrated experience because a significant portion of buyers aren't going it alone. On Zillow, buyers can search and collaborate with a co-shopper in real time. This capability became available earlier this year and is already driving better buyer engagement because it brings a naturally collaborative part of the home buying journey into Zillow's integrated ecosystem where those discussions can be acted on. For sellers, we continue to expand our suite of products designed to provide differentiated ways to market homes and achieve stronger results. Zillow Preview gives premarket listings broad public exposure on the most visited real estate platform in America.

Unlike premarketing in a private listing network, preview listings in front of the buying public from day 1. And with preview, sellers can build interest and get real-time signals, views, saves to our scheduling requests from Zillow's massive audience of deeply engaged users, which is pricing intelligence they can actually use. And preview listing service right in a buyer's regular Zillow search and recommendations, no insider access required.

Yesterday, we announced a new preview collaboration with realtor.com, extending the visibility of preview listings across the 2 most visited real estate platforms in the country. This wide exposure benefits sellers, buyers and agents with unrestricted access to the inventory in more places. New Harris Poll survey data backs up why this matters. Nearly 9 in 10 Americans would be interested in viewing pre-listed homes online if they were buying a home and 85% of soon-to-be sellers said they'd be more likely to hire an agent who can premarket their home to the broadest online audience. So it is no wonder agent adoption of Zillow Preview has moved so quickly.

We announced preview just 7 weeks ago with 5 initial brokerage partners, and we have since added more than 60 brokerages. We are currently onboarding agents to use preview, and we're excited about the significant agent demand as we launch and scale it. After Zillow Preview builds initial momentum and the listing goes active, sellers and agents can choose Zillow Showcase to maximize impact. Showcase listings provide an immersive, high-impact listing experience that includes interactive floor plans, 3D tours, virtual staging and Sky tour and they drive more engagement and sell faster and for more money than non showcase listings.

Zillow Showcase was on 4.3% of new listings in Q1, up from 3.7% in Q4. Agents using showcase on the majority of their listings win more new listings than peers who don't, which is why adoption continues to grow, including through recent enterprise-level agreements with some of the country's largest brokers and franchisors. Together, Preview and Showcase give sellers and their agents a complete marketing toolkit for the listing life cycle. For professionals, the tools and infrastructure Zillow provides on both sides of the transaction can increasingly function as an operating system for modern real estate. Follow Up Boss is the customer relationship management system of choice for more than 80% of the highest volume real estate teams in the country and has seen more than 70% growth in monthly active users since Zillow acquired it at the end of 2023.

Showing time enables tours on 90% of all homes for sale in the country. 40 million tours were booked through the platform last year, and dotloop facilitates closings on nearly half of all transactions nationwide. Each of these is a significant product in its own right. connected, they power the transaction from the first signal that a consumer is shopping to the final closing document.

Zillow Pro brings it all together giving agents a single connected system to manage all of their clients, including those who originated outside the Zillow ecosystem. Zillow Pro is in beta and already drawing meaningful interest with more than 12,000 agents using the product so far. It's on track for a broader nationwide rollout in the second half of this year. Over time, we expect Zillow Pro to reinforce our role as a long-term partner for real estate professionals across their entire business. All of our for-sale solutions point to the same conclusion. The more integrated the experience, the better the outcome, for buyers, for sellers, for agents, for loan officers and for Zillow.

We are executing against our $1 billion incremental mid-cycle revenue target in for sale and the momentum we are building gives us conviction about the path ahead. In rentals, we are building something that has not previously existed in the category, a true comprehensive 2-sided marketplace that brings together the most and the widest variety of listings, high-intent demand and modern transaction tools.

Our strategy is twofold. First, we're building a trusted destination for renters to find every type of property from single-family homes to large apartment communities. Second, we're modernizing the rental transaction itself. Streamlining how renters and property managers connect and manage applications, leases and payments. We reached an all-time high of 76,000 multifamily properties as of the end of Q1, up from 55,000 properties a year ago. Combining this with our industry-leading inventory of long tail rentals, the smaller buildings and single-family homes, Zillow had 2.7 million average monthly active rental listings in Q1, the most in the category.

Zillow Rentals attracted 36 million average monthly unique visitors in Q1. And because of our relentless focus on the consumer experience, renters rate Zillow as their #1 preferred platform. High-quality audience engagement translates to strong outcomes for our partners. Property managers tell us Zillow delivers the highest return on marketing investment in our category. Compared with not just other rental platforms but other digital marketing options available to them, including search and social. They keep renewing and upgrading their presence on Zillow as a result of the ROI we provide. And we see a significant opportunity to keep growing wallet share from here and capture more of the marketing dollars currently being spent on other advertising platforms.

Multifamily was the engine behind our 42% year-over-year increase in rentals revenue in Q1. Our continued growth in rentals is a reflection of what happens when you build real value and improve the transaction experience on both sides of the marketplace, and we're not stopping there. For example, the total monthly price feature we launched recently lets property managers display the all-in cost of a rental. That gives renters a clearer picture and property managers a differentiated way to present their inventory.

And in April, we launched 2 new tools for multifamily property managers, a live analytics dashboard that gives partners a single place to track portfolio performance, benchmark against market trends and make smarter leasing and advertising decisions and a paid social product that puts their listings in front of renters on Instagram, Facebook and TikTok, fully built and managed by Zillow.

The 2 are designed to work together, identify which units need more traffic in the dashboard than dial up social reach instantly. It's all part of the growing list of ways Zillow's rental platform is leveling up for our partners and making it easier for them to fill units faster. The same principles driving our for-sale strategy apply in rentals. Transparency builds trust, integration drives efficiency and a better experience on both sides of the marketplace compounds over time.

Rentals revenue has grown at an average of 32% annually since 2022, significantly outpacing the broader rental advertising market. And because nearly every buyer starts as a renter, our progress in rentals continues to expand the top of Zillow's funnel overall and contribute to durable growth across the business. With a clear path toward our incremental mid-cycle target of $1 billion or more in annual revenue, rentals is one of our most compelling growth opportunities.

Before I turn it over to our CFO, Jeremy Hofmann, I want to step back and put this quarter in context. We delivered 18% revenue growth, net income of $46 million, net income margin expansion and continued growth in both for sale and rentals all against a housing market that was essentially flat. Our revenue has consistently outperformed industry total transaction value for more than 3 years now. That kind of performance in this kind of environment does not happen by accident. It reflects the durability of a multiyear strategy that is designed to perform across market cycles and a platform that operates across the entire housing transaction that consumers trust and return to throughout a month's long journey and that professionals rely on every day to run their businesses.

Underpinning all of it is a strong brand, millions of people come to for help making one of the biggest financial decisions of their lives. We earn the trust of consumers and professionals by consistently showing up for them at every stage of the housing journey. It's why roughly 80% of our traffic comes directly to us. It's why Zillow has searched more often than the term real estate. It's why we have more than twice the daily active app users of our next closest competitor. And it's why Zillow is the only large company in our category that has increased the amount of real estate audience we reach over the past 6 quarters according to comScore.

When people are ready to move, Zillow is where they start and increasingly, where they stay to take the next step and the next -- we are focused on helping more people move with confidence, delivering real value to the professionals who serve them and creating long-term value for shareholders. We're on track toward achieving our full year goals, and we are in control of our own path.

With that, I'll turn the call over to Jeremy.

Thanks, Jeremy, and good afternoon, everyone. We delivered excellent results in Q1 and are well positioned to continue delivering strong performance as we execute on our strategy in 2026 and beyond. In Q1, we generated revenue of $708 million up 18% year-over-year and near the high end of our outlook range. EBITDA of $182 million was above the high end of our outlook range, resulting in an EBITDA margin of 26%, which was flat year-over-year.

Excluding $11 million of incremental year-over-year lease costs, EBITDA would have been $193 million in Q1, representing a 27% margin and 160 basis points of margin expansion. We reported net income of $46 million with a net income margin of 6%, up more than 500 basis points year-over-year. Share-based compensation expense was down 16% year-over-year. Diluted net income per share was $0.19 compared to $0.03 a year ago. We generated $127 million of free cash flow in the quarter, a 44% 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 12% year-over-year to $514 million. Within the for-sale revenue category, residential revenue of $450 million was up 8% year-over-year and in line with our growth outlook. The majority of the increase in residential revenue was due to growth in Zillow preferred primarily driven by the expansion of connections alongside our enhanced markets growth and strong conversion for our preferred partners. Zillow showcase.

Our suite of agent software tools and new construction were also contributors to residential revenue growth. Market-based pricing revenue continues to decline as we transition the majority of our agent related activity to our preferred partners. Within the for sale revenue category, mortgages revenue increased 56% year-over-year to $64 million, above our outlook for 40% growth as we saw better-than-expected conversion rates from customers in our pipeline.

Purchase loan origination volume growth accelerated to 96% year-over-year, which was the main driver of our mortgages revenue growth. Our results continue to demonstrate that Zillow Home Loans has an attractive value proposition for buyers. Note that as Zillow Home Loans continues to scale, the gap between loan origination volume growth and mortgages revenue growth will continue to narrow over time. Rentals continues to be 1 of our most exciting growth stories. Q1 revenue of $183 million grew 42% year-over-year, with multifamily revenue up 57%.

We reached 76,000 total properties on the platform, up 38% from a year ago, a milestone that reflects the strength of our value proposition with property managers. The growth algorithm here is straightforward and working, add more properties, deliver best-in-class ROI and capture more wallet share. We see a clear path to $1 billion or more in annual rentals revenue and Q1 is another data point confirming we're on track. We produced strong growth in the quarter despite tougher-than-expected macro conditions with winter weather and higher interest rates impacting for-sale shopping activity.

As a result, the real estate industry grew 2% as reported by NAR, and we estimate purchase mortgage origination volume declined 1% year-over-year. Q1 EBITDA expenses of $526 million were below our outlook of $535 million to $540 million as we benefited from lower people-related and legal costs than we anticipated. We ended the quarter with cash and investments of $788 million, down from $1.3 billion at the end of 2025. We repurchased $626 million of our stock during the quarter, a meaningful level of activity that reflects our conviction in the long-term value of the business, and our commitment to returning capital when the opportunity is compelling.

This resulted in our diluted shares outstanding declining from 256 million shares a year ago, to 240 million shares at quarter end. As of the end of March, we have approximately $1.3 billion remaining under our existing authorizations. Combining our $788 million of cash and investments, with our $500 million undrawn revolving credit facility, we have total liquidity of approximately $1.3 billion.

This strong liquidity position gives us flexibility on our financial priorities to invest in growth, maintain an adequate risk-based capital reserve, support flexibility for potential M&A and continue to be opportunistic with share buybacks. Turning to our Q2 outlook. We expect total revenue of $750 million to $765 million, implying year-over-year growth of approximately 16% at the midpoint of our outlook range. We expect for sale revenue growth to be similar to Q1.

Within for sale, we expect residential revenue growth of mid-single digits year-over-year. For mortgages, we continue to see a strong pipeline, which we expect puts us on track for growth at similar levels to Q1. In rentals, we expect revenue growth of approximately 30% year-over-year for the quarter. In Q2, we expect EBITDA expenses of $600 million and EBITDA of $150 million to $165 million. Our expectations include approximately $20 million of incremental legal expenses and approximately $16 million of incremental advertising spend compared to a year ago.

Excluding the $20 million of anticipated incremental legal expenses year-over-year, we expect EBITDA would be approximately $170 million to $185 million in Q2, and implying relatively flat year-over-year EBITDA margins. We are planning for approximately $80 million in total advertising spend in Q2, up from $64 million last year. The incremental year-over-year advertising growth is due to timing of planned product launches that were already included in our original full year outlook.

Taken together, our Q1 results and Q2 outlook have us squarely on track for the full year. And importantly, the structural drivers that we expect to accelerate margins in the back half of 2026 are already in motion. Turning to our full year outlook for 2020. We continue to expect to deliver mid-teens total revenue growth, approximately 30% growth in rentals revenue and continued EBITDA margin expansion. We are updating our outlook for full year share-based compensation expense, which we now expect to be down more than 15% year-over-year versus our previous guide of down more than 10%.

We expect our fixed cost base of approximately $1.1 billion to grow with inflation and believe it is the right investment level as we execute our growth strategy. For variable costs, we are continuing to invest in rentals and loan officers in Zillow Home Loans during the first half of 2026. We expect a slower pace of rentals investment in the second half of the year. This will drive variable cost growth to trend towards in line with revenue growth by year-end.

We have consistently said we will be opportunistic with our advertising spend, dialing it up or down depending on where we see opportunities across the business. In 2026, we plan to accelerate consumer awareness of our expanding offerings with modest growth in our advertising spend year-over-year. Our full year outlook implies margins will expand meaningfully in the back half of the year, and there are a number of drivers I will walk you through.

First and foremost, our structural revenue growth drivers and cost levers are well intact. We expect these structural drivers to result in mid-teens revenue growth growing faster than revenue and net income growing faster than both revenue and EBITDA. From a revenue perspective, we continue to see a strong growth opportunity in 2026 and beyond. And for sale, more consumers are receiving the integrated housing super app experience, which results in conversion improving for our preferred agents, Zillow Home loans continuing to grow at a rapid pace and our software suite getting into the hands of more agents.

When coupled with the continued growth in Zillow Showcase and new construction, our for-sale category growth prospects are solid. And of course, our rentals revenue is on a clear path to $1 billion plus in annual revenue. Our rental growth algorithm is clear, add more properties to our apps and sites and deliver best-in-class ROI to increase wallet share. The combination of our for sale and rentals offerings are durable and growing, setting us up to succeed in any market environment.

From a cost perspective, there are 4 key drivers to margin expansion in the second half of the year. First, we expect to continue to leverage fixed cost, which is within our control. Second, variable expense growth will decelerate as we move through the year. In the first half of 2026, we expect variable costs to be a headwind of more than 400 basis points to EBITDA margins. By year-end, we expect that headwind to be close to neutral, a meaningful swing that flows directly to the bottom line.

Third, we expect that legal expenses will be an approximately 200 basis point headwind to EBITDA margins in the first half of 2026. We expect that legal expenses will be less of a headwind to margins in the second half of the year as we get through the FTC trial. Finally, our advertising spend is more heavily weighted in Q2 this year than in prior years due to planned product launches. In the back half of the year, we expect advertising to follow a more typical seasonal pattern, meaning less year-over-year pressure on margins than we're seeing now.

To close, we are pleased with our results in Q1 and confident in our ability to deliver against our 2026 and mid-cycle financial targets. We are successfully executing on our strategy, and we have the right investments in place to support further revenue growth while expanding EBITDA margins, accelerating net income growth and continuing to build the platform that we believe will define how people move into their next home. And with that, operator, we'll open the line for questions.

[Operator Instructions] Our first question today comes from Ryan McKeveny from Zelman Associates.

So first, I wanted to dig in on preview. Obviously, it's early days, but you've quickly ramped up broker partners. So curious if you can talk about what you're learning thus far, maybe what you're seeing in terms of reception or uptake across the landscape of brokers, agents as well as home sellers? And then secondarily, on the relationship with realtor.com. I guess how should we think about the strategy or the opportunity of working with them versus kind of Zillow standalone?

Thanks, Ryan. This is Jeremy Wacksman. I'll take that. So on preview early learnings, I mean the response really has been more than we expected. We announced it just 2 months ago with 5 partners. And as I said, now more than 60 have been announced. And we are really heads down on onboarding agents and onboarding franchisees. And getting it into the hands of those folks. So we've been really pleased with the results.

And I think that dovetails into your second question, the collaboration with Realtor. I mean it's really just a win-win for both Zillow and our agent partners as well, obviously, as Realtor, extends the visibility of this premarket inventory to now 2 of the most visited real estate block forms in the country, and we think that further increases the value and the demand for previous things, which was already very strong.

I mean as a reminder, Zillow Preview brings pre-market listings in front of the public from day 1, right? It's better for buyers, buyers can see listings. That's the way to get homes sold, fastest and for most money. It's better for sellers. Sellers can build interest and they can get those real-time signals before they're ready to actively list the property from now not just Zillow's massive audience of deeply engaged users, but realtor.com's audience as well. So still very early days, hard to believe we've made this push progress in just the first 2 months, we're excited to continue.

Great. And then I guess on the EBITDA guidance, both in the context of 2Q, but also the full year. Maybe can you dig a bit more into how much of the cost is within your control to get the expected margin ramp? And I guess I'm curious, both from a fixed cost and variable cost perspective, just visibility you guys have into the business to have confidence in the margin ramp in the back half?

Yes. Thanks, Ryan. It's Jeremy Hofmann. I'll take that one. So Q2, 2 things are going on from a cost perspective. One is legal costs are up year-over-year. So if you adjust for that, you'd see an EBITDA guide of $17 million to $185 million, which is more in line with margins from last year. The other is we're increasing advertising dollars by about $16 million in Q2. So those are the 2 factors.

As we get into the back half of the year, we are confident in the full year guide and there are a variety of reasons for wide. The first half of the year in aggregate, we're right on plan. So that's a good start. And as we move into the second half of the year, the structural revenue drivers we have are well intact across for sale and rentals. And that growth algorithm is durable regardless of macro environment just because the business is scaling and diversifying so much.

And then with respect to costs, a lot is in our control. So the first one is fixed costs. That's well within our control. We expect to leverage those. The second is variable costs, which were a 400 basis point headwind in the first half of the year. A lot of that is in our control, right? Our rentals investment pace slows down in the back half of the year, and we expect variable expenses to be closer to neutral to EBITDA margins by year-end. So in our control, primarily as well.

Legal costs were a headwind in the first half of the year. We expect there will be less of a headwind in the second half really as we move past the FTC trial. That is on an accelerated time line. And as a result, the costs are on an accelerated time line as well, but we're eager to get through that. And then the last one is well in our control, which is advertising spend. That's more heavily weighted in Q2 this year than in years prior, just due to planned product launches.

But in the back half of the year, we expect advertising to follow a more typical seasonal pattern. So EBITDA is on track for margins to expand this year, and we feel good about it.

Our Next question comes from Ron Josey at Citi.

Jeremy, I want to ask a little bit more on rentals here just given the strength that we're seeing across multifamily in both properties, but also revenue growth. We're lapping the Redfin partnership in 2 in the back half of the year. Just talk to us about the outlook and thoughts on the broader competitive environment of rentals only because I know we're marching towards that $1 billion opportunity, but we do have tougher comps in the back half.

And then as a separate question, just AI mode, got to ask this given we're following up from the Summit earlier in the year, actually just a few weeks ago. live for 5% of the audience today, this is AI mode. Just talk to lessons learned thus far. I know it's early days here, but just lessons learned and thoughts about rolling this out more broadly.

Yes. Thanks, Ron. I'll take the first one and then hand it to Jeremy on the AI mode. On rentals, we expect continued strong growth in execution in the second half of the year. So our full year guide of 30% implies second half rentals revenue growth of upper 20% even after lapping the Redfin related revenue growth acceleration in the second half of last year. And then when we step back and look at the last few years of growth, in 2024, we grew rentals 27%. In 2025, we grew rentals revenue and we expect to grow another 30% this year.

So almost doubling the business over that period. and growing the business faster in 2026 at nearly double the size is something we're really proud of, and we're obviously well on track for that $1 billion-plus annual revenue target. I will say the opportunity from here does still feel early and like we're just getting started, just because the strategy that we have to aggregate as much of the supply as possible, both for single-family homes for rent and are home apartments for rent is really differentiated.

And the value proposition we're bringing to consumers and advertisers is so compelling. So you see that in the growth that we've had in the last few years, and we expect it to continue from here.

Yes. And just to add on to that. I mean, that's part of why we have that target out there, $1 billion annualized revenue target, but that's not the end state. We expect growth beyond that because as Jeremy said, the strategy continues to be really unique, and we see it as more and more valuable. I mean the rental audience growing to 36 million unique visitors and as I mentioned, number one, brand preference.

That's what drives this ROI for advertisers, right? They want to fill their leases and they want a high quality ones to do it. That's why we continue to see we are the best ROI advertising tool they have. Again, not just against apartment-focused sites, but against search and social platforms as well. And that's really the category of ad spend here is they're spending everywhere trying to find renters and Zillow Rentals increasingly has the renters they want and has more of them. So we see green lights ahead for rentals growth.

And then on AI mode, you're going to hear us say it's early a lot because it is early. I mean 5% of audience we're getting a huge signal for millions of users. And what we're seeing is that they're having deeper, more substantive conversations than they do in traditional search. We talked about that a bit when we were with you all during the AI Summit. This can be a lot of incremental activity because you can ask and have conversations about things that you don't get to express in setting a search filter or in looking at a listing. The example I gave is just one of many examples of people just spending time going deeper and for the transaction, that's a higher intent customer at the end of the day, right?

It's keeping that person on Zillow. That person is getting more value from Zillow and those folks find more of their needs from our platform. And then when they reach out to talk to a loan officer or an agent, they're ultimately going to be a higher converting customer. So the structural advantage we have here over the long term is to build the best AI mode experience because of the content we have on our platform, the context of all those consumers and professionals using our platform and the fact that we span the full gamma of the platform.

Again, once you start in our category, triaging Homes is the very top of the funnel. And ultimately, you are trying to get your financing, go to our homes, virtually tour homes, meet with your agent, mess with their agent make an offer and ultimately close, and that's what we're helping you do. And AI mode is just the start of our ability to take AI in the hands of consumers and really help them with that in an AI native way.

Our next question comes from Brad Erickson at RBC Capital Markets.

Guys, can you hear me?

Yes, we got you.

So I guess -- so I guess resi, starting the year out a little softer here. Obviously, the question becomes what's kind of instructing the back half confidence that you're guiding to. Markets clearly weakened starting out the quarter. So would just be curious on sort of how much cushion is in there and sort of your market assumptions you're embedding in your outlook for sale in resi in particular?

And then secondarily, as we think about more mortgage really performing well here, picking up the slack. The critique there is obviously around the lower margin profile and that sort of thing. Can you speak to that and just maybe how do you think investors should sort of ascribe credit to that segment given the potential you see margin-wise over the longer term?

Yes. Thanks, Brad. I'll take those. So in terms of what we're looking for in the back half of the year and how we've thought about it, we're planning for the housing market to continue to be effectively flat. You're right that it started off slower than I think folks anticipated. We're not planning for that to get any better. And against that backdrop, we're expecting mid-single-digit growth in residential.

We're expecting for sale growth to be faster than residential given mortgages are outperforming our expectations thus far. And the enhanced markets playbook, it's clearly working regardless of housing market conditions. So that gives us confidence on the for-sale category overall, regardless of what housing does. And then rentals I talked about before, but that continues to be a real bright spot for us and one of the most compelling growth opportunities we have.

So when we put that all together, total revenue continues to be on track for mid-teens growth. Given the consistent diversification of the business and all of those structural growth drivers are well intact. And then with respect to the mortgages margin question, we are making great progress on growing the mortgage business, but we're not yet at scale. Margins are improving. We are seeing better loan officer productivity. We are seeing better processor productivity even last year, we improved on officer productivity by 11% despite growing loan up or account by about 40%. So that just gives you a sense. That will take time.

But when we look at the mortgage opportunity overall, we see a far bigger opportunity for us than being a top 25 lender. So we're a top 25 lender in the country today. We're proud of that and the progress we've made. But our goal is to be 1 of the biggest purchase mortgage originators in the country. And as we build that scale, the margin dollars potential is really compelling because we don't spend the same amount of money on customer acquisition cost. And we think mortgage origination is purpose built for AI applications over time, too.

So that's how we're thinking about it. It's still a nascent business. But one that we see big revenue potential for and big margin dollars potential for, not to mention the consumer benefits we see when integrating mortgage with great real stations.

Our next question comes from Nick Jones of BNP Paribas.

Great. I guess a follow-up on rentals. I'm just curious, is that business continues to kind of growing nicely here. Is there kind of a threshold where kind of the product velocity and the rental side may start looking at kind of what you've done in residential. It seems like you're seeing a lot of success there. Some of the products you're rolling out are being well received. And as you kind of approach this $1 billion revenue threshold, let your posture on the segment start to change. So that's kind of the first question.

And then the second question, more broadly as you kind of build this end-to-end stack, are you getting more visibility into the consumer behavior than you would have had historically since I get your assets getting more us into their psychology, whether they're looking at pre-approvals. And I think you gave a stat you guys some that 65% of the renters also look at maybe buying a home. So I guess ostensibly, you're getting better and better data as to maybe how the macro environment is starting to look. So just curious if that's the right way to think about it.

Maybe I'll take the first, and you can pay it in a second. I think on rentals, I mean, no, I don't think you should expect our posture to change. We're excited about the march we're making towards the $1 billion target we put out there. And as we've said for some time now, we don't think that's the end. The reason for that is just look at the strategy and the penetration of the strategy.

We are mid 70,000 buildings out of the 140,000, 150,000 buildings that are out there in multifamily, and we are very high ROI advertiser source for them against all of their advertising sources. So our ability to see packages get upgraded as they bring more of their portfolios on to our high ROI provides a long runway for multifamily rentals growth. And then remember, our strategy is twofold. It's multifamily plus single-family and long tail, which is combined 2.7 million rental listings provide becoming a one-stop shop for all renters.

And so all of our property management tools for the semi Pro and long-tail professionals start to contribute more to the platform provide more digital tools and services and integrate those across the segments. And we see tremendous growth coming from there as well. And then I think your second question, correct me if I'm wrong, was more about can we see more of the context of the real estate transaction and for sale. And yes, I mean that's kind of been our strategy really for the last decade now as we've gone down funnel and become a transaction platform. When you are the software platform for a buyer not just to look for what listings are for sale, but to actually get preapproved book tours, virtually tour, hire your agent, message with your agent, bring your co-shopper into the messaging platform, start to write offers and then close on the transaction.

You're using Zillow tools. And then on the agent side, it's the context you're asking about isn't just on the consumer side, it's on the professional side, right? -- follow a boss, this CRM for top teams is seeing all that data about those buyers and sellers to help those agents be more responsive and being the operating system for everything the agent does from buyer management and project management and coordination to tour management and scheduling to listing marketing with premium showcase.

So that platform provides I think, really unparalleled context in the real estate category, and that's what helps us build a better platform overall for this one-stop shop that we keep talking about, and we're increasingly delivering. But it also helps us build the most capable AI platform so that as we all begin to expect AI-enabled services in our verticals, you will expect the Zillow 1 to be the 1 that understands you the best that helps supercharge the professionals the best and that helps provide the most friction-free and delightful experience.

Yes. And maybe just to layer on top of that, Nick. Jeremy said it well, but think about the consumer problem to solve, the consumer wants to see as much inventory as possible as a buyer or a renter and they are often the same person. So having that inventory all in 1 place for sale homes, apartments, new homes and existing homes and the most of it is solving the consumer problem. It's giving us great context. And then yes, we're building relationships with these consumers over multiple transactions.

And if we do a good job on the rentals front, why shouldn't we earn the right for the for-sale business if and when that person becomes a buyer. That's all part of the strategy, but it starts at the fundamental solve the consumer need, and we think we're doing that quite well.

Our next question comes from John Colantuoni at Jefferies.

Okay. Great. First one, I wanted to ask about resi revenue growth. I was just hoping you could help reconcile the slowdown that you're looking for in the second quarter. relative to your expectation for the housing market to sort of bounce along the bottom again. I'm just curious if there's anything transitory there and maybe you're expecting a pickup in the second half.

And then second, just talk a little bit about early responses from agents and sellers regarding the Zillow preview product, and why you think you've got the right of pros relative to some alternatives that have been launched.

So Jeremy, I can take the first 1 and then maybe take the second one. Yes. I think on -- John, for Q2, the market started out slower than we -- folks anticipated. Weather and rates throughout the first quarter was worse than I think than full turn anticipating. And that impacts sentiment that impacts agent sentiment when there is some excitement around the real estate industry, albeit muted heading into the year. And the transactions don't end up occurring, but as a result, I'd say the agent sentiment heading into the spring selling season impacts NBP. And as a result, we've seen this now a number of years in a row, but MVP lags a bit because of that agent sentiment.

So you're seeing that play through in the numbers from Q1 to Q2. And we're just not anticipating or planning for any recovery in transaction volume throughout the course of the year. So you're not seeing that come through in preferred either. But I would really point to just agent sentiment and how that impacts how they think about market-based pricing and what they're willing to buy being the biggest factor there. When we look at the enhanced market strategy, it's clearly working quite well. And you can see that in the consistent revenue performance.

You can see it also in the mortgages growth as well. So that's what we're most focused on versus the quarterly fluctuations, and that structural driver feels well intact, but the on the margin move is really around NBP sentiment.

And then your second question on preview. I mean, preview, the response to preview, I think kind of proves that it's something that's broadly desired by most of the market, and that's just because public is better than private. The vast majority of sellers want to sell their home for the most money and sell it fastest and using the public market and making it available to a broad pool of buyers is how you do that. That's why we gave out some consumer sentiment stats.

Most sellers are going to use agents who can help them maximize price. And the only benefit of private is it benefit the brokerage that hides listings for their own games. So it's not surprising, you're seeing such strong support from brokers and agents even in just the first 2 months, and we're excited to continue to grow and expand it.

Our final question today comes from Nikhil Devnani at Bernstein.

I wanted to just follow up on John's question there around the revenue guidance. So if I think about 2026, is there an expectation on your part that residential improves from mid-single digits in the back half? Or is mid-teens achievable even if that becomes the run rate for residential for the rest of the year?

Yes, I can take that one. So I'll say this Nikhil. Housing market has been effectively flat. We're not planning for that to get better. It may, but we're not planning for it. So against that backdrop, what informs the mid-teens guide is we expect mid-single-digit growth in residential. We expect more sales to grow faster than residential because of the enhanced markets working so well and mortgage growing so nicely. And then total revenue continues to be on track mid-teens growth because you include rentals as well. So they all layer on top of each other.

We're not planning for any macro changes versus what we saw in the first quarter. And despite that, well intact for mid-teens revenue growth for the year.

This completes me a lot of time for questions. I will now turn the call back over to Jeremy Wacksman for closing remarks. Thank you.

Great. Thanks, everyone, for joining us today and for staying a few minutes longer. We really appreciate your continued support. We are tremendously excited for what's ahead, and we look forward to speaking with you next quarter. Thanks all.

Thank you for joining Zillow Group's First. Quarter 2026 Financial Results Call. This concludes today's conference call. You may now disconnect.

Good morning. It is really great to see you all in person here today. I'm Mary Ellen, Director of Investor Relations here at Zillow, and I'm really excited to welcome you to Zillow's Investor Summit for AI. Before we begin, I have a few brief housekeeping items that you'll all be familiar with.

A quick reminder that today's remarks will include forward-looking statements. These statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied. Please refer to, behind me, our webcast materials and our SEC filings for a discussion of these risks.

As a reminder, this event is being broadcast on the Internet and is available on our Investor Relations website. A recording of the event along with downloadable slides will be available after the event on the Investor Relations website as well.

We have also planned a robust schedule of presentations over the next 2 hours with no breaks for those next 2 hours. And I'm sure you're going to have questions. I hope you have questions. Please hold any questions for the Q&A session immediately following the presentations, which will also be webcast.

All right. I want to thank you for taking the time to be with us today. Over the past couple of months, we've spoken with many of you and heard your questions about AI and what it means for Zillow. As part of those conversations, it became abundantly clear that we had an opportunity to turn on the lights about two main topics. First, why we believe AI is an accelerator to Zillow's business; and second, most investors and analysts only ever get to experience the top of Zillow's funnel. Many haven't gone through the transaction experience, either as a renter or a buyer or a seller. And certainly, you don't ever get the chance to see what the professional experience is like. And thirdly and lastly, we have not done an Investor Day since 2013, and we saw this as an opportunity to essentially re-IPO the company in the era of AI, a chance to really introduce all of you to the operational AI execution underway and orient you to the financial discipline alongside it.

Jeremy Wacksman will kick off today's agenda, sharing more about our strong position and strategy. Cynthia Taylor will then discuss how we are building the unified data layer across an incredibly complicated transaction to enable building amazing products that help consumers move and industry professionals better serve our mutual customers. We will then hear from leaders across the business who will demonstrate how we are leveraging AI for consumers and industry professionals. Jeremy Hofmann will then translate these discussions to our financial results in our financial discipline philosophy. Rich Barton will wrap the formal presentations before we transition to a live Q&A session with leadership.

Following the presentations, you were all out in the gallery here before, we will have kiosks available so that you can experience all of the live demonstrations that we are showing today with our leaders to guide you. And we will conclude with lunch, where leaders will also be available for conversations.

All right. With that, let's begin.

[Presentation]

Please welcome to the stage Zillow Chief Executive Officer, Jeremy Wacksman.

Good morning, everybody. Thanks for being here. I'm Jeremy Wacksman. So I've been here for 16 years, and I can honestly say this is 1 of the most exciting times to be at Zillow and working at Zillow because of the technology shift we're feeling, AI. I don't think I'm overstating it to say that AI is changing everything. It's changing how you all work. It's changing how we find information. It's changing how we search, how we shop. And of course, it's changing real estate.

And just like the last change everything moment with the mobile revolution, Zillow is leaning in and leading where AI is going in real estate. And what's consistent for us across all of these technology shifts is actually very simple: our strategy. Our strategy is to build great products and services that consumers and professionals want and need. When we do that, we are successful on both sides of the marketplace, so much so that as you saw in that video, consumers choose and search Zillow more than the category. This has been true for a long time. This was true when the Internet came to real estate. This became even more true as we made the mobile shift, and this is true as AI comes to real estate.

The question we most get asked by this room is really around the top of funnel. Who gets the search? Who gets the first click? How will that change? Well, the reality is, at Zillow, we've long been and believed it is much more than that first visit. In real estate, in fact, consumers have had thousands of options to choose from for finding a listing or answering that first question. They choose Zillow because we build the great product experiences that they want and need and tell their friends about. And you see that in our results. 235 million unique visitors come to Zillow Group sites and apps every month, and 80% of that traffic is direct to us. That is people opening the app on their phone, typing Zillow into the browser, telling their friends about Zillow.

That doesn't come from intercepting demand from a platform. That comes from building the best experience consistently so they choose us. Yes, we have this huge scale of audience and we have this brand that they trust. But more important, the reason they choose us is we are a platform for them. We are a destination for their entire housing journey, not just where it starts and the first question you ask, but the place to go to take action, to take the next step, to move forward with confidence in a transaction. And that is our focus and has been our focus: make Zillow the best real estate experience end to end.

When we do that, as you see, consumers choose Zillow. Agents choose to build their businesses on Zillow. And as new horizontal AI platforms come, they will choose Zillow as the real estate platform of choice.

Since the beginning of Zillow, our goal has also been very consistent, make the consumer experience more transparent, empower people with information, bring digital to this category. But what changed along the way was we figured out that finding the listing or answering that first question, that was the easy part. The hard part was everything that comes after that initial visit.

And so 10 years ago, we moved into the transaction. We bought companies. We built services. We launched new products. We stopped thinking of ourselves as a search or a dreaming and shopping site, and we started thinking about ourselves as a transaction platform helping people buy, rent, finance and sell. That meant investing in infrastructure, investing in workflows and businesses and platforms that the professionals use to transact business, the real rails of the industry.

The reason we did that is because moving is not a one-click experience. It's not a category where you start and end and complete your transaction in one visit. It is a months-long journey. Imagine a renter coordinating with their landlord, their property manager or a buyer coordinating with their agent and their seller and their seller's agent and their loan officer and their closing professionals. We have built the platform to support that entire journey.

And for us, AI has been fundamental from the start, our very first product in 2006, Zestimate, was AI. And many of you, as Mary Ellen said, know us as the consumer brand and you experience us at the top of funnel. And what you may not know is the massive number of professionals that use our platform today. In fact, agents who use one of our products touch 80% of all transactions in this country, and we help fill more than 60% of rent listings in the rental marketplace. Having the platform of scale for the professionals helps us build deeper relationships and be successful with our consumers to help more transactions happen.

And that shift to the transaction is a key advantage for us now because once you operate across the entire transaction, you get something incredibly unique and valuable: data that compounds. We don't just see the search or the initial question you ask. We see the tours you take. We see the affordability data you're using. We see the conversations you're having with your agent, the offers you make, the homes you close on. All of that data, proprietary data and context about our buyers, sellers and our professionals is context. And that context is what allows Zillow to build a far more powerful AI experience than any horizontal LLM can deliver for real estate.

And increasingly, that context is a feedback loop. The more people that use it give us more context about themselves and their professionals that feeds the system. That is not something that is theoretical. That works in our system today, and you'll see a lot of examples of that in the products that the team is going to show you.

Let's imagine a real buyer or seller using Zillow. They've been scrolling for months. They've been saving homes. They have a list of homes. They've been comparing neighborhoods. They've been checking mortgage rates. They've been checking Zestimate. Some people are deciding, should I buy or not? Some people are deciding, should I list and sell or should I stay put? Renters are trying to decide, should I take the next step and stay where I am or move? Every single one of those people at some point hits a wall. And they say, well, what should I actually do next? What action should I take?

And a horizontal platform or a top-of-funnel platform, well, they can serve up answers. They can give mortgage rates, they can give listings, they can give market trends. But they don't see all of those signals to actually help move the transaction forward. Only Zillow can see things like all the homes you've saved and viewed and the ones you're coming back to every day signaling intent.

Only we can see all of the available tour times on all listings, what tours are being booked, what tours are in demand, what customers think about those tours after they take them, our renter comparing lease options while also shopping for homes to buy at the same time, a homeowner repeatedly checking Zestimate and looking at nearby comps in the neighborhood, a buyer's budget in BuyAbility, understanding what they can really afford and the conversations with their loan officer.

Only Zillow has all of this data in context. That is what helps to though the transaction. which means we can do more than respond to basic questions or have AI set a search filter. We can guide and actually help consumers take action from understanding what a home might appraise for to gauging real-time demand to understanding why this Zestimate is what it is, to helping someone decide if they're financially ready to transact. And we don't stop at guidance. We help them take action, booking an instant book tour, getting preapproved, hiring an agent. That strategy only works if you have the full vantage of the category. You need live housing data, the content. You need all of that consumer behavior, the context. And you need to be an end-to-end platform, the transaction infrastructure.

Zillow has all three of those things. That is why we can build the LLM experience that actually helps people take action and actually helps people move. Content, you're going to hear a lot about content today. Zillow has the most comprehensive and differentiated inventory in the country. And that's because we work across all of the marketplaces, homes for rent, existing homes for sale and new construction. Why does this matter? Because most consumers shop across these. The majority of renters are also looking to buy The majority of sellers are deciding timing and whether to sell or list for rent. And many buyers are looking at existing homes for sale and new construction inventory at the same time.

Because we work across all these, we see how people actually shop. And a growing portion of this inventory is unique to Zillow, especially in new construction in our rentals marketplace. But basic listing facts, they are the tip of the iceberg of this category because it takes more than the address and the price and a few static photos to really understand the home and guide a consumer. That's why we've been investing for years in our content advantage, immersive media.

Our proprietary rich media is really twofold in its strategy. It starts with a consumer. We give a consumer a better shopping experience, but it also gives Zillow valuable insights. Listing showcase, the 3D tours you can walk through a home, the interactive floor plans that are generated, the virtual staging capabilities, the sky tour video you saw. Today, nearly 10% of new for-sale listings have proprietary rich media on them. That is a fantastic start, but we have a long way to go because we expect that to become the default experience that buyers and sellers demand all listings have in the future.

And that substantial coverage we have today becomes very differentiated data. It teaches our system crucial details. What's the light? What's the layout? What's the flow? What's the quality of the house? It informs detailed an accurate square footage, useful in a transaction and conforms to mortgage standards. But most importantly, it helps train our AI models. It makes the consumer experience better. It makes the shopping experience better. It makes our Zestimates better. And it becomes an embedded capability across our AI experience. So that content is what allows us to generate the unique context from our buyers.

I quoted the stat of 80% of our traffic coming direct to us. Traffic is a count of people. And what matters is the quality of traffic that you have. And we are incredibly proud that we have the actual buyers and sellers using Zillow through their transactions. 70% of everyone who buys and sells a home in America is using Zillow during that transaction process. And what they are doing on Zillow is what matters. They're not just browsing or coming in and out for a quick visit. They don't pop in and leave for months. They are spending 2 to 3 hours a week over 5 months as a buyer.

Yes, they're searching and they're finding listings, but they're also using our financing tools, setting their BuyAbility, shopping within their budget. They're comparing homes. They're collaborating with their co-shopper. They're using all of our rich media to take virtual tours and spending hours in those virtual tours. They're booking real tours on ShowingTime and meeting agents. Once they hire an agent, they're messaging with their agent in Zillow Messaging. That is not casual traffic. That is sustained, deep intent. And that is the context that compounds for our AI platform. Every tour scheduled, every financing app, every transaction closed, every lease signed, all of it feeds the system, and that's what allows our AI to become more intelligent, more personalized and more capable. We don't just answer questions, we personalize the transaction.

Understanding the homes gives us the content, understanding the behavior gives us the context, but what matters is putting it together and giving consumers the ability to act, integrating all these platforms, all these software products together. I quoted this stat that agents touch 80% of transactions. That's across a variety of really incredible tools, ShowingTime powers tours for 90% of all listings in the country. Last year, 40 million home tours were booked on ShowingTime.

Follow Up Boss is the CRM of choice for 80% of the top teams in this country. Nearly all Zillow preferred teams are on it. 100,000 agents are using follow-up boss to run their business. It's quickly becoming the AI-powered workflow engine for the best agents. And agents are being delivered great high-intent customers because of our software products. Real-time touring, which many of you have heard about, those customers convert at 3x the rate of normal customers. ZHL customers, folks who have been preapproved with Zillow Home Loans, they convert at 5x the rate as nonpreapproved customers. So our agents are using our platforms to run their business and work with high-intent customers.

And when they get ready to close, dotloop sees closing for nearly half of all transactions in this country. Taken alone, every one of those products is an incredible success story. But you put them together, connect them, that's how you transform the transaction. When you integrate the shopping behavior, the touring data, the CRM data, the financing data, the transaction data, you create context that differentiates Zillow and value that only we can deliver. Sustained intent combined with proprietary rich media,provides an AI platform that is directly integrated into the rails of the industry. That is a powerful combination, and you're going to see many examples of that from leaders throughout the morning and the demos you get your hands on.

And oh, by the way, we're not just doing this in any category. We are doing this in arguably the most regulated and complex category in the country. Structural complexity in housing shapes how AI can even operate. In fact, we have to have licensed brokerage relationships in all 50 states just to get listings, let alone answering questions that require a license to properly answer. The volume of complexity in this category is staggering. Every state is unique in regulation. There are hundreds of thousands of brokers working across over 500 MLSs, powering 1.5 million agents to do transactions.

We have operated in this space for 2 decades, building deep industry partnerships so that we can innovate, but do it with an err towards compliance and trust of the industry. And doing all that is a massive undertaking. It is a structural challenge to operate in this industry and do it effectively and build technology to actually build the platform. The reality is that complexity and that regulatory scenario shows up as massive inefficiency. The best way to think about that is the best agents and loan officers that you meet will do maybe a few deals a month. The reason they can't do more is this inefficiency.

Zillow is clearing the way for that inefficiency. Technology, increasing our AI power technology pulls away all the busy work, all the waste so that humans can become super humans. Agents can become super agents. That is really our fourth multiplier in the industry, helping the most productive agents, the most productive loan officers and professionals become more productive and do more volume at higher quality. LLMs are dramatically reshaping how all of us do our jobs. In real estate, that's going to allow professionals to spend time doing what they do best so that technology can take away the things they don't want to do that they have to waste all their time doing.

We're already seeing that today, and you'll see examples of that today, and that productivity gap is only going to get wider. When we can connect the intelligence and the infrastructure together, you allow agents to do what they do best so technology can do the busy work. That is the real economic unlock in this category. Cameron is going to share a bunch more about our professional tools and how you're seeing AI show up today to do this.

AI is accelerating our strategy to become the housing operating system of choice. That is true today, the way the industry works. That will be true tomorrow as competing LLMs develop capabilities. Consumers and industry professionals choose Zillow. And agentic AIs will need to choose Zillow because we sit at the center of it all. We are building the operating system that makes buying and selling from the very, very first visit all the way to the closing document feel simpler than ever. Because at the end of the day, the problem we're solving, the people holding these phones, the buyers, the sellers, they are making the single biggest decision they'll ever make in their life financially. It is incredibly complex. It is incredibly emotional. And oh, by the way, they do it once every 14 years on average right now.

When you make a decision like that, you want clarity, you want confidence and you want trust in the platform and the professionals that you are going to hire. So AI can help the buyer understand what they can afford. AI can help the agent respond instantly instead of hours later. AI can service the right insights at the right moment to move the transaction along. Tech will handle the complexity so that humans can focus on the judgment, the advocacy and the trust. AI is absolutely going to reshape housing, and the winners are going to be the ones that empower and supercharge people with the best tools to take action. That is our advantage.

I'm really excited to bring up Cynthia Taylor to take you through our product strategy to deliver all of this. Thank you.

So you just heard Jeremy walk you through how Zillow is positioned to win in an AI world. And I am so excited to walk you through our product strategy for how we're building in this incredibly complex space. Zillow's combination of proprietary content, unique user context and deep integrations allows us to build the products that you are about to see, that we are about to demo for you. We spent years building the infrastructure underneath the transaction itself. And that foundation is what allows AI to truly transform the experience that we provide to consumers and professionals coming to our products on a daily basis.

We know we aren't the only ones building technology. And in today's world, it is easier than ever for somebody to spin up an app in the real estate space that does things like generate listing copy or answer a question about the neighborhood. But the difference is that those apps are building at the edge of the transaction, while Zillow is building at the core. And building up the core, as Jeremy said, means knowing how to build in a complex, fragmented and heavily regulated environment. There's a lot of actors in this heavily regulated space. And that means that it limits companies without licenses in how they're able to serve their customers and the types of questions and the types of guidance that they can provide.

Generic LLMs may not be able to answer questions that start to look like agency or fiduciary guidance or brokerage activity because answering those questions requires a license. So questions like, how much is my home worth exactly? Or which offer should I accept? How much house can I afford with my finances?

In addition to that, then there's the issue of fragmentation. Fragmentation is the other piece of the problem that Zillow and our products are solving for. A fragmented product has numerous limitations, numerous identities, fragmented data models, multiple workflows. Every single time you go and look at your user, you only get a portion of the picture. And Zillow is unifying the complex fragmented real estate system with our products and our platform. And we have spent years on the product side doing the harder work first.

Zillow understands the regulatory landscape because Zillow has operated within this regulatory landscape for 2 decades. Zillow holds the licenses and has the infrastructure already built to actually participate in the transaction itself, not just observe it from the outside. And integrating the tools, the data, the workflows that power each step of the move so consumer journeys and professional journeys and workflows are in sync is something that only Zillow can do.

So today, we are here to show you how Zillow has already unified the fragmentation, creating a platform that allows AI to bring the integrated transaction to life for our customers. We're building solutions for consumers and professionals alike who are all participating in the real estate journey together.

So taking a look at the consumer problem first. In most real estate experiences, as a consumer, every step you take, every professional you work with, every step of progress you make can feel like starting over because you maybe working with fragmented systems that don't know the whole picture of your move, of your intent. You may be a renter where your payment history doesn't follow you and doesn't inform your financial readiness to buy. You may be a buyer where the platforms you're using doesn't know the homes you've toured, the preferences that you're unknowingly signaling by the homes that you're lingering on. You may be a seller who's not sure how to take that next step. Every interaction with every professional feels like it starts from scratch.

And what Zillow is doing in this space, Zillow is building one shared version of a mover's intent across the entire real estate journey. What that means is one persistent consumer identity, one evolving profile of what the consumer can afford across their renting and their buying journeys, one view into a user's preferences, a consumer's preferences, what they've toured, what they've saved, what progress they've made, one view into next steps and when that consumer should take them.

Most people don't get stuff on inspiration when they're thinking about renting or buying. Most people get stuck on that action knowing what that next step is and when they might be ready to take it. And why what we're building matters is because having this unified intent layer is what allows Zillow's products and Zillow's AI to move from answering really basic, simple questions to anticipating consumer action, understanding what a mover wants to do and what they are ready to do next. So Zillow's unified intent layer is what creates these product experiences that ultimately drive success for a mover.

From a renter's perspective, a buyer's perspective, a seller's perspective, that means that someday can actually start today because that consumer is finally going to be able to make the move. And similarly, on the professional side, the real estate experience for agents and housing providers, their fragmentation can be just as real. In most real estate tools for professionals, each tool keeps its own version of the truth. So the CRM has one version of the client. The transaction system has a different version of the deal. Sometimes fields that have the exact same label and different systems actually mean entirely different things.

So Zillow is building one shared version of the deal across the entire Zillow professional ecosystem. These are the products that hundreds of thousands of real estate agents use on a daily basis. One identity layer, one deal object, one contact model, one document system. And what this allows Zillow to do is it allows Zillow to pet a picture into the deal and have one version of the truth. So when something changes in one place, it's reflected everywhere. A consumer question isn't just a lead. It informs the professional where this client might to go next. A showing isn't just a calendar event. A document isn't just a PDF. It informs the engagement. It informs the move and informs the deal.

And when every part of the system runs on the same foundation, the same understanding of the mover and of the deal, AI built on top of this platform does not have to guess at what's happening. AI built on top of this platform understands the mover's intent, understands the transaction, and this is where it all becomes uniquely powerful. Zillow is building the unified platform for real estate. Our content, context and integration are the three advantages that make the products you're about to see today possible.

And when this content, context and integration are in the same system, the experience deepens in a meaningful way for our consumer and our professional customers. For consumers, Zillow remembers them, Zillow understands where they are and Zillow helps them take the next step. For professionals, Zillow's products supercharge those pros with AI-powered tools and enable them to do better and do more. We're building at the core for real estate, allowing deep integration into the transaction itself and truly becoming the housing super app.

And today, we've brought product leaders from across our rentals and our for sale teams to show you what we've already built and what we're building for the future. So first up, Michael Sherman is going to show you our rental product strategy and end-to-end experience. Then Nicholas Stevens is going to show you how Zillow's unified intent layer is coming to life today for buyers and sellers. And finally, Cameron Swiggett is going to show you how Zillow's unified understanding of the transaction transforms the real estate professional experience.

Thank you. And I'm inviting Michael Sherman to the stage now. Thank you very much.

Hello, everybody. Nice to see everyone here. I recently started wearing glasses, but I'm going to try and do this naked. Eyes are naked for this. So the point that Cynthia was making around fragmentation is a really good starting point when talking about the rental strategy. We are, the rental space, is really a microscope on that fragmentation. So our originating strategy was built around the idea of fragmentation in listings. There is no MLS in rentals. So there's no central repository. There's no database of all rentals across the United States.

So we took that as our first challenge. How do we aggregate as much inventory on our marketplace as possible? And the reason there is simple. It is the #1 thing renters want when shopping for their next home. They simply want to see the inventory first and foremost, far above anything else a marketplace can provide. So solving that, step one. Step two, three, four, five is everything that can now happen, everything that happens next.

So to give scale to how we approach this segment, there are roughly 3x as many renter moves annually as there are for sale moves. So the opportunity is huge, yet it remains the most disconnected, high-friction experience in housing. 64% of renters say that they looked at homes for sale during their for rent journey, 64%. So it becomes imperative that we have a platform that has both listings for sale and for rent in one place, allowing for easy navigation between the two. And for most people, renting is kind of the entry point to housing. It's the first thing they do in housing.

So if Zillow can handhold that consumer throughout that first step of their journey and do a really good job, something really personal, very tailored to what they need at that time, we can set up a lifelong relationship with the consumer. We can help them through that first step. We can help them through maybe their second rental and then help prepare them for financing, help them with that first home purchase. And then that opportunity gets reciprocated back to the rentals marketplace when they might want to rent again in the future.

So our position of strength really comes on the back now of multifamily advertising.We've built the largest aggregation of listings in the United States and now we have the largest audience of rental shoppers in the United States. Our rental business is expected to grow about 30% year-over-year in 2026, and we're well on our way to a $1 billion revenue target that we set out. But the revenue outcomes are really just mile markers along the journey. What we are really excited about is the opportunity for a fully transaction-enabled marketplace, a place where renters can come and not just search, find, connect with a property, but ultimately secure, pay rent and feel confident using our platform for the entirety of their rental life.

So I'm going to walk through some steps that we've built, some steps that we're exploring today and figure a really good starting point is where the renter starts, at search. So as I mentioned, we've built the most comprehensive set of inventory in the country. And that's really important. And it spans across both long-tail inventory, which we would define as properties with 25 or fewer units in them and multifamily inventories, so properties with over 25 units in them. And this inventory, this aggregation of content is really important because the trust that we're able to build with the renter.

When they come to Zillow, they have confidence that they're searching the entire market. Rentals trusting our comprehensiveness of marketplace is important, but also the depth of detail on each listing. Real-time pricing, real-time availability, being able to schedule tours, detailed and rich descriptions about the unit or property, all of these evoke more and more trust and confidence in the marketplace that we're building.

From search, we move to messaging. The rental landscape is wrought with fraud. Trust is at a low. There are scams constantly happening across the category. And more and more renters are asking us if they can connect directly through utilizing our first-party tools and platform because they have the confidence that they are actually engaging with a human, with somebody that actually represents the property and can actually open the door and help them secure that listing.

From that connection, we can move into tour scheduling. And you can see how quickly we're moving away from search and find and lead generation into something that's much deeper in the funnel. At this point, we're really orchestrating the beginning of a transaction. This is done through both our first-party experiences as well as deep third-party integrations. These third-party integrations are critical because it's not just about, hey, we can display information on our site that maybe a third party has. It's critical because we can build a native experience. So a consumer on Zillow doesn't necessarily need to know what's happening behind the scenes as long as it feels cohesive and the next step being right in front of them.

And then we move into applications, and applications is a really pivotal point in the rental journey. It's the moment we move, Zillow Rental moves from marketplace connector to really a true infrastructure player. Annually, there are millions of rental applications submitted through Zillow, millions, and this gives us unique demand insights. It highlights the incredible value of our product, and I want to touch on three components of our application products that are unique.

So one is we innovated on both the experience and the monetization model. So our application is purchased by the consumer one time. It's common across properties and it's reusable over a 30-day period. This is inherently a better consumer experience. Renters apply to multiple properties before they secure their home, and reducing the cost and burden on that step is very important.

Two, it ties monetization directly to the transaction. This is no longer about traffic and leads and volume. It's about high-intent shoppers actually wanting to secure rental.

And then three, the application positions us to integrate more directly with both the property management systems who support property management companies with robust applications as well as the property management companies directly themselves. And this is really important. More and more property management companies are asking us if they can enable their application on our platform to create those efficiencies, remove steps in the journey for the renter and help them swiftly get into their unit in their property.

So after application, we're in lease signing, lease building, lease e-signing and payments. Since launching payments, we've processed more than $10 billion of rent on our platform, and adoption continues to grow. In February, year-over-year payment process was up about 20%. More and more companies are trusting us as their payment platform and more and more consumers are looking to us to provide that value in their rental experience.

So pausing on payments for just a minute. It's a really important product because of the value that it delivers. But it's also very important because it extends the relationship we have with the renter and the landlord or a property manager. It's no longer about just that upfront lease signing moment. It's every month we have an embedded touch point with those parties.

So going further in that direction, we launched a product around rent reporting, where we now report on-time rent payments to the three bureaus, helping consumers improve their credit score. To us, this is a no-brainer. We absolutely want to do this. It advantages our renter both when they want to rent their next home as well as when they want to prepare to buy. We've played a pivotal role in helping them improve themselves as they navigate through that real estate journey.

So when you zoom out, you're seeing something quite powerful. This isn't just about search and upfront lead generation. It's search, connect, tour, apply, leases, payments, renewals, the entire transaction increasingly happening on our end-to-end engine.

So we talked a lot about the consumer, but it's really important to also shift focus and look at Zillow Rental Manager, or shorthand would be ZRM, which is our supply side product and offering. And the best walk-through of this kind of pivots around the three legs of the transaction stool in rentals, which would be applications, leases and payments. So applications, you have tenant screening on the supply side; leases, you have lease builder and e-signing; and then payments, you have rent processing.

So jumping into applications. Again, within ZRM, landlords view potential tenants in one consolidated dashboard. This includes credit reports, background checks, eviction history, payment history, all of their income documents. This inherently makes the operator's job easier, more efficient and gives them access to our super set of audience.

Two, executing the lease. Landlords and property managers can either upload a lease that they historically have used, edit it a bit, set it up for e-signing directly through our platform, or they can go through our lease builder tool, which is compliant with local laws and regulations and navigates them through the journey of building a lease, giving them confidence that they're building something that will be usable that onetime as well as being able to come back time and time again to use this product.

And then three, collecting rent. All of these steps are enabled directly on Zillow, managing maintenance tasks, ongoing communication with the renter, everything within one connected system. Zillow stays embedded throughout the entirety of the journey.

So look, most companies in this space are doing 1 of 2 things. You're either building a marketplace that drives audience and you're selling advertising or you're building tools and services and selling them to the supply side, kind of like SaaS products. We see an opportunity and have already begun executing on both, tying together this large audience to best-in-class AI-powered tools and services. Efficiencies, productivity goes through the roof for the operators.

So everything I just showed you is built under one end-to-end transaction engine. And really the reason why we kind of have the permission to go forward with this strategy is because of the ROI that we know we provide to partners. This is the best-in-class, most efficient leads in audience. They are transaction ready and they are ultimately coming to Zillow to find their next home, whether it's a long-tail listing or a multifamily property. No longer are we in the business of just generating leads. We're in the business of generating outcomes.

So obviously, today, LLMs and SEO for 20-plus years before that can do a very good job of summarizing listings, providing that very top of funnel information, driving traffic to our platform. But what happens next is the really exciting step. It's about creating efficiencies in the process, building agentic solutions that transform the way that people are engaging on our platform. This is where Zillow AI can do far more than just listing summary and top of funnel navigation. And it's only possible because of the data that we have in this interconnected system that we've begun to build.

So listing fragmentation was step one. We had to go forward and aggregate that super set of inventory. It opens the door for everything that we want to do next. We're building trust with the consumer and building the trust with the operators. We're generating highly efficient, high ROI audience that turn into leases. There are billions of dollars in annual rent flow across the United States, and participation in that transaction pushes our sites well beyond that $1 billion mile marker I mentioned at the opening. We want to build something that ultimately is truly transformational for this category.

Okay. That is a good deep dive on rentals. I look forward to connecting with everyone later in the day. And we're going to play a short video before welcoming Nicholas Stevens to the stage. Thank you.

[Presentation]

Good morning. So 2 weeks ago, I actually moved, like real-life moved. I've moved a bunch of times, a bunch of different apartments, different tech jobs. This is the first time moving with 2 kids and a cat, which, frankly, I would not recommend to any of you. But after the last 2 weeks, we've finally started unpacking. I have more than 4 spoons. I have Wi-Fi. I have coffee. And I'm finally feeling the gratification of going through that entire process of figuring out what the next home for me and my family would be.

I've worked at Zillow for over 10 years now. I joined way back when to be the Zestimate and personalization product manager. And when you get to work with all of the AI teams, 300 people building the experiences that you are seeing today, you get a lot of chances to sit down with customers and see what's on their minds. But actually moving for the first time in a while was a more visceral reminder that all these questions they have from the very beginning of the journey all the way down to keys in hand get a ton more real when it's you. You're not just asking academic test questions on what the neighborhood is like. You are trying to figure out if that neighborhood is right for you.

So building AI experiences, we think about the entire mover experience, not just the left of shopping, discovering, thinking about what you can afford, but all the different questions, the guidance you need as you start thinking about touring, as you start thinking about finding an agent, how to sell, wanting to message with these professionals and more. And from an AI perspective, it's a really tough challenge. A lot of customers in the same session start with what I would call surface level questions. They're wondering, is this new listing worth more than 10 seconds of my time? Could you describe it in a way that I understand? Can you give me an overview of this neighborhood?

These are important questions. They're not hard questions. If you have that content, a generic AI can do a pretty good job. You have to make sure it doesn't hallucinate. But it's important you get the content, you do a good job at the surface level. In the same session, though, those same customers usually want to go pretty deep. They start at market overview and descriptions and they end up going, hey, maybe I actually want to tour this home. Maybe I need to get preapproved. Maybe I need to connect with an agent and more.

This top to bottom dream has been our vision from the moment I joined 10 years ago. But it's an incredibly hard challenge because if you make up any of the answers, if you get anything wrong, if you give the wrong guidance, that's an incredibly trust-busting moment. You need the AI to join the customer where they are in the trenches and really make sure it's appropriately guiding and directing, just like any good confidant would.

So when I started thinking about moving with my wife 6 months ago, I, of course, used generic LLMs. Who didn't? I said, hey, I'm looking for a 3-bedroom home in Phoenix under $450,000. And a generic LLM does a pretty good job. All those homes are real homes. It found them on the Internet. It summarized them. It was pretty good. Of course, I went and toured some of these homes and had follow-up questions. And when I came back and said, hey, hold on, one of these homes doesn't have a fenced yard. I have a 5- and 7-year old and we're not trying to run into the road here. The generic LLM goes, you're going to have to be more specific. Which one are you talking about? And I'm going to go search the Internet and sites like Zillow to try and figure out the answer to your question.

A generic LLM can do that surface level well. It's a great start. But as soon as life gets more interesting, as soon as you want to go deeper, that's where it has to hand off to a company like Zillow. So AI with content answers the question. We spent 20 years amassing rich interesting content. That is no small feat. But AI with content, with context about the users and professionals and with integration, end-to-end integration, that's what closes the loop.

So as we sit here and look at this iceberg this morning, many of our Zillow teams have been trying to figure out how can we build an AI-based experience that truly guides our millions of consumers end to end from the very tippy top of that iceberg all the way to keys in hand. And today, for the first time publicly, I get the privilege of demoing a new experience, we call it AI mode, integrated directly into Zillow that will do exactly that, help you understand if this home is worth more than a couple of minutes of your time all the way to guidance, right before you make that offer, right when you get those keys in hand.

And we're thinking, okay, how can we demo this to you today? It's this brand-new end-to-end experience. We're going to show it to you at lunch. But like how do I show you all these cool things it can do. And we thought, why not actually take 3 customers who had real experiences with AI mode the first day we turned it on for them and show you their real prompts. So as we go through Beth, Peter and Cindy, we obviously made up their names, we changed their pictures. But every single question we go through this morning is a real consumer question in the first session of them discovering AI mode on Zillow.

So let's start with Beth. She's in Phoenix. She's a first-time buyer. She's rented a bunch. She's used a lot of the products that Sherman was just talking about. And she's thinking, is it time for me to actually buy? She opens up Zillow, the desktop view. She starts looking at a home. And because we turned on AI mode for her, she sees a bar at the bottom that says, hey, you can ask Zillow.

And the first thing she does is say, okay, does this home have any recent renovations or upgrades? Good news. This home in particular has an updated kitchen. It has the bedrooms that have been updated. It has a finished basement and then a [ Lennox ] HVAC. Apparently in Phoenix, that's an important thing that all best really, really need to know. And then she proceeds with these types of questions. She says, hey, what year is the roof replaced? It's a newer housed roof. What type of roof? It's slate, exterior material, brick. Year built, 1938. It has 4 bedrooms, 3 bathrooms. She gets all of this in a couple of minutes.

Now this is useful information. I'd say it's pretty surface level. I haven't talked to this Beth, but I bet she's just trying to test out not only is this home worth it to me, but if AI mode can do a good job summarizing the home for her. Is it going to make anything up? Or is it going to give real content in its replies? She gets all of this in a couple of minutes.

And then something interesting starts happening. With that confidence, her next question was, what makes this home stand out? The AI mode goes, hey, classic 1920s brick bungalow, flexible bedroom layout, updated kitchen, covered patio, large lot with expansion potential. Now not only is she trusting AI mode in this answer, but if you look at those details, those are answers that only Zillow can give given our incredibly unique content. It's not generic location, it's down the road from a school. This is something that you could only answer if you have seen inside the home, if you've amassed that unique content.

So back to the iceberg, she started with renovation. She's kind of testing, what year was the roof replaced, what makes this home stand out. She's getting near the watermark of our iceberg and beginning to think about, hey, could AI mode really help me end to end?

So let's go back to this Beth in Phoenix. Next up, and this is truly an order that she asked, can I afford to buy this home right now? Now this Beth was a pretty active consumer on Zillow before AI mode popped on to the scene. She is a BuyAbility user. That's a product that we built. Roughly 4 million people have registered with BuyAbility. They've given us unique financial information like debt. We figured out their credit score with them. We've given them a monthly affordability payment they can use to shop. And so when she asked, can I afford to buy this home right now? We don't go, maybe, or why don't you go and calculate that. We say, hey, given your BuyAbility, this is somewhat within your range. It's a bit of a stretch but it is possible based on all the stuff you've already told us.

With that, she goes, okay. Can you show me homes with 4-plus bedrooms within $450,000? I love this prompt because she literally wrote in parenthesis, my BuyAbility, good news, AI mode Zillow obviously knows about Zillow's BuyAbility, but she wanted to make sure we included that. And we gave her a rich map of about 580 homes for her to pan through and look based on all that information.

Unfortunately, she thought to herself when she's looking through these homes, they're not really worth me stretching. $450,000 is a lot, 4-plus bedrooms. I might not need that. So she adjusted in her follow-up prompt and said, what about 3-plus bedrooms? What about $400,000? She got a lot more options, 1,600 homes. And it started to be a little bit closer to what she's actually after in real life. Then she asked, what are today's mortgage rates? And instead of us going, okay, we're going to search the Internet. We're going to look at rates from a couple of days ago on random sites. Good news. With BuyAbility and Zillow Home Loans, we pulled up to the minute rates that backed her BuyAbility number and made sure they were displayed accurately in the response.

Okay. She's done a lot in one session. It was pretty impressive when we were watching on the other side. In that same session. Her next prompt was, I want to tour this property. At this point, we said, get out the yellow pages, go to 1800. No, we're Zillow. We are showing time plus. 90% of homes in America are booked with real-time availability given ShowingTime plus, and that is already integrated into AI mode. She within that session selected Wednesday at 1:00 p.m. We said we'll confirm that live. And before you get into that home that you're zeroing in on, if you want to go back to get prequalified, if you want to update your BuyAbility, go ahead and do your homework right before you get to see that in person.

So first session, Beth in Phoenix, renovations and upgrades all the way down to actually scheduling and confirming a tour and the beginnings of getting preapproved, an incredible surface level to end-to-end AI session.

Next up, we have Peter. I particularly like Peter because he's considering moving to my hometown of Seattle. He's probably excited about us potentially getting an NBA team in the next 3 to 30 years. And so when he is looking to Seattle, in his first session, he started zeroing in on one condo. And his first question that we're going to see live is, what is this home's estimated market value? It's one of the most frequent questions AI mode gets to date. But then over the course of 3 weeks, he doesn't stop there on that one condo. He looked at others. But on that one condo, he's doing due diligence, he's doing a deeper analysis. And he's even thinking about his own lifestyle. What are the grocery stores nearby? What's the actual neighborhood like? He's basically getting a PhD in this condo before he makes an offer.

So let's actually see him live. His first question, as promised is, what is this homes estimated market value? Remember, I joined a decade ago to be the Zestimate product manager. And at the time, we talked a lot about natural language processing and neural networks and the ability to see in the homes. But we didn't have the technology to actually have a conversation with the Zestimate. Consumers see that number and they go, why is it that high? Could it be higher? Could it be lower? What produced that number? And now with AI mode, we can actually have that conversation based on all the data that Zestimate uses behind the scenes.

Because we told him about all the different factors, he turned into basically Zestimate scientist and started asking questions like, does this other condo have any recent upgrades or renovations? That's obviously something that helps the Zestimate going forward. His next question was, does this condo include a pool or a club house? In Seattle, Washington, if you haven't been there, pools are kind of rare. And so that does add some value to a condo. And he was wondering, hey, does other condos nearby also have a pool or a club house? Is that going to increase the market value of similar condos?

And then week 3, this is when he gets interesting. He goes, hey, are there any HOA fees associated with this property? We say, yes, as traditionally true with most condos, roughly $275 a month. What about utilities? Are any of these included? Sorry, they aren't included according to AI mode in the HOA dues. You'd be responsible for paying electricity, water and gas separately. And then, and this is a real prompt from Peter, actually, I'm pretty sure utilities are included in the HOA dues. The current tenant mentioned that. Zillow already gets this kind of feedback from consumers. But usually, it's in a divorced kind of help center experience. Now with AI mode, we can take that information, obviously update it on our systems, but, more importantly, tell the seller, tell the seller's agent, tell the landlord that, hey, some of what you're posting online might not be accurate. Do you want to fix that so you can better market your property to the open market?

Okay. Then Peter has seen enough. It's probably a week 2 or 3 at this point. He's going, okay, I'm ready to move to Seattle. I'm getting excited about this location. And he starts shifting to lifestyle questions. Are there any highly rated restaurants nearby? [indiscernible] my favorite, if he's celebrating, it is #1, all the way down to [indiscernible]. He goes, hey, how far is the nearest grocery store. If you haven't been to Seattle, Pike Place market, #1. But let's be practical, Safeway and Whole Foods also down the road. Third, what points of interest are nearby? Again, if you're new to the market, we go, hey, everything from Gasworks Park and Woodland Park Zoo all the way to [indiscernible] is just down the road.

And then last but certainly not least, what are today's mortgage rates? It's an incredibly frequent question from buyers who are near that water line thinking about going end to end. And of course, because of BuyAbility and Zillow Home Loans, we give him an up-to-the-minute view of what kind of rates he might get if he gets prequalified. So Peter is no longer searching. He's deciding. And over those 3 weeks, we learned a bunch about Peter. First, we learned all the traditional things that without AI mode we usually learn from saves and shares and clicks. We learned his target price. We learned what kind of neighborhoods he's interested in, some basic level features. But with AI mode, we learned a lot more. We learned what matters most to Peter. We saw rich behavioral signals. We know how ready he is and what the qualification for the best condo for him is in real life.

And if you're like, okay, well, that's just useful for Zillow. No, that's useful for Peter. He asked 17 times about that one condo. And if we woke up on 16th prompt and go, hey, what's your name? What are you asking about? What are you trying to do? He'd be like, I don't want to use AI mode. But because we save all that rich context, the next prompt, we're able to guide and point him in the right direction as he proceeds down his path.

Okay. So we've covered Beth. We've covered Peter. Third but certainly not least is Cindy. Cindy is one of my favorites because I'd identified with her in my own home search. She did a lot of rich comparisons that only Zillow can do, and I really wish I had AI mode when I was looking. Cindy is all the way on the other side of the United States. She's in the Panhandle. She's in Florida. And she asked a whole bunch of questions as she discovered AI mode in her first session. So she's panning around in Florida. She opens up this home that has a pretty amazing covered pool. And she starts going, hey, I love this pool, but it's near busy street. How big of a trade-off is that? AI mode goes, yes, the pool is strong. This street honestly is not that busy. It didn't really decrease the Zestimate as much.

Her next question is, okay, this one, this other home has a higher Zestimate but honestly doesn't look as nice. What is driving that difference in Zestimate? Again, now we can actually have a conversation with the Zestimate rather than a single number. We start breaking down in AI mode, what is actually producing that different number. Next up, is the location doing most of the work here? Again, she might be applying to Zillow to be on our science team or just understanding what is providing that number. Next up, this one checks almost everything, but it's priced high. Am I stretching for the features? I love the Am I stretching for the features. She's starting to ask for actual advice. She's relying on AI mode to lay out what's in front of her and help her reason through it.

She's looking through this and kind of getting excited about this specific area. Next step is really, is there any near grocery stores, where she can actually be able to walk to versus have to ride the bus. Second to last in the same session, do you think I'd actually use all of these features? And then last but certainly not least, if I stay 5 to 7 years, does paying more here make sense? That is an incredibly trusting first interaction with AI mode. She went from, again, surface level questions that any good generic AI LLM should be able to answer all the way down to stuff that only AI mode can do authoritatively.

Next step, she was wanting to compare two of the homes you saw flash in front of you. Anyone can make a good comparison table. I did this in Python and CS101. But what's unique to AI mode is that how we are laying out is based on all the context and all the content that we have unique to her. We're saying, hey, Wintergreen offers more space. The layout is superior in one of these parking that's important to you. There's one car garage in the Galeno. Condition is moving ready. And then the community, basically HOA fees are the same between each and every home.

After all of this comparison, AI mode on its own accord says, look, Cindy, sit down for a second. I need you to tell me between two clusters of home what matters most to you. Basically, AI mode saw all the ones in her criteria set and said, on the left, you can either go garage, gated slightly newer, or on the right, you can go extra bedroom, lower total cost, brand-new appliances. There's a fork in the road here. You can't have it all. But if you tell me, if you tell AI mode which one, Cindy, that you think is more important to you, I will be able to help you navigate which one to actually tour in person.

Okay. We're going to pause on Cindy. I see some of you writing notes. I'm going to tell you, no spoilers, it works out well for Cindy. But we're going to pause here because I want to talk about rich media before her next question. Rich media is something that Jeremy and Cynthia mentioned. It's been a 10-year journey at Zillow. We have been working hard to get the best 3D experience so that buyers, sellers and renters don't really have to figuratively imagine what a home is like. They can see it from the comfort of their current home and really think about, hey, is this home worth it for me? You can fly around outside homes. You can obviously zoom inside. We have the new sky tour product we mentioned earlier, where you can really get a sense of the neighborhood. And more recently, if you want to reimagine the home, you can virtually stage it from all those rich listing images.

All of this is not easy in AI land. You can do a pretty good virtual staging with a generic LLM, but usually that's about 60% to 70% accurate. It's going to imagine a new bedroom. It's going to replace a wall by accident. It's going to forget about your couch. If you are in real estate, you can't do any of that. That's a trust-busting move. And so when we do virtual staging, we have to make sure the models are 100% accurate. Every change is something that actually honors the room geometry and enables that buyer to really imagine herself in that home.

Now there's a bunch of stuff we've been doing more recently. We vastly improved the realism and image quality of the indoor views when you're flying around the home. This is no small feat. I don't know if you've ever tried to take an indoor photo with your iPhone. To try and get this kind of quality, both inside and peering out the window took a bunch of awesome science, and we're pretty proud of the result.

And the thing that we're going to actually debut for the first time here is how we're improving the actual capture process of building our floor plans. Our floor plans are one of the most popular feature on Zillow. This took me by surprise. I thought they'd be interesting especially to click around and see different parts of the home. But actually, this is something that gives buyers and renters a deeper sense of how everything is laid out. For me, in my old home, my bedroom was right next to the kids playroom, and I realized that was not smart as the kids scaled. And so when I was looking at new homes, making sure those two rooms were not right next to each other, super important.

But the opportunity here is that we can make the capture process for photographers easier. Today, if you are 1 of the 10% of listings that have rich media, that required a photographer to get a 360 camera, put it on a tripod, put it in the room, run out of the room, take a quick picture, run back, grab it and have that capture upload to the cloud. It's a pretty great process. It's not that hard. But it still means running in, running out, waiting for feedback as it processed in the cloud.

Today, for the first time publicly, we are debuting what we call instant floor plan. This is something that we can demo at lunch. So if you think this is a made-up video, it's not. This is an actual Portland listing. The photographer in this case is using their own iPhone Pro, any traditional iPhone, and starting in any room pointing at the corner and then proceeding to wave that phone around to capture in real time.

What's awesome about this is twofold. One, it's accurate. It's actually identifying the corners, the room geometry accurately. But even more important, it's giving that feedback as the photographer is in the room. It's saying, hey, you might have missed a corner so go back and make sure you point your iPhone there. And then at the same time, it's building that 3D model on the iPhone so the photographer can pan around and make sure everything is looking exactly as he or she sees it in the home itself.

Again, if you think this is made up, we have this running on iPhone. Most homes don't have ballrooms. So it will be interesting to see how much it captures of the full room, but please take a look at it. It's pretty awesome to see in real life.

All right. You were wondering about Cindy. We said, hey, let's take a detour to rich media, let's get back to her. Her next question, not making this up, is does the kitchen get natural light? Generic LLMs would say, maybe, or why don't you look at the listing images or maybe you can Google Search it. But because we have the densest and most awesome set of rich captures in the nation AI mode would go, we have south-facing windows in this home, open sightlines, a window placement over the sync would give you that natural light that you are in the mood for.

Okay. We've covered a lot of ground with our 3 customers. And really, I hope that you're leaving with the sense that Zillow sees that full arc. AI mode needs to be good at that early stage. Is this home relevant to you? Do you want to save it? Do you want to use 3D tour? All the way over to actually booking that tour, getting preapproved and hopefully closing. It's this full arc that gives us a sense of where customers are at buying, selling and renting at ridiculous scale. We already can predict if you are likely to sell because you are hammering on this estimate, you're thinking about renovations, you're looking at homes.

With AI mode, that gets even richer because we are having a natural conversation with where you're at, what you're in the mood for, what you're trying to do as you think about your next home. And that wheel is a pretty stunning one. If we start on the top left with high-quality media, all those rich media captures, basically being able to fly around the home outside, inside and then also look at a floor plan, that drives behavioral data. That drives more Beths, Peters and Cindys to the site to really deep dive in every home they might be interested in. That deep diving helps AI mode understand what actions should they take next. Do they need to filter down? Do they have a left and right decision? Do they need additional guidance? And that guidance drives more agents to our platform and essentially helps them show up at the right moment to be that superhero agent when they need it most.

Before I get off stage, I want to return to these three customers. You're probably wondering, okay, Nick, you're a product manager, you took the three best customers from day 1. And they used it, they asked all the right questions and then they probably never used it again. And I would say two things to that. First, we're hiring product managers at Zillow. That is a fantastic question. So come see me after. But two, I checked on all three of these customers on Friday to see how they were doing. Were they using AI mode more than once?

And good news. Beth went from those 40 initial conversations to 116. She's getting pretty excited about 8 properties. She's done 11, what I would call, deep dives on financials and what she can afford. I think she's the closest to actually making an offer. Peter, he's got a PhD in Seattle condos at this point. 45 conversations, 4 distinct properties. I think he's about to make an offer on that first one. And then Cindy, Cindy's ready to compare every home in Florida. She's had 176 conversations, 24 properties. She's been using AI mode 14 out of 14 days we've made available to her, 43 comparison conversations in the process.

All right. So this is a tour de force of AI mode. We started at the top left, basically shopping based on affordability, thinking about touring, finding your agent. I didn't get all the way to the right. because at that point, Cindy, Peter and, of course, Beth, need a real professional to help guide them across the finish line. And so what better to keep that story going than introducing my coworker, Cameron, who will tell you about the professional side of that very same journey. Thank you.

Good morning all. I would have hoped to be more than a coworker to Nick, but alas, here we are. Nice to see you all. My name is Cameron Swiggett. As Nick mentioned, I am going to be talking about the professional side of this equation. We're going to do a bunch of demos, walking you through a day in the life of what it looks like to be an agent, particularly as an agent in this new AI-powered world.

The thing I love about real estate is every single one of you in this room can relate to real estate on some level. You've either bought, you sold, you've rented. You were likely one of the hundreds of millions of uniques that come to Zillow and scroll and search and dream and shop, right? I think the thing that is perhaps less readily apparent to people who aren't deeply in the industry is just how much of the consumer experience is actually driven by the real estate agent. And Nicholas teed me up a little bit there.

But as soon as shoppers start to get pretty serious, whether they are about to schedule a tour, about to make offers, transact or close, or if they're on the sell side, if they're about to list the receiving offers transacting or closing, an agent becomes the driving force and, quite frankly, an extension of their consumer experience, as does the tools in which they operate. And they are the engine for that consumer. I would argue there are a lot of engines out there. There are 1.5 million licensed agents in the United States. And I am not going to make you all raise your hands, but I bet you if I asked, how many of you know someone in your life, a friend, a cousin, an aunt, a brother-in-law who's a licensed agent and hasn't done a deal in a year or 2, a lot of hands would shoot up.

And we see that in the numbers. It turns out the long tail of licensed agents is rather long. Said another way, 20% of the top agents in America drive 80% of the transaction volume. 20% drive 80% of the transaction volume, which is now at the point I want to address the elephant in the room, right? We are here under the guise of the AI Investor Day. And we are talking about AI, how AI is inevitably disrupting so many industries, revolutionizing so many industries. We all read the same headlines. And probably some of you in this audience are wondering, is that 20% going to go down to 0. Could a synthetic agent transact at scale for all of America?

And I, quite frankly, understand the intuition. I think it's a fair question. I would personally bet that is not going to happen. I don't think that happens for a couple of reasons. The research and the data informs that decision. But also if you just take a step back and think about what it looks like to transact for the average American, this is a highly emotional thing that they're doing. Literally more than half of them cry during the transaction. And it is the most financially significant thing that they will do in their life, whether they're buying or selling it is the vast majority of their net worth. And they have told us, and we have seen, that they want a human to hold their hand and to guide them and to coach them and to give them the confidence that they are doing the right thing for themselves and their family.

That said, I'm not blind to the fact that AI will, has and will continue to change real estate. The question to me is not does 20% go down to 0? The question is how do we get more leverage and more scale out of that 20% so that they perhaps gobble up 100% of the transaction share? Or you could do the other side of the equation. Could fewer than 20% still maintain the same ratios of 80%? I think the answer to that is yes. And I believe that Zillow is uniquely positioned to make that happen. And I say that for a few reasons. One, we have all the top of funnel advantages that Nicholas and team have talked about, the hundreds and millions of uniques that come to Zillow every single month, the context, and that brings massive, massive advantages for our agents, of course.

But also the top 20% who are driving 80% of the transactions, they're already on our tools today. They're in Showcase. They're in Zillow Pro. They are in dotloop, which touches more than 50% of transactions. They're in ShowingTime, which sees more than 90% of tours. And perhaps most importantly, for this conversation, they're in Follow Up Boss. 41 of the top 50 real estate teams in the United States are on Follow Up Boss. So these are the 20%. These are those who are pushing forward the most amount of customers, be that on the buy side or sell side, to their successful goals.

So I figure, why don't we do a little bit of a day in the life of an agent so we could see how we are infusing AI at every single touch point to make these agents even more efficient so that they can offload some of their work to AI so they can concentrate on the human connection, the thing that these clients are clamoring for, and they can delegate the rest of AI so they can take on more concurrent transactions. And I am making an assumption. As much as you all know about real estate and you may love real estate, I'm assuming that none of you have been a licensed agent before. And even if you have purchased, you have not been behind the scenes and seen what an agent's day-to-day looks like. So we're going to do just that. We're going to do a little bit of a day in the life of an agent.

And I should caveat by saying there is no typical day for a high-performing agent. They have chaotic whirlwind type days. And in this fictional example, we're going to talk about this agent servicing 7 concurrent clients and then juggling hundreds, if not thousands of people in their database that are going to be kind of coming in and out of potential BuyAbility.

All right. First step. Agent wakes up, just like you and me, brews a cup of coffee. And the very first thing that they're going to do is they're going to open up their CRM. They're going to open up Follow Up Boss. The reason why they do that, this is effectively the Little Black Book. This is the place that they are getting information on what they need to do next, which clients need to be actioned on, what tasks are readily available for them to push the ball forward, who is the best potential person for them to convert into either an offer or listing opportunity. This is ultimately how agents make their money.

Now I'm sure many of you have not seen the inside of Follow Up Boss. We're going to walk you through the new version of Follow Up Boss, the AI-powered Follow Up Boss. So the first things first, this is called Action Hub. And you will see here, no longer is this an unorganized untriaged list, but you now have a fully stack-ranked opportunity here. And at the very top is an opportunity. We've got Ryan here. Ryan is a client that this agent worked with months ago. And this individual said, I think I'm knocking on the door of getting promoted, and when I do, I want to go ahead and start making offers. Well, their Zillow history is lighting up like a Christmas tree. They are obviously very active right now, signaling to our AI and Follow Up Boss that they probably got promoted.

AI summarizes their activity. It generates a message, very actionable, personable, curated for that agent, allows the agent to edit it if they want, send it. They're off to the races.

Next individual, Priya. So Priya is a new tour request coming from Zillow. Never met this individual in their life, yet all of their information from Zillow is starting to flow in because of My Agent Relationship, which we'll talk about in a minute. But once again, even though he never met Priya this agent now has a better understanding of the hopes and desires and aspirations that she has as it relates to real estate. Generates a message, send it.

And then finally, we have David. So he is an active client. They've made an offer. An inspection report has come in. AI has analyzed that inspection report, surfaced a couple of findings, generated a message for this agent, and then they are now scheduling a time to review that inspection report.

So I want to talk about two things before we move on here. One, that last individual, David Park, the inspection report, that was a super simple task. Remember, inspection report on David Park, we're going to come back to that at the end of this demo, because behind the scene there's a ton of complexity to surface what seemingly looks like a simple AI task. The two clients, you had Ryan and Priya, the thing that made that so insightful was the fact that we were able to surface all of the Zillow activity. These are not just cold leads. These were deeply insightful, actionable leads because of the activity that they're generating on Zillow, a lot of which Nicholas kind of walked you through a little bit ago.

That is possible because of something we call the My Agent Relationship, and that is formed on all Zillow leads, creating that bond between the client and the agent allowing that symbiotic relationship where information is being passed forth, and Follow Up Boss, our CRM, goes ahead and summarize it. This notion of a My Agent Relationship, while it happens automatically for Zillow leads, is also now available for any lead that this agent finds. If they're in the coffee shop, if they get a referral, if their cousin wants to work with them, they're able to send this My Agent Relationship link, which you can see right here, simple as one click within the CRM.

It's prompting you to what that activity starts to ultimately look like when this accept occurs on the client side. There's a message that AI drafts, which, of course, has been fine-tuned to make sure that it is the most acceptable for that client. The client receives these terms, one click. And once they've done that, what you'll see is their customer profile in their CRM updates automatically. What have they been looking for? How has their surge evolved? What are the types of homes that really piqued their interest? What are no goes? Do they really need an attached garage? Do they, for some reason, not want to live in an HOA? And what are the specific homes that they've been honing in on for the longest? Have they come back to them multiple times? Have they hovered on certain photos for a long time? Have they shared them? Have they saved them? This is massively insightful information for an agent because it's effectively writing shotgun with them the entire time, learning their habits and allowing you as the agent to anticipate their needs potentially before they even know about it.

All right. So our fictional agent. He's had his cup of coffee. He's blasted through the top leads and tasks in his CRM. And that may have in the past either been not as fruitful or would have taken hours, but he's done this very quickly because of AI. He's about to walk out the door, get in his car for the very first tour request, very first tour of the day. And he gets a notification from Follow Up Boss. One of his clients, a somewhat dormant client, has now requested more financial information to ensure that they are ready to start making offers.

So what does this agent do before he gets in the car? He passes over all his AI summary information. The loan officer or ZHL Loan Officer digests that, adds to the system, and within minutes, creates multiple curated personal loan scenarios as well as a recommendation for that client. Our agent passes it back to their client. And this happened from the span of them opening the front door to getting in their car.

In the olden pre-AI days, which was like 6 weeks ago, you would have gotten back in the house with a laptop, did a bunch of work. The loan officer would have done a bunch of work. And the best case scenario, in the afternoon, this client would have had that information. This is the kind of thing that's happening at scale, allowing this agent to continue on their day to handle more transactions and more volume.

So our agent gets to the house. And now he's faced with, I would argue, a two-part awkward scenario for buyers, agents. So one, likely never been to this house before in his life, maybe never been on the street, never been in the neighborhood, has no idea what this house is about other than what he's seen on Zillow. So he's walking in with the same amount of information as his client. But he is the real estate professional. He is supposed to be able to give guidance, right, on what to do. And the other, also somewhat awkward, either has never met this client before or it's been months and he doesn't remember because he's been shaking 500 hands in between that time.

And so Follow Up Boss is there for him, sends in his notification, hey, you've got a tour in 15 minutes. Why don't we familiarize yourself with both the home and this client? So it opens it up. All of a sudden, what has this client been looking for in the past? What are things that have been of interest to her? How has her search evolved? What does her affordability look like or BuyAbility, things that she has flagged that she loves about the home. She loves the fact that it's in a specific school district. She loves that it's had a renovated kitchen. She really does not like the fact that it was either missing a garage or whatever, right? Also, by the way, this home was built in 1938. It's a little bit older. Maybe as the real estate professional, you should ask about things like maintenance for the home or the roof, rather.

So now this agent knows both more about the home more about the client and they go on and they have their successful tour. He gives the coaching and the guidance that she's looking for. At the end of it, they have a conversation. What are we going to do next? We are going to think about it overnight and potentially make an offer the next day. Follow Up Boss prompts the agent before he gets on the way back to the office. How did the tour go? He voice dictates into Follow Up Boss everything about the client, everything she said she liked about home, everything that she wants to do next, takes that voice note, synthesizes the voice note and then updates her profile in his CRM ensuring that we have the appropriate description of what her hopes and desires are.

And it creates a discrete task. She flagged that she wants to think about it overnight and potentially make an offer. So when he wakes up the following morning with his coffee, he's going to have some of the top of his list, follow-up with this client. And oh, by the way, AI, can you prep some offer documents just in case that she's ready to make that? Offer. Once again, reducing the mental load for this agent.

All right. our agent, he's back on the road, headed to the office because he's got more work to do. He gets to a stoplight. Phone buzzes and he has a new tour request. Great. He wants to action on this as quickly as possible to make sure he's locked this client down. Fortunately, AI has done all the work for him because of the ShowingTime integration, because of the integration with his calendar, because we understand what the clients' needs are, done all the contact resolution, suggests at a time, prebooked it and then surfaced it while this guy is sitting on a red light and then says, hey, does this time work? He has confidence this time is going to work because the AI has done all the work for him. A simple click is yes, confirm, we're great. Notification back to the client, they're ready to meet Wednesday at 10:00.

He's now going to legally and safely drive and he gets back to his office. Once he's back at the office, I want to transition us a little bit here, I'm going to harken back to what Nicholas talked about, too, with this listing soon model. So you'll note that all the work that this agent has done to date has been all buy-side focused. They've done tours. They've done offers. They've done financing, right? They've done all the things that a buyer would need of them.

Well, the top 20% who are doing 80% of the transaction volume have a diversified business. They do buy and sell side typically. I want to show you how that predictive, that listing soon model, which, by the way, this is a visual representation would actually show up and manifest for an agent. So our agent, he's back at the office. He's on his computer. He logs back into the CRM. And what does he see? AI has discovered an opportunity for him. There's two AI signals have converged. A lead that occurred many, many moons ago with somebody saying, look, I've got this vacation home in Tempe, Arizona. The soonest this market starts to look like I can actually move this home, let me know, and I'm happy to list it.

Well, great news, Zillow Insights are informing us that the market is getting hotter. And by the way, this client's already kind of beat it to the punch. His Zillow activity is flagging that he is in fact interested in looking at comps and listings. This now surfaces to the agent and the agent goes, hey, by the way, bud, great time to start listing. Let's go ahead and get a booking on the schedule to talk about what our listing pricing strategy could look like and when we want to go to market. AI generated that message, he sends it, and he is now working on what would have previously probably been an undiscovered lead. AI is constantly looking in the background for those opportunities for them.

All right. So our fictional agent, he's blasted through his day. He looks down, he says, oh, shoot, my little kids got a soccer game. Drives over to the soccer pitch and he leaves his phone, his laptop and his iPad in the car. And he's in pure dad mode. He wants to be the best parent he could possibly be. And this, to me, is the greatest opportunity that AI has to allow us to scale to these agents to new heights to be able to handle even more transactions. Because while he's being that good dad, AI is not apparent. AI does not have to watch a soccer game. AI does not have to eat or sleep, and it will work in the background for him.

And what I am kind of touting is this notion of a virtual transaction coordinator or a virtual listing coordinator. These are real-life humans that people employ, but this can be done at scale with AI. I want to walk you through what we've been developing in a platform that we are calling Zillow Workspace. And Zillow Workspace, you could think of it as the grounds in which we're putting the best of dotloop and ShowingTime and Aryeo and listing management, document management, transaction management, the kind of deeper funnel, back-end office tools that an agent needs in their tool chest field to complete transactions compliantly. And he has this all now in Zillow Workspace. And oh, by the way, it's now doing things agentically on his behalf.

So remember that listing soon opportunity in Tempe, Arizona. Why doesn't AI go ahead and generate all the collateral and assets and materials for him, generates a pricing report, a comparative market analysis report, a listing price strategy, presentation materials, all things that he can then share digitally in advance of this meeting, or he can print it and sit down at the kitchen table and represent why he is, in fact, the best individual to list that home and he has the best data informed by Zillow and the insights into how they're going to have the most successful outcome.

All right. Remember, we talked about -- I said the inspection report, right? That was a super simple task item that showed up as David Park in the very beginning. Well, here's what it actually looked like in the background. This is a very complicated robust document understanding model that we've created. What happens is the PDF came in. That program then classified it as an inspection report. It digitally read all the information of the 47-page document. It extracted all the information, it put it in the transactional system of record as licensable activity. And then it surfaced insights, things that this agent should go action on.

Now what does that do? The agent doesn't have to read 47 pages, which is a great start, saving them time. But also AI, after all the decades of experience that we've infused it with, is giving really robust insights into what is the appropriate action to take on behalf of his client. And that, of course, showed up as that super simple line item and Follow Up Boss, but you're seeing in the background how that actually came to fruition. Now an inspection report is one complex document, but real estate is full of many, many complex documents. And we've built this model to be highly flexible and real estate specific.

Let's do another example here. This is a listing agent receiving a bunch of offers. Those offers come in. Similar game, right? It gets classified as an offer. It gets programmatically extracted. All the relevant bits get put into the transactional system of record. Once again, this is licensable activity. And the great thing is, at the end of it, the agent knows the key terms. They don't have to read the 20-page document. They know what matters. AI can also generate a really simple consumer-facing offer comparison sheet, something that they, as the agent, can put in front of the client and say, you've got 4 offers. Here's the thing that actually matters the most for you. Here's my recommendation. Which of these what you like to go forward with?

This document understanding, if you go use a generic AI, whatever one you personally use on a daily basis, you will find if you shove a bunch of PDFs, it does a reasonably good job a document understanding. What we've done is we've taken that great foundation and then we've just added so much of our expertise and transactional knowledge on top of it to create a housing specific version of it, which is flexible and scalable and drives really amazing insights on behalf of our clients.

So I'm hoping that you've seen now a little bit of the day in the life. I know we typically talk a lot about the consumer, but I wanted you to learn more about the agent a bit here. And you've seen two things, one, just how chaotic their life can be as they're juggling numerous clients and trying to win business at any given moment, also where AI plays a pivotal role at literally every stage of the transaction life cycle. It is providing them scale and efficiency to allow them, if they're part of that 20%, like we have in our tools, to scale themselves and to handle even more transactional volume.

And what I hope after listening to Nicholas and mine is that you see the harmonious relationship that both the real estate professional and the consumer have together. And what I truly hope is that you see the commonality between all of that, of course, is Zillow sitting there at the middle. It is the glue between the consumer and the professional, and AI is simply making that glue that much stronger.

So for now, I'm going to wish you a good morning. I'll be in the Q&A session. We can talk more about lunch. I'm going to welcome up Jeremy. There are two Jeremy at this company, of course. But there's only one Jeremy Hoffman. So Jeremy Hoffman. All right.

All right. I am really happy to be here. I have been excited about a Zillow Investor Day for a long time. I got less excited when I got smushed in between Cameron and Rich Barton, but I will do the best that I possibly can to keep this interesting after all those awesome demos and before Rich talks about crossing the chasm. I'm thrilled to take you all through how all of this great product work ultimately translates to a great financial story.

Before I get into the numbers, I want to remind you all about the financial philosophy that we have that has underpinned my 3 years as CFO here at Zillow. First and foremost, we have to have strong revenue growth driven by superior products and services. Just as importantly, we have to control our fixed cost base to drive high incremental margins. With that, we will gain meaningful leverage on our path to strong GAAP profitability. We will use M&A as an accelerant to our growth strategy. And last but not least, we will be opportunistic with our share buyback to control dilution. That financial philosophy underpins the strong execution that you all have seen from us over the past few years.

First and foremost, our revenue is growing well and we're consistently outperforming a challenging housing market. Let's look at what we've delivered. We have grown revenue in aggregate since the start of 2023 by 43% and consistently outperformed the housing market, which has obviously been challenged. In 2025, we grew revenue 16% year-over-year against a housing market that grew roughly 3%, so 1,300 basis points of outperformance for the full year. In 2026, we expect to outperform the market again as we continue to execute on our strategy.

While we've been consistently outperforming and growing revenue the way that we have, we've also meaningfully diversified our revenue base. On the rental side, we have accelerated growth as we have leaned into multifamily buildings. Our rentals revenue has grown 130% since 2022, and we have nearly tripled the number of multifamily properties that advertise with us from 28,000 back then to more than 72,000 as of the end of Q4.

On the for sale side, we have grown revenue nicely versus the market over this time. We've introduced real-time touring, enhanced markets, both of which are resulting in better conversion and more transactions. We have focused our efforts on Zillow Home Loans, becoming a consequential purchase lender, increasing our purchase originations by more than 6x over this period of time. We have introduced and expanded seller products, including Showcase, which is now on nearly 4% of all new listings in the country.

We have acquired and grown Follow Up Boss as part of our expanded agent product suite. Follow Up Boss is being used by effectively all of our preferred partners today, and you saw all the awesome information and demos that Cameron showed you, which I think is amongst the most interesting stuff that we show today because you don't necessarily get to see the agent workflow in your day-to-day, but you see how powerful Follow Up Boss has been.

We've also expanded our New Construction business to deliver more new home inventory to more consumers. So back to Jeremy's content, context integration, that content for New Construction is quite important alongside existing homes for sale and rentals. All of this contributes to the sustainable revenue growth that you all have seen regardless of market conditions.

We aren't just delivering consistent revenue growth. Our earnings are growing faster than revenue as we continue to expand margins. The way we expand margins starts with diligently managing every part of our cost structure. We split our cost structure into three distinct buckets. First is fixed costs. Our fixed costs as a percentage of revenue at the end of 2023 was 80%. Fast forward to the end of 2025, the number is 64%. I'll dive in further on the next slide to take you through how we've been able to accomplish that.

The second part of our cost structure is variable costs. We have been investing in variable costs ahead of revenue to support the rapid growth that we have seen in rentals and Zillow Home Loans, which collectively grew 83% since 2023. This period of forward investing in variable costs has been the right strategy to support the growth of these nascent businesses. And we expect variable costs to trend closer to in line with revenue in the second half of this year.

The third bucket is advertising. We will dial up and down advertising depending on the opportunities that we see in a given year. For example, we stepped up marketing from 8% of revenue to 9% of revenue in 2024. That was to support the growth in rentals and make a clear campaign around Zillow has apartments. In 2025, we decreased marketing as a percentage of revenue based on the conditions we expected throughout the year. In 2026, we expect marketing to step back up as a percentage of revenue given the opportunities we see across our products in rentals and for sale. Just to give you a sense of how we dial up and down marketing depending on the opportunities we see, the last 3 years in 2026 gives you a good flavor for that.

I do want to spend more time taking you all through how we've been able to manage our fixed cost base from 2023 through the end of 2025. First and foremost, we have been consistently saying that we want our fixed cost to grow with inflation. And we'll fight that inflation where we can, but grow with inflation has been a place where we thought we could drive a lot of leverage in the business and continue to make investments along the way.

I am pleased that on an organic basis, we have grown our fixed costs in aggregate since 2023 at 5% versus inflation of 6% over that period of time. We have also added fixed costs through 4 acquisitions we have done since then, including Follow Up Boss; Spruce, our closing service; Aryeo and Virtual Staging AI.

Underneath this fixed cost control is a lot of prioritization and discipline that our entire team believes in. Our entire senior leadership team believes in this discipline, and we go through every year during our annual planning. For example, over this period of time, we have decreased fixed costs across corporate functions and overhead by 5%. And we have redeployed these savings into product and development, primarily in rentals, mortgages and, most importantly, in our AI efforts. These AI investments include talent, software solutions for our employee base, development costs, tokens and many more.

Additionally, we reduced stock-based compensation over this period of time by 14%. Using savings to reinvest in highly strategic initiatives while also gaining leverage to expand margins is a winning combination for us. Like I said before, we start every year, challenging each team to produce our fixed cost base. Then we make decisions on what we will deliver to the bottom line versus what we will reinvest into growth initiatives. You have seen our ability to expand margins and expand profits faster than revenue. We are proud of this. And we are also proud that when we do reinvest, we are shipping at a faster pace than ever before.

The innovation cycles at this company when powered by AI have been impressive. We are shipping 40% more code per engineer. We are shipping products faster than we ever have before. One great example amongst many is the smart summaries you saw Cameron showed earlier, where those text messages showed up for an agent. We went from concept to launch of that feature in less than a week. The opportunity to digitize and integrate residential real estate is enormous and we are just scratching the surface.

And of course, this is all in broader service of our broader mission, which is to make real estate more efficient by integrating renters, buyers and sellers with the industry professionals that serve them all inside our housing [ suite ].

This strategy and execution has allowed us to perform quite well over the past few years. We have grown revenue by 33% from 2023 to 2025. We have grown EBITDA by 59% from 2023 to 2025. And we have grown adjusted free cash flow by 71% from 2023 to 2025. And we've been actively managing our capital along the way. We have consistently delivered strong financial results, and share buybacks at have become a key part of our capital management strategy and financial philosophy. We will continue to be opportunistic with our share buybacks, especially in times of market dislocation.

Q1 2026 is a good example of this. We are very, very confident in our go-forward opportunity, and we leaned into share buybacks accordingly, repurchasing over $625 million of stock in Q1. Going forward, we will continue to be opportunistic as we grow our earnings and actively manage our share count.

With respect to 2026 financial goals and mid-cycle financial targets, I'll take you through each of those. Our 2026 financial targets are unchanged. We expect mid-teens revenue growth, we expect continued EBITDA margin expansion, and we expect share-based compensation to be down more than 10% year-over-year. With respect to our mid-cycle financial targets, our goal is of $5 billion in revenue in a mid-cycle environment and a 45% EBITDA margin are unchanged. Importantly, today, we are adding a 25% net income margin target to our mid-cycle financial targets. We are adding this target because of the confidence we have in our path to strong GAAP profitability.

Our execution over the past 3 years has been strong and we expect it to be going forward. While we have been executing well, there have been a number of key debates that have emerged around our company over the last 3 years. I wanted to take some time to check in here on the status of those key debates.

Debate number one. For those of you who remember, this was fall 2023 type time frame. Buy-side commissions will rapidly decline causing Zillow to be disrupted. Our perspective at the time was that independent representation has value. There will be differentiation based on quality of real estate agents, and we work with the best agents. Fast forward to today, that has played out as we expected. Independent representation has proven its value. There will be differentiation based on the quality of real estate agents and we work with the best ones. As a result, Zillow preferred agents have not seen any impact to their commissions because they are the best of the best.

Debate number two, a large competitor enters category with significant investment spend causing Zillow to be disrupted. Our perspective then, our brand strength and our unique strategy are differentiated and we will continue to grow. Our perspective today, our brand strength and traffic have both increased since 2023. We have added $638 million of revenue since that time with rentals growth as a clear standout, doubling the number of multifamily properties along the way.

Debate number three, distribution of for-sale listings will fragment, causing Zillow to be disrupted. Our perspective at the time, in any future industry scenario, we are well positioned to have broad listing coverage because of our brand, our audience and the quality of our strategy, products and execution. Our perspective today, in any future industry scenario, we will meet consumers where they are and be flexible about how we get listings. A recent example is Zillow Preview, which we announced last week. We continue to have a beloved brand and a highly engaged audience.

Debate number four, recent lawsuits by industry participants and regulators will create challenges to our operations causing Zillow to be disrupted. Our perspective at the time, the allegations mischaracterize our business and we will vigorously defend ourselves. We build products and services for consumers. Our current perspective, Compass abandoned its lawsuit last week after a judge ruled their arguments had no merits. We will vigorously defend ourselves against litigation and continue putting the consumer first in our products and operations. And the brand strength amongst consumers and agents has never been stronger.

So that was a lot. Before I wrap, I want to put our performance over the past few years and what consensus has for 2026 into context. This set of charts looks at our performance and expected performance across all consumer Internet companies in the $10 billion to $50 billion market range. Our revenue is expected to grow 34% over that time frame versus a category median of 29%. Our EBITDA is expected to grow 56% over that time frame versus a category median of 34%. Our stock-based compensation is expected to decline by 22% versus a category median of flat. And there are very few, if any, end markets that are more challenged than housing during this period of time.

Now of course, we're here today because we are discussing debate number five. Horizontal LLMs will make vertical Internet marketplaces obsolete, causing Zillow to be disrupted. Our perspective today, AI is an accelerator to our strong brand, our engaged audience, our unique strategy and our differentiated workflows. AI will help us grow faster and will make us stronger. Today is intended to show you how strong our opportunity is and how important AI will be to helping us further differentiate ourselves from anyone else in real estate.

So it's a really exciting time at Zillow. When I'm in recruiting pitches with prospective employees, I often get the question, why are you so excited about the company? And I answer it simply. We have an iconic brand. We have a unique strategy. We have huge goals, and we operate with start-up speed and ambition.

And so much of the credit of who we are today is a reflection of our next speaker. With that, I'll hand it over to Rich Barton, our Co-Founder and Co-Executive Chairman.

All right. I get to kind of land the plane right before we head into demo land and lunch later. But it's really nice to see you all. There are some familiar faces. I really want to thank you for coming out and spending all this quality time with us, especially given everything that's going on in the world and in our working lives right now. So thank you very much.

I'm going to speak for about 15 minutes and then we're going to bring a panel up to do Q&A. And that will be the final stage session to take your questions.

Okay. So what I wanted to do as the one of the more experienced of us here is to tell two stories of personal experiences with companies that have crossed a technology chasm, okay? And then I'd like to share a simple framework that I use to determine who in my world, I think, is going to make it across the chasm or not. All right.

So starting with story number one. Let's go back, if you can, to 2001. Again, many of you may -- some of you at least may not have started your careers by then. But in 2001, I was the founder and CEO of Expedia, which was had been public for 2 years, was the leader in the online travel space, a burgeoning interesting brand and a disruptor in and of itself, taking advantage of the Internet chasm.

And I got an e-mail from Reed Hastings, who was the founder of Netflix, and he was inviting me to dinner. I was a subscriber to Netflix DVD by mail. I'm sure, who out there actually had -- yes, okay. This was an amazing product. But it was obviously a product that was going to hit a wall. So Reed invites me to dinner because he's getting ready to go public, and he's trying to put together his go public board. And I come in meeting Reed, and I say, Reed, this is certainly an awesome product and an interesting company, but like DVD is dead man walking. This is just not the right form factor.

And Reed kind of smiled and leaned in across the table, and he said, Rich, I didn't call the company DVD by Mailflix. I called it Netflix. And I pause for a second, I said, Reed, that's a pretty good response. So from day one of the founding of Netflix, Reed had his eye on the chasm. He knew it was coming. He knew it was over for the DVD form factor, and he was confident that he and his incredible team would find a way over the chasm to what became streaming, basically a delayed Internet shock wave for his business. I joined the Board and I enjoyed a front row seat on Reed's trip across that chasm. And I learned a lot from that. I am still a Board Director to this day. All right. So that's story number one.

Story number two, let's fast forward about 6 years. This chasm that we're facing is the mobile chasm. It's 2007. Zillow.com is 1 year old. We launched version 1 in 2006. So it was a year old and we were well on our way to category leadership, but we're still about half the size of the leader in the category in 2001. We got there very quickly on the backs of an incredibly provocative product anchored by the Zestimate, which was a completely innovative feature that drew lots of people to try Zillow out. Okay.

But then something happens. Steve Jobs goes on stage at Moscone, I think it was Moscone. And he introduces the iPhone 1.0. Okay. I remember Lloyd and Dave Beitel, our CTO, who is also with us at Expedia, you'll meet him in a sec, and myself, we all got iPhone 1.0 on the first day. And we kind of disappeared into it. And we had this incredible epiphany together that it was obvious that this device was going to change computing. It was going to change everything. We immediately threw our BlackBerries away, which we were addicted to. I'm sure some of you out there had those BlackBerries then.and I'm sure you complained about the soft keyboard of the iPhone 1.0. We figured out how to use our thumbs and use that soft keyboard because we saw this as a brand-new platform.

We decided it was going to change everything, especially in real estate. As cool as zillow.com was at a computer, at a desk in your house or in the office, so cool, it was going to become 10x cooler when you could have it in your hand, walking around a neighborhood that you were shopping in or driving on your Sunday drive for shopping. We knew it was going to be 10x as interesting. And so we called the code red. We decided to pivot the whole company and go all in on this new platform. We decided if we didn't do that, we were going to get run over by the company that did.

All right. It worked. We were the first real estate app out on the iPhone platform and we were by far the best. There was no map rendering service offered by Apple or Google initially. We had to build our own map rendering on iPhone, so much so that Apple took note and invited us down to Cupertino to tell them how we did it. Okay. So we formed a relationship with Apple. We're very excited that at a future launch, Steve Jobs himself actually demonstrated the Zillow app at a product launch, which is pretty huge for geeks like us. So this app propelled us. We were kind of half the size of the leader in the space on the web, and the Zillow app propelled us into the #1 spot in the category and we've never looked back.

All right. Moral of the story is we saw the obvious future. We pivoted fast and with skill, and we crossed this mobile chasm to glory.

All right. So we're facing a new chasm right now, all of us, and trying to figure out who's going to make it across and who's not. In addition to being Founder and Co-Chairman here right now and an occasional CEO here at Zillow, I am a venture capitalist and an investor, like you all. So your questions that you're asking are the same questions that I am asking. So I'll share a quick kind of rubric that I've been using, the criteria that I've been using to begin to grade company's prospects.

All right. Here's a summary of the criteria. It's not going to be a lot of surprises here. I'm looking for companies where the founders are leading the company or really highly engaged in the company. I want to see founders. I want to see big complicated transactions. I want to see unique content and data, truly unique. I want to see hidden depths of industry integration. And I want to see brands that command their customer or the consumer funnel. I'll dig into each one of these briefly.

All right. Founder engaged, this is an obvious one. The founders created the mission and they care take the mission. They are usually engaged and paranoid. They're usually engineers, which means they can hire great engineers and all of the terrific product and support people that surround great engineering teams. Founders tend to be product first. They tend to lead product-led organizations. Founders are much more willing to hit the big red button and pivot the company when a new threat or opportunity emerges.

Okay. So how does Zillow rate here? Well, Rich and Lloyd, you'll meet Lloyd in a sec, some of you know Lloyd. We actually met at Stanford as engineers and studying engineering and economics. It's kind of trite that we met at Stanford, but it is actually true. Lloyd, in fact, started working at Microsoft when he was 14 years old because his mom and Bill Gates, his mom, were buddies, and they both had geek sons. True story. He went to Microsoft after school, and he had a hand and recruiting me into Microsoft. While at Microsoft, we put a great team of people together on a project, Expedia. Together, we did that, we spun it out of Microsoft and did quite well in creating a really iconic consumer brand there.

When Barry Diller bought Expedia, the two of us combined took some of our winnings from Expedia and rolled it into the founding of Zillow. We took the first $5 million that we put in ourselves into Zillow. Okay. This is all a way of saying that we hear, we care, we're involved, we're experienced, we're motivated. And we are really excited about this AI acceleration that we're seeing right now.

All right. Next criteria for making it across the chasm. Big transactions, I want to see high dollar transactions, ones that matter. I want to see ones that take a long time. I want to see transactions that are complicated and recursive in their process. I like visually engaging shopping experiences that create emotional connection, emotional and entertaining connections. All of these things are defensive against kind of horizontal platform assault or being meted. You guys can think of companies that tick the boxes here. this reads.

From a Zillow perspective, this reads like a laundry list of the real estate transaction. This is one of the reasons was attracted to this transaction initially, and it is the reason I love it as we are looking, staring down the AI chasm.

All right. Next criteria for winners from losers. I look for unique content and data. This is an obvious defense against horizontals and being meted. It's also an obvious audience attractor and differentiator as well. Some companies really do have this. I put a few examples here. Most do not, however, and it takes a discerning investor to figure out what content is actually proprietary and unique and protectable and what is not.

How does Zillow rate here? A big chunk of the day that you've seen, the impressive demonstrations and speakers that you've seen today, I hope have afixed in your mind that Zillow is sitting on a giant and rapidly growing trove of unique content, unique content and data that we integrate with more commodity content to create a unique alloy in the form of listings, media and actually this double feedback loop of consumer data from the consumer side and the professional side that intermingle to reinforce each other that feed this proprietary user information into a insatiably hungry AI that just makes the experience better and better. The breadth and depth of the data that we have at Zillow, and that is accelerating in growth, will widen the lead that we've established in the industry.

All right. Almost on number four differentiator or criteria that I look for, hidden depths of industry integration. Of all the stuff you've seen today, Nicholas' demos were amazing, Cynthia laid out a great framework. Probably, you hadn't seen or known about a lot of the stuff that Cameron talked about relative to the professional, the agent and the loan officer as a user of our software, a multiple times daily user of our software. So that's probably been the most eye opening for you.

But generally speaking, I'll just summarize it, I think you get this point. But looking for companies where the -- you guys probably know this, but a physics fact, 90% of the mass of an iceberg is actually underwater.I'm looking for companies where 90% of what they do is actually underwater, where their software is insinuated and pervasive in an operating system like way into the digital workflow of an industry. I'm looking for massive use and dependence on the pro side.

Companies that are springing to mind here are, I don't know them intimately, but I would assume Carvana is this way. Expedia has a lot of this. Airbnb is absolutely this way, Shopify, Uber. This is where the user experience that we experience on a daily basis when we use the product is literally just the tip of the iceberg of what the company is.

How does Zillow rate here? It's been on great display today. There is a lot going on under the surface of the water at Zillow and more every day. Zillow, I think you've heard it, people have said it a couple of times, but we have been talking strategically about building the digital operating system for the whole of the industry, and we are well on our way to doing that.

All right. Finally, my last criterion for separating the AI winners from the AI losers, who's going to get across that ugly chasm, that image was probably produced by AI and AI is in the base of the canyon, command of the consumer funnel. I want to see companies that really do command their consumer funnel. They have huge brand strength as measured by third parties, not themselves. I want to see low churn on every churn metric or low relative to competitors on every churn metric that we can think of. I want to see, almost all, most of the traffic or customers coming to the brand directly, not via paid or even SEO channels.

A way to measure this that I particularly look at is I'm impressed by companies that have low sales and marketing spend as a percentage of revenues relative to their competitors. It's a pretty simple one. I'm not telling you anything that you don't already know. Some that I'm familiar with, Netflix and airbnb. Their sales and margin expenditures are 20% to 33% the size of their competitors, so 1/5 to 1/3 of their competitors.

And guess what? Zillow is the same. We're highly efficient in our sales and marketing expenditure as a percentage of revenues relative to our competition. Zillow is in rare air. This is one metric that I'm grabbing that just happens to be a third-party metric comp score. It's correlated to brand strength. This is just unique users. But it puts Zillow in a category of brands that are fortress brands, powerhouse brands, brands that command their own funnel and command their own destinies.

It's a little surprising almost to a certain extent given the size of the company, honestly, I've always said we cast a much longer shadow at Zillow than we are tall. And what that says to me is tons of opportunity and potential to grow, right? Here in lies tons of opportunity to grow. We have a lot of TAM in front of us.

Okay. So Zillow has no dependence on anybody upstream and we never have. It's another proof point. Another one is that Hoffman just talked about, Zillow has withstood a massive and violent competitive attack in the last few years and done so with [indiscernible]. That should be telling you something. It tells me something.

Okay, summary, my little checklist, my scorecard. Zillow checks my boxes. Founder engaged, sometime founder annoying. You're going to meet a couple of other founders right now. Check. Big complicated transactions. Obviously a big check there. Unique content and data. Check now, and it's going to be double check in the future. Hidden depths of industry integration has been on display today. It's impressive to me, and it's been our strategy right from the start. And obviously, Zillow commands our own consumer funnel.

All right. So you can tell I feel good. We have the team. We have the experience. We have the tools. We have the vision. We have the motivation. Personally, I love technology chasm crossings. I believe the teams that I've been a part of and led perform at they're very best in these moments. We've navigated across the Internet chasm. We've navigated across the mobile chasm, and now we are navigating across the AI chasm. We see it as an accelerant. We see it not as a problem but as an opportunity.

As evidence of how I feel, you may have noticed in the last few weeks, I've been a pretty serious stock buyer in Zillow personally. So I guess I'll summarize by saying I'm more fired up about the opportunity in front of Zillow now and our position relative to that opportunity than at any point in our 20-year history.

Okay. Again, thank you for coming. I'll invite Brad Berning back up on to the stage to bracket it while we get our Q&A panel together, which is the last session. Thank you all very much.

All right. I get to officially kill a few minutes while they try to reset the stage for us, listening chair. So first of all, thank you, Rich. Thank you to all of our speakers, and thank you to all of you for being here today. I think you got to learn a lot, but I also want to make sure you get a chance to have some time for Q&A here with investors and ask follow-up questions to the day.

So during the Q&A phase here, I'm going to have a few ground rules to try to help out a little bit. We're going to continue to do this live so people can actually hear this online. So raise your hand, I'll call on you, and you'll be able to get a microphone. We have 3 microphone runners that will run around that are going to be able to help you out a little bit.

Sorry, I'm just killing a minute. So our speakers today are going to be Jeremy Wacksman. It's going to be Jeremy Hoffman. It's going to be David Beitel tell. It's going to be Rich and the rare parent from Lloyd Frank as well. So I think you'll be excited to get the chance to ask all the direct questions from our teams.

So with that, I will invite our Q&A guest speakers to join us here in about probably about 30 seconds, I'm guessing. Awesome.

All right. While we're getting queued up to get some questions started. I'm going to start with one question to just get us warmed up a little bit. And I'm going to have -- Rich, I'm going to have you talk a little bit about we've talked about the future of AI, but maybe draw the through line about the vision of Zillow from inception to how AI is looking forward for you.

Yes, if you haven't heard enough from me. For me, a simple strategic insight and the through line to everything we've done in our careers, at least the 3 of us here on the end is, and you may have heard me preach about it, I call it power to the people. It's a sure thing to bet on technology and products and services that empower people, that give people more power.

And the history of technology has been the history of giving people more power and more control, tracing back to when we were kids and the PC came out. And that was really radically empowering in a really eye-opening way for a subset of us that were using those products. And then that PC got connected to other PCs via the Internet. That was another technology chasm. And that opened up a whole new host of personally empowering services like Expedia and like Zillow that enabled regular people to kind of tear down the walls of the Bastille and access information and tools themselves by which they could make better decisions.

Then that whole system got packaged into a tiny little iPhone and an Android phone later, and it became kind of a mobile version of that magic thing that has ended up turning into a remote control for our lives, a magic remote control for our lives that we can control right from where we are standing, sitting, driving, wherever. Another empowering layer.

And I'll wrap by saying, we see AI in this same way. It is the next evolution of this personal empowerment. It's a much more kind of intimate -- it's almost like an intimate and a much more kind of action-oriented, away from kind of research and control into an intimate and action-oriented technology. It will be another layer of super empowering consumers.

So I'll stop, and I'll actually turn to Lloyd because we promised that Lloyd will get some airtime, and we think you'll enjoy hearing from Lloyd. And I'll ask him what was my setup. All right. So Lloyd is our co-founder and lovingly our most super geek, okay. His role relative to AI at Zillow has been the largest token consumer, the largest single token consumer and I would say the Chief AI provocateur to every organization in the company. He's captain code red. Captain AI code red.

So Lloyd, tell me about how do we set this up. Tell me about November 30, 2022.

So that was the date that ChatGPT 3.5 launched. And I first heard about it from Rich. He said he'd seen Bill Gates at a cracking game and Bill was engrossed to his phone doing this chat thing. And he's like, what is that Lloyd? And I was like, chat? I don't know, we've seen chatbots all over the place. Like I don't really know what you're talking about. Later that week at a dinner, somebody mentioned this ChatGPT. And I was like, oh, second source. I should maybe go figure out what...

I wasn't enough for you. Bill Gates wasn't enough for you.

I felt like a little -- I know there was a little guilt, like I got to go check this out at some point. But when somebody else says it, it was like, I got to go check this out. So after dinner, I go home and open up my laptop and I open this thing up and I'm like, okay, write me a program that prints out the prime numbers between 1 and 100 in language basic. This is the first program I ever wrote on a computer and basic isn't -- this language isn't around anymore. So I'm like, okay, can it really do that? And so it spits out like 5 lines. And I was like, well, I'm like, oh, that's not quite right.

So I'm like, okay, I'm not ready to dismiss this. I see a bug in it, right? And I kind of go, hey, are you sure that's right? And then oh, yes, and it fixed it. And I was like, okay, just a second. And then I was like, okay, do that in the programming language C. And then I did it. And then I said, okay, [indiscernible]. And it did it. And then I'm like, how about Swift. Yes. How about Python. And I'm just like, oh, my god, I knew that I wasn't going to get a lot of sleep at night.

So for the last 3 years, every time a new model comes out, I lose sleep just playing with it and it's just so exciting. So I've been vibe coding for the last 3 years doing all different sorts of little projects, lot of them are kind of video games, pong games, different Atari games, et cetera. But then a lot of them are work-related things, too. I can imagine any app and I do all apps for the iPhone, and they're actually just on a website, but they work really well on an iPhone. I can imagine any of those things, and I can make it happen. It's just a magical experience for me.

How do you work? What does your cockpit looks like?

Okay. My mission control, I call it my mission control. We work from home. And I have three different monitors up there. And so I work on handful of different projects at any given time, three of them I can have open. I'd work on these during meetings. I can kind of start something here, monitoring what's going on there, what's going on there and paying attention to the meeting. But there's a lot of work that's going on in the background. And inside of each one of these projects that I have opened, it's cursors the main control panel that I have. and I use Claude code and ChatGPT. They're working together. They're criticizing each other. They actually work pretty well. Their personalities are pretty fun when you get them to collaborate together.

And then I have Databricks, where all of our data in Zillow is. And anything I could imagine, any question that I have, my lens on to our data, I can just whip up a little app and get the answers to it. It's just the most fantastic experience.

So I remember, some of you actually may have come to our Zillow Unlock event. Have people done that? A few of you. Okay, right. Nobody wants to answer. I remember last unlock you running around talking to the agent team leaders and the agents and the brokerages with an iPad open, running your vibe coded data app.

Yes. And so let me explain to you. This is...

You don't want to talk to them to learn about their kids. You wanted to talk to them to show them how they're performing.

So the way that -- when we're looking at our business, we have a funnel of the business, all the users that come in, the actions and then the funded loans and the transactions and the integrated transaction that come out, right? And so we have our funnel of all the data. And I have my particular view of that on my iPhone that I can look at by day, by week, by month and all the different charts, all the different metrics, and I have a really good sense for our business on my phone. So I want to do that for loan officers and for real estate agents and for the team, so those real estate agents.

So I have this little app. It's like their pipeline, all the data that you see on Follow Up Boss, right? And we have a similar CRM for our loan officers. They can see each other. When they're working on mutual clients, they can see each other's pipelines. But I can see their pipeline, whether or not they're green yellow or red in terms of performance. And that's measured how the allocation of leads that we're going to give them. And they just are blown away that I can just instantly say, okay, tell me about this lead, tell me about what happened in this month. Oh, you were gone since last year. What happened to your conversion there, right? That's the main metric that we look on.

And they're just like, oh, my god, you can see all of that? And they know it. And it's a much richer conversation that I can have with them and try to figure out if they have a strong relationship with a loan officer. And they realize, if they do, that those leads that have been preapproved by ZHL are 5x more likely to convert. So when you get somebody that actually viscerally understands that, you can see that their conversion is much higher, and they're much higher up on those leaderboards than other people are. So those are the kinds of conversations that I can have.

On Conversations, he's kind of the data terrorist for inside and outside of the company, right? Let's get David, but let me set you up, David. So David is our founding CTO. He was the founding of Expedia almost, the CTO when we worked at Microsoft together before that as well. .

Yes. I mean, in having a founder -- I mean, you could sense Lloyd's excitement, right? Having a founder that is so engaged and has had his aha moment, the kind of culture that created our company, right? And it's not a fear. It's an empowerment. It's a way of thinking as an employee that if there is something you need to know about what Lloyd's describing, how our business works, how our products work, how we should think about that next feature, you don't wait around for someone to bring that tool. You go figure it out. And that's just really a huge unlock.

Maybe many of you in this room haven't had that personal unlock, that personal aha. But once you do, then there's nothing you can't do. And there's certainly people around the company that can help you. So that is kind of what happens within the kind of the confines of Zillow. You are empowered. You're given the tools. The models are changing. That's awesome, right? Every time, every week of the tools get better and there is nothing we can do. That's the mindset.

I appreciate that. Not everybody in this room gets a chance to meet our founders and get to have this conversation. So hopefully, it gives you a little bit of context behind the culture, right, on AI that we're driving behind this and why we're excited about the opportunity set. And so I appreciate you guys getting a chance to share that with the group.

And it also, I think, explains to Rich's checklist, in which you have engaged founders, which I think becomes very obvious even if Rich wants to call it in...

We can wind up the section, and you can take the ball back. But I'll conclude with -- for those who were at Lloyd's lunch table or you might run into them out in the demo zone out there asking about a couple of things or don't because you..

I got a lot of different little...

One is this incredibly cool solar system app that he vibe coded that he's very proud of. That's the solar system. But the one that's more useful is all those conversations that Nick -- those real conversations with real customers that Nicholas was demonstrating when he was up there, Lloyd wanted to see all the raw conversations. He didn't want to see the AI summaries of the conversations that were happening. So he vibe coded a little iPhone app that literally has the real-time Zillow AI mode conversations that are happening right now flying through. So he can actually go inspect everything himself. So ask them about that.

All right. Awesome. All right. We'll get to your questions now. So who's going to risk the first hand? Karl, if we can get a microphone over here. And if I could ask, state your name and your firm names, please, so we may get a little bit understanding of who's asking questions, please.

Yes, of course, Matt Cost from Morgan Stanley. It's been great. I guess you're clearly spending a lot of time thinking about what the next generation of tools on Zillow might look like and experimenting with a lot of the technology. So I guess first question would be what are 1 or 2 moonshots that you're working on right now that are the most exciting? Are there virtual agents that are coming up? I mean what's happening in the bowels of Zillow using this new tech that could be transformative?

And then the second 1 are on premarketing and Zillow preview. I guess, what are the opportunities that you might get from the data of seeing people at that first point in the exploration journey of what homes are available. But then when you think about EXP signing a deal with homes and Compass and Redfin, is there an execution challenge there as well because the first step in some people's journey if they want to see that inventory now takes them away from Zillow.

Yes. Before we get started on that, I probably should have set one ground rule. We'll start with one question at a time. Trying to remember three at a time is a little tough. So we'll get to all of them. But do you want to start?

Yes. You guys can jump in. I mean I think, you saw a lot of the moonshots today, honestly. I mean if you think about the categories of where we're focusing our efforts, you saw Nicholas take you through AI mode and rich media experiences that become just much more immersive, much more realistic and drive a lot more consumer engagement. I think that's kind of one class. And you saw moonshots on the professional side, everything from what we're doing with agents, but also what we're doing with photographers and letting people do things without specialized hardware. These are things that will drive more engagement from the buyers and sellers, but will drive more engagement from the professionals that are building their business with us, and that feedback loop just continues.

So I think you'll get to spend some time with some of the demos this afternoon. I encourage you to play around with them. And then on preview, as Jeremy said, we don't really get too concerned about listings flow. Listings always flow. Previews is really response to the market and wanting to be able to bring coming soon listings online. There are so many markets where there are coming soon listings. They're a small percentage of inventory, but they start some listings. And many rules and MLSs don't allow those things to be displayed publicly. So we were -- we looked at that and said, "Okay, brokers want a way to have that coming soon inventory on Zillow." And the response even in the first week of announce has been really tremendous. I mean the broker partners we launched with, we've got hundreds more that are beating down our door to get into the program, and we'll talk about those as we're able to get those onboarded. So I'm sure there'll be partnerships and fragmentation around some of this listing supply, but one thing we are highly confident in is most all buyers and sellers, most all agents who represent buyers and sellers are going to want to find that content on Zillow to get their homes sold.

John Colantuoni from Jefferies. I wanted to ask about the potential evolution of the role of agents as it gets easier for consumers to do research on properties using the AI products that you're creating. I'd be curious to hear how you see the importance of agents and the fees that they're charging evolving over time and how this potential change could impact the way that Zillow generates revenue?

Awesome. Thanks, John. I think we'll start with you on that one.

Yes. I mean I think you heard, Cameron, I think, put it pretty eloquently. The long arc of technology come to real estate agents has been to elevate the good ones and empower the good ones to be better at what they do. And I think you should expect AI to continue to accelerate that trend. You're already seeing the rise of the more professional agent, the more team-focused agent, the one that can respond to modern clients. And you saw some examples today even of how technology lets them do that more. That allows them to do more deals at higher quality, right?

More volume and more quality at the same time doesn't normally happen. That's a real economic unlock. And the value they provide goes up in that case. And the best data point to look at there is through all of these technology shifts that Rich talked about, we ask buyers and sellers, how do you want to hire professionals? Do you want to hire professionals? What do you want to hire them for?

The percentage that want to hire help has gone up through the technology shift of the Internet, the technology shift to mobile and now with AI. Now what help they want is what's changed, right? If you asked that question in 2006, well, I got to hire an agent because he's got a book of listings that I don't have access to. So I'm basically just paying for access. It's not a great experience, right?

Now I'm hiring my local market expert, the person who knows my street better than anyone. I'm hiring a negotiator who wins listing or wins offers more often, tell me win in a competitive market, right? That's what they're hiring now. They're able to hire a better professional. That's why you heard Jeremy talk about through all of the changes that have come, the partners we work with have seen their businesses and their pricing power go up because they're good at what they do, and they're unlocked to do a better job.

Yes. And I'd just echo that. If you think about what we're building with all that Nicholas showed, it's going to better empower a consumer to understand more before they get off their couch. That means it's going to be a higher intent lead. And on the other side of the marketplace, you're making these agents far more productive because you're delivering higher and higher intent leads. So, so much of our opportunity is not just to grow the funnel that we have and grow the brand, but also mind the group of people that are already in our sites and apps today. 70% of all buyers and sellers are on Zillow today, and our transaction share is far beneath that. So we think about these AI enablement tools as way more understanding from the consumer creates a higher intent lead, creates higher productivity for the agents and the whole marketplace spins better as a result.

Bernie McTernan from Needham & Company. I'm assuming the goal of all this AI technology being rolled out is to keep the share gains going or even accelerate them. Can you talk about what's the more important part? Is it the consumer technology to get that more funnel? Is it the professional side? If you could just talk through those dynamics? And maybe the follow-up is just when this could actually start impacting the financials in a more material way?

So maybe I'll take the financials and you hit the...

Yes. And David, no issue. I mean -- I'll start, I mean -- both sides are important. It's kind of a cop-out answer, but you sort of saw it in how we organize the day, right? The consumer side is really important for driving deeper engagement, more rich conversations, as Jeremy talked about, that just results in higher quality leads if you're on the professional side. But you saw examples of that from Nicholas. I mean the depth of conversation and the tools, the depth of interactivity with rich media, those are just a couple of examples of pulling the consumers below the surface of that iceberg.

And then on the agent side, it's similar. It's tools for productivity and it's tools to unlock them to do a better job, whether you're an agent, whether you're in a team leads office doing other roles, whether you're the loan officer, whether you're the closing professional, getting that transaction done more efficiently, that lets you close more deals for the same cost. And as a small business, I know that's the #1 thing you're focused on.

So for us, both sides are important. And I think it's a great question because if you take one thing away from today, back to Rich's checklist, it is you have to work across this whole thing to build the real estate experience. There are a lot of companies that are going to attack a little piece of it are going to attack just the top of funnel of it. And I think that doesn't actually solve the problem, right? Like solving the problem is covering both sides of what you asked about.

Yes. And then from a financial perspective, it's already showing up, right? Like we started -- to Lloyd's point, we started using AI tools as soon as we possibly could in late 2022, early 2023, and it's been part of the cost structure that we fight inflation against and then look to invest in these AI tools. Those are delivering a ton of value to us already because we're seeing more growth in conversion transactions, and we're seeing that done with leverage. So I'd say it's already there. We then look and say, we're still scratching the surface comparatively, and this should be more of an accelerator on the product strategy because of the way that we're deploying it.

Mike Ng from Goldman Sachs. Two questions for me as well. First, for the Zillow Preferred Agent business, I was just wondering if you see an opportunity to increase the number of leads that get served up by selling leads to preferred agents that may not necessarily be buyer initiated, but by using all the queues and intent signals that you see from browsing data. And I just have a quick follow-up after that.

I mean I think it's -- that's more of a conversation about the overall philosophy of kind of the lead qualification funnel we have. And I think AI basically plays a huge role in that, but so does providing software and tools to help agents mine their entire business, not just their business on Zillow. And so I bring that up because I think you can take Zillow Pro as a really good example of how we might do that.

Again, you saw it today firsthand what an agent does and then what a team does who has 10 or 50 or 100 agents at that scale is they are running a small business office with a whole bunch of customers with some amount of conversion rate of those customers in any given week, month, quarter. And our ability to help them figure out who to work with and how to work with them drives conversion gains, but it also drives volume in because when they're doing a better job and they're doing a more efficient job, they're able to go grab and attract more customers. And so the tools we're building them that you saw from Cameron, those tools are the same tools they're going to eventually use on their entire business, and they're going to be able to be more efficient at the customers that are already in their database or their referral customers the same way that they're using Zillow customers. So our goal, as Jeremy said, is more and higher converting customers for agents and then more and higher converting agents to be able to work more effectively with those customers.

I'm just going to -- sorry, I want to add one thing on to. At Unlock last year, I think we had an agent who made a really good example of this. They have 350,000 people in their database. They don't have a problem on number of customers. The prioritization of which customer to call is their bigger problem. And I think you can see from the stuff that Cameron was showing today, some perfect examples of the prioritization that we're using real signals on integrated experiences that others simply cannot do.

Great. And just as a follow-up, great to see the new net income margin mid-cycle targets. I think there is a little bit of a debate about what mid-cycle is at this stage. So I would just ask like do all these tools and does this product road map give you the confidence around double-digit revenue growth even beyond 2026 if the housing market kind of stays the same?

Yes. No forward guidance beyond '26, but I would say, Mike, we feel very confident in our ability to hit those mid-cycle targets. And I understand there's a portion of that, that's in our control and a portion that's not. But the portion that's in our control is a really attractive financial return before you even get any load from housing macro. So we feel like we're well on track and AI is going to accelerate, if anything.

Jeff Meuler from Baird. Can you talk more about solution penetration rates within the rentals business? I think you did a really good job of providing a lot of penetration metrics for the various for-sale services. But within rentals, you obviously have outsized growth in multifamily. And I would think some of the larger multifamily managers are already using other vendors, accounting software providers or things like that for services you're trying to provide. So can you just help us with, I guess, end-to-end solution within rentals and where you're seeing penetration growth by solution?

Yes, I can start. I think you saw a little bit of it in Michael's but that was less of his focus today. But the way you want to think about it is, you're right in your question, the more professional segments have more tools in their disposal that they are using, and our strategy there is integrate in. And then the long tail, which is actually the majority of the inventory does not have tools and our strategy there is provide tools. And then you want those two strategies to meet where they can, right? So a good example of that is our applications product. The long tail uses our applications product because they have nothing else. It saves them time and effort. It saves their consumers' money. It's why it's preferred. And that portable application is on a growing set of inventory that's unique to Zillow, right?

A good chunk of that long-tail inventory comes to us uniquely because of tools like that. Well, the multifamily segment has an application product in many cases. And so -- but they want the benefit of Apply Now, and they want the benefit of tour scheduling. They want the benefit of the consumer experience. So we can partner with them to connect that in more places. The benefit to the consumer is they get a more consistent experience more broadly and maybe we're pulling the long tail and maybe we're pushing to multifamily to get to a more consistent experience. And I think you'll see that strategy play out. There'll always be tools that partners have capabilities on, and it's what's the value we can add to plug into those tools or provide those tools. And then over time, that tool set should provide more value across the marketplace because we have the biggest set of audience, and we have the biggest set of content to put it against.

Can I add something to a number of the questions. One thing that may not be clear that we've invested in is a framework that allows us to leverage all the existing models that are out there, but also have the people and the expertise to build very specific smaller modules and agents that help power these experiences. And so where you might see some of our competitors or some others in our space just act as a proxy to the big players, when you start looking at the richness and the personalization and the depth of the types of products we're building and the interactions and the conversations that we're having, you're going to see us separate ourselves quite a bit. And that is because we are investing in these very specific models that help drive very specific use cases within real estate. And we're just beginning on many of those, but it's accelerating, and you'll start to see us separate from the others from that.

Dae Lee from JPMorgan. Rich, when you talked about technology companies crossing the chasm, as we look at the AI chasm in front of you guys, like what gives you the confidence that Zillow will be the one to move the fastest in crossing that chasm and be able to successfully cross that chasm? And where do you think we are in crossing that chasm right now?

I mean I think I will fall back on my checklist. I talked for a while and fairly passionately about the checklist that I look for. I can run through it, maybe if I can pull it off the top of my head, but you're meeting some founders right here who are obviously very, very engaged in the company. The complexity of the transaction is a real defense mechanism relative to new player disruption and incursion, especially by horizontal players. It's real. It's not permanent, okay? But it is a real defense, which gives the companies that have these complex transactions a lot more time, okay?

Interestingly, wind back, the Netflix story that I told, the streaming thing didn't happen to Netflix until probably -- you guys tell me, it must have been like...

10 years?

'08, okay? The graphical web showed up in '96, okay? And the easy transactions fell very quickly to Internet disruption, books, airline tickets, some of the stuff that we did. And then the complicated transactions that were more bit heavy, which was the Netflix story, just a lot more bit heavy, okay? We knew it was going to come, but it was a lot more bit heavy. That was delayed 10 to 12 years before that, that transition happened and drove the DVD into the ground and then eventually cable and broadcast into the ground. So the complex transaction holds out a lot longer or the big transaction holds out a lot longer.

This kind of industry rails stuff that you're hearing us talk about and that you've seen, it's not a permanent -- being the digital operating system for workflow in the industry is certainly not a permanent defense mechanism. But it is an incredible -- it buys you a lot of time and puts you in a -- the risk there is that you get distracted on digitizing and automating the processes and people that are in place now and you lose -- you take your eye off the ball to the disruptor that's coming from the side doing something completely different, okay?

But rest assured, we have red teams that we're funding all the time that are working really hard to figure out what that nonobvious disruption is in the whole thing, okay? And we have done so since ChatGPT 3.5 launched. It was like a serious effort. It has been a serious effort for us to try to figure it out. We haven't seen it emerge from anyone else, but we watch very carefully the others as well. So anyway, on the way there, the first really interesting product from that red team that is working is actually this Zillow AI mode that Nicholas was demonstrating.

I mean, Nicholas and his team have been working on this for a long time. And they've had -- they've drilled a lot of dry wells, okay? To my and Lloyd's and David's frustration, okay? And I'm pretty blown away by what's happening with the small percentage of people that have been exposed to Zillow AI mode right now. This is the -- I think this is the aha -- I think this is the aha moment for us. I'm trying to think of what other...

I would say the productivity gains that we're seeing are real from using all these AI tools internally. There's a lot of people that are using [ Replit ], which is basically a nondeveloper vib coding tool to express their ideas. All the developers are using Cursor and Claude Code or ChatGPT or Gemini. Those gains are real, and we're moving as fast as we can to become what we call an AI native company.

Is it guaranteed that we're going to be the one? No. But I really like our hand and I like our position. I like our mindset. Now there's a lot of popular stuff happening on Twitter and whatever that says you got to fire everybody or stop everything that you're doing for 30 days and figure out who's on board and who's not on board. That's one way. And maybe if you're a lightweight shallow SaaS company, you ought to do that. But we're doing our version of that and have been actually for the last 3 years, okay? And Hoffmann able to hold fixed cost steady is a manifestation of -- while growing at the same time is a manifestation of that strategy. And it's working. And I'm pretty confident it's going to continue to work.

Yes. Maybe just to wrap because it's so core to who these folks are. We have consistently been the innovator in the category for 20 years. We have the brand that we do. It is a hard category. Folks have figured that out the last few years. It is a hard category. We have consistently out-innovated. We are the leader, and we are highly paranoid people. So when you put all that together, we feel very confident in the future.

And from a technical perspective, I mean, when you have -- when you're a leader in the space and we have the data we have and the user intent that we have and you think about the models that we're building and training, who's going to build the best personalization, Who's going to build the best models to drive these experiences are the ones that have the expertise and the data to do that in the context. So I like our chances there. We're executing faster with the productivity gains that you're seeing. So we're getting deeper in our backlog faster. And when you think about the richness of the -- and the complexity of the transaction, as we go deeper in the transaction, the kind of experiences that we're creating, others can't create. You just start seeing that when you want to take a tour.

We're giving real-time tour confirmations in app, right? I mean these are just the beginnings. But you go deeper and it just gets more complex. And the Zillow AI mode that we're building can be deployed everywhere, right? I mean it's not just -- we're not just setting filters, right? I mean you look at some of the others that are doing this, they're just setting filters. And that's great. That's better than doing it manually, but that's just the beginning.

I guess there's one more thing. We've always been threatened by the horizontal players, and there's always been a thesis. I mean, -- talked about this a little bit in his presentation. But the infrequency of this transaction makes it relatively unattractive to the ego-driven Super geeks who are building horizontal platforms.

Okay. I love these people. Like we know these people. We grew up with these people at Microsoft, and I love them. But we've purposely chosen categories that were less frequent and more complicated because we pretty much knew that it would be far down their priority list to get around to try to subsume that. And I would say, I don't know for sure, anything can happen, but it hasn't happened with the whole history of Google in real estate. And I would say it's unlikely to happen with the emerging LLM horizontals. -- is going deep on real estate and focusing on this particular narrow vertical marketplace worth the effort relative to the other opportunities they have. I'm being a little candid here, but I just think that logic has held, probably will hold. If it doesn't hold and it changes, we will figure out a way to -- based on everything David is saying and everything we presented today, we'll figure out a way to make sure we're still the winner and that we grow. But that gives -- that should give you a little bit of comfort. It gives me comfort.

And we will be there when those -- we were the first app to launch within ChatGPT, right, and for real estate. And so we're going to be there to learn and figure out what's working. But when you want to have the richness of the experience that our customers want, there's going to be a point where you need to jump into the full Zillow experience to have that. And so we're learning a lot, and we're going to be there.

These large LLM horizontal LLMs are quite excited to partner with us, and we are going to go meet our customers wherever they are. So they're there, we're going to be there.

And I'll probably just wrap this -- conversation. It gives all of you some insights. like we're having real debates. We've been having these debates for 3 years. Like these are real conversations about how we're preparing ourselves for this. And the accelerating our strategy is not by accident that we picked that as a main point of the day, right? I think you can see the why. So with that, I'll move on to the next. We got...

Nick Jones, BNP Paribas. I guess, can you speak to data moats? I think there's a fear that as AI gets deployed kind of everywhere, maybe on the legal side, a lot of the back-end information will start to kind of leak into the ecosystem. As we think about Zillow's business model, where are the really strong data moats maybe on the supply side? And I guess, how does the super app strategy play into maybe building the moat? It sounds like there's a focus on this infrequent maybe 14-year transaction, but you mentioned, I think, 65% of rental viewers also look at for sale homes, which is more frequent. So that seemingly would bridge maybe a timing gap between a 14-year transaction and a 4-year transaction or a 3-year transaction. And is that where the data moat is? Is kind of the consumer engagement data or on the supply side? Like where are the data moats? And how should we be thinking about it?

Sure. And David, you should jump in. I mean I hope you saw some of it today in some of the presentations and demos. I think the data moats are on both sides, right? On the consumer side, it's all of the content that's uniquely Zillow's. I mean the rentals marketplace, a good chunk of that content is uniquely Zillow's. The proprietary rich media is uniquely Zillow's. All of the content we augment the commodity listings with is uniquely Zillow's. But the consumer content is probably the most interesting for the AI platform. All of the data post listing content is in that 5-month period when you're actually buying, all the examples Nicholas gave you when he was showcasing, that's all content beyond the listing description with the agent wrote. That's everything from the touring data to the insights about the neighborhood to what this estimate knows, all that data, everything post kind of listing description, address and price is what the buyer is using. And increasingly, all of that is uniquely data for Zillow on the consumer side.

And on the agent side, it's all the productivity tools and data and workflows. It's everything from the showings and the tour data to the conversation insights about the buyers, the agents and loan officers are using to the loan officer workflows, like all of that data is also unique to us. So we think about it as, again, as I said this morning, it's taking the proprietary data that we all can see as users, but it's really the data below the surface, as Nick talked about in the iceberg. That's all data that you don't see when you're using Zillow unless you're a buyer or seller. And that's all the data that's richer to actually help drive the transaction and to help drive the platform to be a useful platform for buyers and sellers to use. So David, I don't know if you want to add.

Yes. No. And then, of course, that data is feeding into the models to make them better. The 3D content just alone is an incredible source for making assessment better and there are other cases. And then how we switch that data into the experiences. I mean, Cameron and others showed how we're bringing that richness into those interactions. So when you're an agent, you're seeing all this richness of the customer come to you in real time, right? I mean that's really powerful.

And it's all inside the fence. Like it's not going to be easy or possible or certainly easy for somebody to break inside the fence and steal all that data, not that they would even know what to do with it. So we have a lot -- we have an increasing amount of private conversational and click and behavioral data that is all proprietary to us. No one else is even really conceiving of this. Like they don't really even -- they're not even attempting to do this. This is a pretty audacious thing that we're building right now, and we're having success already building it.

I've seen the test results of the AI mode, right? And I think, Mary Ellen, correct me if I'm wrong, we're working on getting beta test out to the audience, right? And so you able to test some things. I've seen the 31 different quality tests that we run through there. And the personalization that we can get versus other things we're testing against are very tangible and very real. You saw that, I think, in both Nicholas' experiences as well as Cameron's experiences today, right? You can see those are incredibly personal experiences, right? That's the differentiation of the data. At the end of the day, it's all the context and content and the integration all coming together.

Yes. And just to wrap there, maybe we can go to the next question. Our ability to build that experience is uniquely ours. Horizontal LLM, a player that's playing at the top of the funnel just doing lead generation, they can't create that agentic experience all the way through the transaction and all that data feeds all the way through. So you just get confidence not only against the horizontal, but also those that are in our competitor space that are nowhere close with respect to assets and data differentiation.

Alec Brondolo from Wells Fargo. I think as I observed the AI mode demo, I think the interesting thing about AI mode is it goes from the customer finding information on Zillow to Zillow potentially making recommendations about how they should approach the transaction. How do you think about the potential channel conflict that introduces with the buyer's agent? Like where -- what should the buyer's agent be advising on? What should Zillow be advising on? And where is the line that you draw and say, "Hey, we don't want to be part of that part of the transaction because we need to maintain value for the purchaser of the...

Yes, it's a great question. There's no conflict. I mean that goes back to the philosophy. So go ask our preferred agents. Every time we invent a technology to hand them a higher-quality lead, they go, thank you. When can I get more, right, from real-time touring to the buyer's agency agreements to preapproved connections, which Lloyd talked about, and they first go wait, why are you doing this? And they go, "Oh, that's a 5x converting lead."

So it's the same thing. It's kind of the question earlier. Great agents want to spend as little time as possible, repeating themselves, doing the busy work, doing the automated follow-ups, they want to spend time closing more deals. And if we can hand them higher-quality customers and AI mode will do that. The more we can help prepare a customer, you saw even the experience, like that first customer asked so many more questions and then said, now I want to book a tour. And that was the meeting of the agent, and that customer is going to be even higher converting for that agent. So we see this as a conversion gain and our agent teams will absolutely see that way. That's how they've seen all of these software tools.

Yes. And maybe just to put some context, let's say we hand an agent 100 consumers today. We convert those 8 or 10 of those folks convert into transactions, just given rough numbers. That's 2 to 3x anybody else. If you look at third-party data, there's still 90 of those folks that are not converting. And our whole opportunity is make more and more of those folks higher and higher intent because it allows the agent on the other side to be more productive. They're spending less time with people that actually aren't going to transact. That's where we get more and more excited. And we're not in conflict because our conversion rates can still go so much higher as we make people more and more thoughtful on what they're buying.

Question for the audience was if it was 8 to 10 before IMO, like what could it be with this?

I don't think we're putting a target out there, but the march we've done from wherever we started to quite a bit better than the rest of the category as a result of all the technology innovations, this will be yet another one.

And we're getting towards the end here. So I think we're going to have one last question here, and then I'll have you guys wrap and then I'll give you guys a little bit of details on next steps.

Mizuho, Jack on for Lloyd. The follow-up boss demo looked really impressive. How much of this is effectively already in the business versus tools where there's more adoption or further product improvement ahead that can unlock better conversion rates for agents looking ahead?

I mean it's a mix. I can start and -- Is Cam in the room?

I can start. I mean it was a mix, and I think he highlighted that, and you'll see some of that if you go outside and play with some of the tools, too. Some of these capabilities are out live. Jeremy talked about we shipped features to initial users and then we get them out to the rest of the users because they claim be for in a week. Some of these are capabilities we're piloting and testing. But the through line on all of that is they're all features to drive improvements in efficiency and conversion and effectiveness of the agent and to drive higher quality for the agent. That's kind of the overall grouping of them that you saw. This is all about, as Jeremy said, how do you know who to talk to and how to convert the folks you want to talk to, both from Zillow customers and from the rest of your database. And there's a long road map ahead for helping them do a better job of doing that.

Yes. Awesome. We're going to wrap here and say thank you to all of you. Thank you to all of you. This concludes our morning session. We're going to have some live demonstration at kiosks that are outside that are going to be open for about the next 90 minutes. Then we're going to start lunch in about 30 minutes, up one floor, right, Mary Ellen, correct? Up one more floor for lunch. There, you're going to have tables where our leaders are going to be there for -- be able to continue this conversation. And you'll find that some of you have assigned seats on the back of your tags, so you'll know what sheet to see that for some of the leaders we have. But we also have some other leaders that are in the back of the room that lead a lot of the actual execution on a lot of this as well. And so there will be an amazing group of leaders to be able to sit down and have lunch with and welcome for you to continue that to be able to better understand our business. So thank you very much, everybody. I appreciate this morning. Thank you.

Welcome to Bernstein's TMT Conference.

Thanks for having me.

Absolutely. I'm sure many of you in the room already know Zillow. It is one of the leading online portals to search, discover and now increasingly transact when you're in the home buying process and the rentals process. The business continues to evolve and sort of expand its reach across multiple different services within the housing ecosystem, and we're going to get into all of that today.

Jeremy, I'd love to kick it off with maybe a look back, right? You just wrapped up 2025. The business grew about 16%. Adjusted EBITDA grew about 25%. You've seen GAAP earnings now start to come through on a more consistent basis. Look back on last year, what went well? What are areas that you're looking to continue to improve upon as a senior leadership team as you look ahead as well?

Yes. Yes, we're really pleased with how 2025 went. Business grew, like you said, 16% overall. EBITDA grew 25%. We were a GAAP net income profitable in all 4 quarters and for the full year, which was an important goal for us as a company. When I look beneath those overall drivers, we see green lights across the business. Our for-sale business grew quite nicely versus the market.

Our rentals business grew 39% year-over-year. And then we're doing it with good cost discipline. So we're able to expand margins by about 200 basis points. And all of that put together against the housing market that is at 40-year type lows. So that all feels quite good in a very fluid and dynamic market. The business execution has been really solid.

And as I think about your financial framework for this year, it feels like more of the same is in order. You've talked about mid-teens growth for 2026, a little bit of margin expansion, but there's various components to your guidance and your framework for the year. Can you walk through that a little bit and the key variables that you think would push you above or below on some of those metrics? .

Yes. So we are expecting mid-teens growth again this year with not much coming from the housing market. So again, really good growth against a fairly depressed market and expecting to expand margins at similar rates to what we did last year and the year before. So the formula is the same in many ways. Beneath that, we are expecting rentals to grow another 30% or so in 2026. And that's on the back of it growing 39% in 2025 and 27% in 2024.

So that business has done really well. And the for-sale business across residential and mortgage, we're expecting good growth again, too. So from a revenue drivers perspective, it's really the same strategy that we've been embarking on, which is taking all the great demand engagement that comes from having a brand as strong as Zillow and turning more and more of those folks into transactors. That's the strategy. That's what's driving the growth, and that's regardless of what the housing market does.

Underneath the cost drivers, we're expecting to hold fixed costs effectively flat with inflation. We've done that since the second half of 2023. That's been a really good discipline for us, and we're able to continue to find ways to accelerate product development while keeping the same number of people. And then on variable, we grow. We're growing faster in the first half of the year than revenue, and that's really on the back of rental sales folks and Zillow Home Loans loan officers.

But then we expect that to come closer to in line with revenue growth in the second half of the year.

And on the variables that would push you above or below, is that predominantly would you say macro driven? Or as you look at the product road map? Or are there things you're excited about that can be pulled forward if they're going well?

I think on the products side, everything like feels quite strong, right? You look at the metrics across the board and the strategy that we're going after. It has been able -- like the strategy is working quite well. We're executing well. So from a product perspective, we feel good. What would be a boom to us. We're not counting on it. We didn't model it, but what would be a boon to us to extend further would be some bit of macro recovery.

But when we plan for the year, we plan our cost structure and we plan our revenue plan around consistent kind of not much changing in the housing market.

Yes. I think that's about as far as any of us can see out right now so that makes sense. You've described to the point of strategy, you've described it as becoming increasingly a housing super app walk through that vision a little bit more? Why is this the right strategy and vision for Zillow in the long run? And how do you think about some of these various initiatives coming together?

The whole goal for us is to be all things housing to consumers in the U.S. how we do that is we take a lot of great brand engagement audience and 80% of our audience is brand direct or is direct, I should say, less than 5% is in SEM. So just to give you a sense of the strength of the audience, it's 65% to 70% of category share, depending on how you -- depending on the month.

So all of that has been built over 20 years. It gives us the opportunity to then go deeper into the transaction funnel across buy, sell and rent and increasingly create more of an operating system for the real estate transaction overall with some of the software and tools that we've either acquired or built over the years. So that all makes good sense to us from both an offense perspective and then also defense perspective as well.

The further we get into the vertical, the more we're in the guts of the transactions across rentals and for sale, the more durable, we think the offering is. And that's been a strategy in some form or another that we've been on for almost a decade at this point and makes a ton of sense to us, and you're starting to see really good results that come out of it as well.

And bringing some of these factors in-house, right, bringing mortgage in-house, bringing aligning how you monetize with agents. Is it -- should we think about this as sort of improving the quality of service at the end of the day and improving conversion rates around the business at the end of the day?

In a lot of ways, yes. I think we want to have best consumer experience, and we want to align those folks with best real estate professionals, which is not that hard a concept to think about, but it is hard and practice to do. The learning we had 2017 or so time frame was back when we were just doing pure lead gen. Like somebody would just submit their name, submit their phone numbers, submit their e-mail and off they went.

What we learned at that point in time, consumer wasn't getting called back 50% of the time. Like that is just not going to work for a long-term value proposition. We can continue to aggregate demand, but if consumers aren't getting what they want and agents aren't getting what they want, we're going to have to figure out something different. And that drove so much of what is now a much more deeply verticalized transaction-based business.

And you're right to say that alignment mechanism of real estate agents, we get paid when the real estate agent gets paid, has been really good to drive just alignment and then it allows us also to keep pushing on conversion to make that experience better for consumers. It makes it better for real estate agents as well if they're converting more customers. And then you do it in an integrated way with mortgage and closing and all the other services associated with it all inside their Zillow app, that ends up being a far easier consumer experience and a far better agent experience.

That's probably a good segue to a broader topic around AI as investors are now trying to evaluate which business models have moats that are durable and which ones are more susceptible to change. This AI disruption narrative, which started significantly in software is completely bled over into consumer Internet now. And I think if I were to frame very simply what the bear case would be is that, hey, housing data is, in fact, commoditized, and there's not a lot of proprietary information in this industry.

And there's a risk over time that the way you search and shop and engage with agents and go around a home transaction might change in the long run. I know the company recently put out your rebuttal to the AI bear case and where you think Zillow adds value and why you think it can be a positive for you. So can you recount some of that a little bit? Why is the bear case wrong in your opinion? And what is it missing?

I think it's obviously like very hectic time in the capital markets at the moment. And whenever technology shifts occur, there is, okay, how does this all play out. And how do you think about a future state. So I don't necessarily think of it as like their case, bull case, it's just how do we feel day-to-day on what we're doing and why do we feel like we're advantaged as a result of using generative AI. Start with the top of the funnel on the brand. So brand is very strong. Consumer preference has never been higher for us. 80% of our traffic is direct. 65% to 70% depending on the month is of real estate shoppers that are coming to us.

So that feels very good. The term Google -- excuse me, the term Zillow is more often Google than the term real estate. Just to give you a sense of like how much Zillow has become a verb. So that is a great start, but it's not the end, right? How people first discover real estate listings, that has been commoditized for a very long time, right?

Anyone that signs up as a brokerage can get access to all the inventory. We've been competing in that world for 20 years, where we add value is far beyond just that first search. It's start -- let's just use the user journey, the buyer journey in this case. It is then understanding the -- what's actually going on inside the house. We have proprietary technology that captures 3D images, floor plans, walk-throughs, that's on 10% of all listings today.

That has grown quite nicely. So that's a richer experience than a typical just photos on the Internet. And then you go down the funnel and by the time that somebody is looking to actually transact, the first thing they want to do is tour the home. We own showing time. Showing time power is 90% of all tours in the country. The experience is different than anywhere else on the Internet. If you look to take a tour, right? So that's proprietary to us. That's interesting data that makes our LLM smarter.

You then get prequalified or preapproved. We have Zillow Home Loans. We're doing that today. You then work further down the real estate agent who is going to meet this consumer works and Follow Up Boss. 100% of our preferred agents use Follow Up Boss, which is CRM that we own, that has interesting and unique data to make the LLM experience on Zillow, even stronger.

And then you get through offer rating Dotloop, which we own has 50% of all offers in the country go through Dotloop. And then we're starting to ramp up Zillow Closing. So you put all of that together, and there's a lot of interesting data and unique data to us, not just at the tippy top of the funnel, but all the way through the transaction that allows us to make our proprietary LLM smarter. That will be the experience on Zillow over time. And that's pretty well differentiated in a real estate category that is highly fragmented, highly complex, infrequent and messy. We're doing all that.

We've been doing it for a very long time, and AI just accelerates all of what I just articulated. I think one of the things that I've realized over the past 2 or 3 weeks as this has been a bigger conversation is so many of the investor community doesn't use Zillow the way that we get paid right? So if you look at it and you use Zillow solely to just search homes at night, that's not how we get paid. We get paid all the way through of what I just articulated and part of why we're doing this AI day on March 24, is to really expose that entire transaction life cycle and really understand from a buyer, a seller, a renter and an agent what is their experience within Zillow's ecosystem.

It's wonderful for me to talk about all the things I just talked about. But until you feel it, until you understand what we actually do and how we get paid, the quick their case will be, oh, but what if somebody gets MLS data. Like, okay, like somebody's going to get MLS data, they will get access to photos, that is a world we have lived in for a very long time. We've built so much more value all the way down the transaction, and that's how we get paid.

So we see it as this really substantial accelerator for us because of all the unique data that we can feed into our own proprietary experiences, but we've got to go prove that out. And it's important to be out and chatting with you all while you're trying to figure it out.

You mentioned their Zillow proprietary LLM or some sort of experience. When do you think we can start to experience that as consumers using more conversational search in the home search process. I think I could see that being a differentiator for certain portals that are able to get to that point. And it's eventually going to become the consumer expectation on search across almost anything I would imagine as you look out 5, 10 years. So when do you think we get there and the level of investment and product development required to make that happen as well?

We're live now. We're testing it with a small number of users, and we're testing with a small number of users because it just has to keep getting better, right? Like you don't want to just -- and when you're releasing something like that, that could be pretty transformative for us.

You don't want to release it very widely, and it's not a great experience, right? It has to get better. So we are live now. But what's unique about what we are doing, and you'll see more of this as we get to our AI day. What we are doing is not just chat bot about a listing it is an assistant that takes you through all of the transaction process. All the things I just articulated our assistant will guide you through that.

So it is not just, hey, what is going on, on this property and how many homes does it -- or how many bedrooms does it have, something like that. It is here's what's going on with the home, let's help you understand that. And then when you're able to take a tour, we're going to facilitate that. And when you're going to meet a lender, we'll facilitate that. When you need an agent, we'll facilitate that. And all of the proprietary data that comes into those experiences, we're going to guide you all the way through the transaction process.

That's going to be really hard to replicate because of the brand scale we have, the audience we have and the unique data that flows through. So that's where we get really excited. The other thing we get really excited about in that future experience is it really widens the aperture for us to interact with consumers, right? Today, a map-based search with filters, it's great. It's as good as it can be, but there are a lot of questions we can't answer.

And even in the early days of testing our identic experience, you're seeing these really rich conversations that would otherwise have no possibility to do for a consumer. So the amount of queries come up the amount of time you spend on Zillow comes up, and we're going to make you more and more qualified so that when you're ready to meet a real estate agent, you are really understanding what you're doing, which ultimately will mean higher conversion, which is a good thing for consumers and obviously a good thing for agents. So that's what we get really excited about.

We've got to go prove all that out. But it's pretty obvious to us that it's a big win because it likely is going to have people spend a lot more time with us through the shopping cycle. And in real estate, it's a really long transaction cycle. There's a lot of starts and stops. It's not just like buying shoes, it's -- you're going to go and make the biggest purchase of your life. Let's have Zillow alongside an Agentic experience that can help you through that discovery process and also help you through the entire transaction process.

Do you foresee any risks or changes longer term to the role of the buyer agent, the human agent in these connections?

I think our view is work with productive agents, work with the best agents in the country because a real estate transaction is so infrequent, so expensive, such a big part of your net worth and so emotional. People like advisers there, and they like good advisers. So that's what we have oriented the business around. 2015, we were -- let's bring as many real estate agents as possible on to the platform to work with our customers.

We've been pretty significantly calling that to the point that now 20% of all agents do 80% of all transactions, and we work with that group of people. Our perspective is all the things that we've just talked about and AI can make them more and more productive and the more and more productive agents who are using our technology who are working with our highly qualified consumers end up being the winners.

That's been a story for a longer period of time, like we've been on that journey for a long period of time. We think AI pushes it even further so that we can take so much of the busy work out of their day-to-day and let them work with consumers and do what they do best. That's our expectation. Our expectation is you're still going to want that advice. At the end of the day, you're going to want a human being on the ground to really be your therapist through a big purchase. We're just going to do as much as we possibly can to have that be the real estate agent's job rather than the busy work.

And we do that follow of is a good example. We are now allowing the AI to listen -- obviously opted in, but allowing the AI to listen to calls that agents have, type up smart messages, give them text messages that allow them to not have to go and write all their stuff down. Like we're saving hours a day already with like fairly rudimentary stuff comparatively. And we feel like we can make so much more productivity gains as we get smarter and smarter with the LLM.

The core part of your enhanced market strategy is that you bring the various pieces of the business together between Premier Agent, home loans, again, software services for these agents. And you've talked about 44% of the connections are now happening through these enhanced markets. The ambition is for that to be 75% plus. What variables dictate the pace at which this strategy rolls out, which aspects of it take longer to build as you think about that road map?

The biggest gating item for us in terms of rollout for the enhanced market is getting the integration between the loan officer, the Zillow Home Loans Loan Officer and the preferred partner agent. That relationship has to be really good. It's a mutual sales cycle where an agent and a loan officer have to work well together, and they have to service the mutual customer really well, and building trust takes time. .

Like you really only get -- if we want a shot at the mortgage business and we ask a real estate agent to give -- help give us a shot and work with mutual customers, they have to believe that we're going to do a good job. And you really only get 1 chance at a first impression, particularly in a real estate market where transactions are hard to come by. So we're going to be methodical there. We're obviously moving as fast as we possibly can. But getting the mortgage integration with the real estate agent, right, is what paces the move into the enhanced markets.

On that point of mortgage, what is the long-term ambition for how big and significant Zillow Home Loans can be for the business? Where do you see it going? And what's the general aspiration there?

Yes. And for context for anybody that's not as deep in this as I am, we grew mortgage 53% this past year on Zillow Home Loans that is. And we are now probably just around the top 25 lender in the country. So we've made good progress over the past few years. but we're still basis points of share. The mortgage market in purchase is extremely fragmented. The leader in the space maybe has 5%.

So we look at that and we say, we should be one of the biggest lenders in the country. We have great technology. We have a great brand, and we have really good real estate agents to pair with the mortgage product and an integrated experience. we're growing quite nicely, but the opportunity set from where we are today, which is great and growing and all the things, but where we could be is a lot bigger.

And it's on the back of really fragmented marketplace and one that we should be able to grow quite nicely. We haven't put out some long-term target around it, but our ambitions are to be one of the biggest purchase lenders in the country.

If we come back a bit to the residential portion of the business, it's undergoing a bit of a business model shift, right, from market-based pricing, which is your traditional lead generation model to now preferred which is more of a transaction-based sort of revenue or commission share agreement with agents. Can you just talk a little bit about how that transition in the business model impacts your sort of relative performance, right? My understanding is there's a bit of a J curve as you move people over. You may be upfront lose a bit of co-marketing dollars. But then over time, as transactions happen, you should be making that back. And we talked earlier about incentives being aligned longer term as well. So can you walk us through that piece a little bit?

Yes. So whole strategy is delivered a tone of consumer value, deliver a ton of partner value. We think the best way to do that between buyers and real estate agents is to align where we get paid when they get paid. So that's the preferred model. That is the model that will be the majority of the business and growing to 75% plus, as you highlighted earlier. .

As we go through that, what we're doing is we're changing the revenue from prepaid advertising to sharing at the commission. What happens there primarily is just you go through a point in time where the mortgage revenue from Zillow Home Loans comes later because the transaction happens later. Whereas, when you referenced co-marketing, that's where a mortgage lender is paying alongside a market-based pricing advertising model, that happens at the same time.

So what's different is you start to see the mortgage revenue come in a little bit later. And we go through that model shift. It's we knew that, that was going to happen, and it's totally comfortable, and we feel really good about the growth of our residential business our for-sale business, which is the combination of residential and mortgage and obviously, total company, but we are going through that shift and there's just a lag in the revenue that comes off of mortgage as a result.

And how do you think about the monetization of the residential, like the Premier Agent piece in new model versus old model? Does that eventually, over time, get better with the new model? And how do you -- what have you learned, I guess, from the markets that have already gone live with this?

Yes. The key there is more transactions, right, driving more transactions. That's through a combination of bringing more people through and also higher conversion. And we see across these enhanced markets, continued conversion uplift, and that makes us really excited about it, why we're moving as fast as we can. And then we're also seeing consistent adoption of Zillow Home Loans.

So the 2 key metrics regardless of MVP versus preferred or any headwinds in luxury versus first-time homebuyers like market will always move around. The key to us, what we look at is cancel all that noise out for a second. It's are we converting more customers and are we adding more revenue per transaction.

And we're seeing that consistently feel good about it and why we're running as hard as we can at the enhanced market opportunity.

It's obviously a tough macro backdrop to be running against. You've got existing home sales that are bouncing along this $4 million number, give or take. On the last earnings call, I heard you sound more optimistic about the backdrop than I think in previous periods, the main factor being affordability is starting to get better. What are you seeing with your agents on the ground? What's the feedback on -- from operations on the ground around affordability? And how that is feeding into your broader view of existing home sales for this year?

Yes. So we did not model much of anything in terms of macro improvement, where we are a little bit more excited is your point on affordability, which is we're starting to see wage growth outpace home price appreciation, and we're starting to see affordability come down as a result. So at the peak of unaffordable 2 years ago, roughly 38% of your income was going towards housing, that number at the end of December was 32%.

The magic number from economists is around 30% that you start to say, okay, this feels affordable. So we see affordability getting better. It's on the margin, right? Like when I say maybe I'm a little bit more excited than I've been in the last few years, I don't expect some ramp up in a way that we see 5 million or 6 million home sales this year, but I do think their affordability on the margin is getting better. We have not seen that play out in activity yet in this winter, but some of that has been weather related.

Like it's tough to put your home in the market when there's 30 inches of snow type stuff going on. As many of you, I assume, I have felt.

It's on the way to this conference in particular. I think you've talked about a $1.3 billion revenue opportunity as the market hopefully eventually recovers to that $6 million a year normal cadence of transactions. What are the underlying assumptions you've made there on market share in that bridge?

They -- the market share assumptions are we stay where we are, like that is just purely a macro move. We thought that was the right way to think about it. Like we tried to isolate -- these are our mid-cycle targets. We try to isolate what's totally in our control and then what's macro, and macro, we didn't expect that we would have more share, which just said, the share that we are, you get the macro improvement. What does that mean? .

Obviously, we want to take share. We expect to take share. But when we put that assumption in, we want to be as intellectually honest as possible.

Maybe a quick aside and a reminder for folks in the audience, if you'd like to submit questions, you can do so via the QR code, but I have plenty more here that we'll get into. On -- we've talked a lot about the For Sale and -- For Sale piece of the business. If we switch gears a little bit to rentals. This is a portion of your business that's doing quite well. You've talked about 30% growth this year even as you start to lap that arrangement that you struck with Redfin last year. So good underlying growth there. Supply continues to grow. How do you get from the $600 million-plus revenue run rate to that $1 billion target? When you think about the components of supply mix shift as you upsell customers on more premium plans and then pricing on a like-for-like basis. Walk us through some of the components of that longer-term target.

Sure. And maybe I'll zoom out on the rental strategy first because it is pretty unique and interesting. In For Sale in the country, there's the MLS. That is the organizing function of supply. In rentals, there is no MLS. Our goal is to be the one-stop shop for all things rentals.

That's what the consumer wants. The consumer wants to see all homes for rent that are single-family homes, and they want to see all homes for rent that are apartments or condos or whatever else. So that's the strategy we've been pushing on. We now have over 70% of all the single-family homes in the country on Zillow, which is primarily unique to us as well. So going back to some of the questions around content, rentals, single-family homes, primarily unique to us. That drives really good traffic because we have more selection than anyone else.

So it allows us to drive organic traffic. That organic traffic allows us to show up at a multifamily operators office and say, we should be taking your apartment buildings on Zillow as well because we have more traffic and higher quality traffic than anyone else. So that in a nutshell is the strategy. It has been a labor of love for a long period of time. Single-family home rentals are very hard to fund and very hard to make unique, but we've been able to do it quite well with great product ingenuity and brand. And now we are really well monetizing the apartments portion of the rentals market. And that's been really the main driver of growth the last few years.

Stats wise, we are now at 72,000 buildings as of the end of -- as the end of December, that's more than double 2, 3 years ago. So the growth has been really strong, and that's translated quite nicely to revenue. So revenue grew 27% in 2024, 39% in 2025, and expecting to grow 30% in 2026. How do we grow further, right? So we're -- the rentals category for us is $630 million at the end of 2025.

We've been quite clear that we have a clear path to $1 billion plus in that business in these mid-cycle targets, and we think there's a far bigger business to build beyond that. The way we do it is continue to add more buildings where 72,000 buildings out of an addressable market of 140,000. So we need to keep adding buildings. We need to keep adding value such that existing buildings and new buildings want to spend more money with us. And that's just through really good ROI. And that's -- those 2 levers are the ones that we think about growth from here. We have been -- we have best-in-class ROI, and that's by design. We want to be able to be a preferred advertising source for these operators across not just Internet listing sites, but also they spend a lot of money with folks like Google.

And they're telling us that our ROI is better than anyone. So it's like, okay, let's go get the share of all of that as best we can. That really is going to come down to, can we keep adding more buildings adding more -- adding wallet share, and that's going to come off of like can we fill more leases? And can we keep growing traffic, which is that's been a good formula, and we think it's a really good formula from here. We're a lot less focused on pulling price because we think there's so much wallet share to go get and so much market to still get.

Do we know what the ceiling on building count or volume count can be?

Yes. So the addressable market is 140,000. I think when you get into the tail end of that, there will be things like senior living and student housing, things like -- so it's not going to be all big apartment buildings in New York, but we think there's still plenty of apartment abilities to get. And again, if you zoom all the way back, we want to wake up in some time in the future and have most, if not all, of the rentals, no matter what it is on Zillow because consumer wants that.

And if a consumer wants that, and we become the one place for them to go look for a rental because we have all the inventory, there are a lot of business opportunities for rentals beyond just multifamily advertising as well.

And with the single-family homes, is there a monetization opportunity there as well? Or is it -- should we primarily think about it, as you mentioned, traffic acquisition and then it feeds that overall network effect?

It's primarily traffic acquisition and network effect. We likely monetize it today, but a natural question is like why have we been able to build so much supply, why have we been able to get so much of it unique to us. You cannot sell. You cannot build a sales force to sell into the dentist in the middle of the country that owns 2 rentals.

Like there's no enterprise sales effort that you can possibly do. You have to be able to attract that person via brand. So Zillow's brand known for housing, like is a great start. We have a bunch of these people already on Zillow. We've been able to attract them that way. We then make the ability to get leads to take payments to create leases, all effectively free to that landlord.

So they're able to basically fill their vacancy on Zillow without having to pay any money, that's huge value, and they don't go anywhere else because they're satisfied. So that's the supply portion of the single-family homes business. On the consumer front, the way we monetize is via an application, primarily.

And that application, if you're in our network, you pay one time and it travels to any home that's for rent in the network. So it's a common application, which is a real benefit to a consumer. They don't have to apply all these different times. The 1 application they take goes throughout the network. So that is how we created it. It -- we started that in 2015, '16 something in that time frame. So it's a long slog, but it feels very, very durable, and it's now allowing us to grow the business substantially with multifamily operators as well.

Speaking of rentals, one of the aspects that investors have been debating recently has been around some of the regulatory or legal headlines that have hit the business in the last few months. One of them has been specifically focused on the rentals business, which is the FTC case that is placed against the arrangement between yourselves and Redfin. Any impact on how you were thinking about running the rentals business this year, right?

And given there is some sort of pending risk that maybe that agreement has to be unwound, how does that influence how management and the sales teams on the ground think about upselling these customers into your broader distribution, which I imagine is a pretty strong pitch you can make today. But if that's in question, how does that change your day-to-day?

Yes. So I can't comment on active litigation. What I can say is we feel really good about the partnership. The partnership has worked really well. We obviously feel confident that we're going to grow from here and expect to grow 30% in 2026, bringing Redfin on as a source of demand has been great.

They've done really well with us. And obviously, our partners really like it because we're perceived to be best-in-class ROI. So all of that is working quite well. With respect to the case, the we feel good about our defenses is maybe the best way I can say it. From a consumer perspective, it's pro-competitive because Redfin and its sites pre partnership had 20,000 or so buildings. They now have 72,000 buildings.

We are actually competing for traffic with Redfin. Renters are seeing more inventory in more places. That's procompetitive. And then on the property management company side, the payers, they're seeing best-in-class ROI. So we've been able to do both of those things. We're happy to defend ourselves and explain that, but feel quite good about the defenses because it is so pro competitive on both sides of the market.

Yes. I appreciate there's not much you can say at this point. I guess the one other case that has come up to some degree recently has been around the RESPA case or the dynamic in the enhanced markets between the Premier Agents and the loan officers. So similar question there to the extent that you can talk about how you feel about your position in that? Just any changing views on how to operate and manage that relationship between those 2 sides of the business?

Yes. The case itself, we find is deeply mischaracterized the business. So we'll put the case to the side. But the -- how do you operate within the framework of RESPA is something that we think about every day and something we thought about since the moment we started in mortgage because Zillow is a big brand, and RESPA a gray area at law. And we knew Zillow being a big brand was going to have scrutiny around RESPA and we've designed programs with that in mind.

When I think about what we're doing from a consumer perspective is we're giving folks choice, right? We think an integrated transaction is the right one because it makes it easier for a consumer to transact, but there's obviously a ton of choice that comes alongside that. And that's backed up by the fact that we're double digits adoption rate, which we're proud of. We're double-digit adoption rate in Zillow Home Loans, but that's a portion of Zillow customers, meaning anywhere between 85% and 90% of folks that of -- consumers that go and work with our Premier Agents aren't using Zillow Home Loans. So there's obviously a ton of choice there. And we expect that to be the case going forward. We're always getting, people need choices. We think we -- if we compete well on price on service and on technology, we hope to win that business, but we're doing it through those means rather than anything beyond that.

And in terms of the ability to improve attach rates on mortgage over time operationally, what do you anchor on? And what's the ambition there for that relationship growing?

It's going to come down to can we deliver a great consumer experience on Zillow. Can we help people better understand what they can afford, better understand the value that they can offer home, all those sorts of things. We should do that on Zillow through things like viability that we've built and others that will build in the future. Such that by the time you're ready to get off the couch, you're actually preapproved with us. Like that's a great outcome. That's a smarter buyer, that's a more high quality buyer and ultimately likely a more high converting buyer as well.

So we've got to do that. We've got to be competitive on price. We are competitive on price, and we've got to deliver service such that we're closing on time and doing all the things necessary to make sure the transaction actually gets done. That's how we win here. And if you go back to like what is the mortgage opportunity that's the opportunity, right? It's brand, it's technology experience and then it's delivering great service. And because we are -- we are one of the key places that people start their home-buying journey.

One of the key questions is understanding what you can afford. And that gives us a grade into -- to get people to use the Zillow Home Loans and then you pair them with a great real estate agent, and then it all comes together quite nicely and is the building blocks of what we've already been doing.

Switching gears a bit to margins. I think what we've seen from the business recently is that there's been more consistent margin expansion. This year, we talked about 200 basis points or alluded to the last couple of years as a framework, which pointed to about 200 basis points of margin expansion, and that includes some legal headway as well. And so it seems like the underlying margin expansion of the business is actually getting better even with the increased litigation costs. So can you talk about what's happening there? And what's helping that? Are we just at a point of scale now on the revenue front, coupled with just culturally how you're managing the cost base overall? Like what's allowing the margin expansion to get better on a core underlying basis?

So I'll take the legal one first and then go to margin expansion overall. The -- we are -- we have about 200 basis points of headwind we estimate in Q1 around legal expenses. The reason that is, is because the Redfin Matter, FTC matter, we just talked about is fast tracked. So we'll be in that trial sometime over the summer, is what we estimate. And as a result, we're compressing a lot of time to get ready for a trial in a short period of time.

Usually, you have 3, 4 years for these things, and we have, whatever, 5, 6 months. So that's why it's heavier in the first half of the year. And then we expect it to tamp down in the second half of the year and be ultimately 100 basis points of drag to EBITDA throughout 2026. Underneath all of that is just really good cost discipline that we've had in views in the company for almost 3 years at this point.

And that's -- yes, it's cultural at this moment. Like every year that we get into annual planning at this point, people know the fixed part of our company is going to be flat, like we're going to continue to push on getting more out of the same number of people. And we're able to do that by good prioritization and thoughtful things like that, but also AI helps us there, right? Like we are not by any means slowing down.

If anything, we've gotten faster at product development, and you've probably seen that if you followed us the last few years. The product development is ramping, and we're able to do it with the same number of folks as a function of some of it being AI-related.

Does the AI aspect -- as a CFO, the world is changing very quickly as you kind of look at the capability of these tools and how you think about managing resources. I mean how is your world view around this changing? And do you envision being able to do a lot more with less at a quicker and quicker rate? Do you envision running even leaner? Like how do you think about just what all of this means for the productivity of the Zillow workforce?

We think the opportunity for us is far bigger than we are today. So we start with, let's invest in all the places we think we can grow, right? So underneath that flat construct, there's a lot of ups and downs associated with product development. At the moment, that has worked really well for us. Now if tools change and we can do better, great. But I think the ability to take savings, reinvest into product development and run after these really, really big opportunities. That's been the goal the last few years, that's what we've executed on.

We've been able to drive really nice leverage in the business. We've expanded margins 200 basis points in 2024, expanding margin just 200 basis points at 2025 and expecting a similar framework for 2026. And we've been able to do that with growing the mortgage business the way that we have, the rental business, the way that we have, introducing listing showcase, introducing Zillow Pro, like these are really impressive things to do, adding all these features and follow-ups, like all of that speed, agility and new product development is happening with the same number of people.

And it's allowing us to grow revenue in the mid-teens despite a housing market that has been really, really challenged. So that feels like the right formula. To the extent things change over time, and we can do more, we'll obviously look at that. But the formula of like, let's do more with the same. I think one is a great imply message. And two is a really important message for long-term growth of the business.

And in terms of those core product development or investment areas for you in 2026, does it look the same? Are there other ones you would highlight in terms of focus areas?

I think it's executing on the same strategy that we have talked about for a while now. We need to grow our residential business. We need to grow our mortgage business. We need to grow our rentals business. And then the exciting one that's not included in our mid-single targets in any real way is Zillow Pro.

So I'd say that's the most interesting new product development that we're out in market really in beta right now. That's one other. It's not a contributor to 2026 revenue in any meaningful way, but we think it meaningfully expands the serviceable addressable market that we have because what we're doing is taking all the goodness from these enhanced markets and follow-up loss and extending it to a real estate agent's sphere of influence, so that they start to get those tools to work their customers that they don't meet on Zillow.

And maybe just like breaking down the funnel, you have 100 people better around Zillow today -- or sorry, 100 people that transact today, 70 of those folks are on Zillow, 6% transact with us. 25% of these -- of the people actually reach out to us. So our opportunity on Zillow is make that 6.25%, but then there's the 25 to 70 that may not ever transact with us, Zillow Pro, but they're on Zillow, they're shopping, they're buyers.

Zillow Pro helps us access that addressable market. So again, not a big contributor this year, but the expansion of addressable market is really exciting as well.

The explanation on why it's not a big contributor to this year, is that simply because of the timing of the beta test to broader rollout? Or is it something else?

It is just we are a testing and price for adoption and planning to learn it on. Like one thing that we've learned time and again over the years is real estate agents are really busy, small business entrepreneurs. Introducing new technology takes time, takes training and you learn along the way what works and what doesn't work.

We've done that consistently, and we've figured out ways to grow quite nicely, but Zillow Pro, we're going to learn a ton through the course of '26 and then we expect it to be more meaningful in the out years, but '26 is really about learning and adoption.

The longer-term margin target is about 45% today sits at roughly half of that, give or take. How do you come up with the 45%? Why is that the right number longer term? And help us work towards that?

Yes. The framework of -- like fixed staying flat, there's going to be some inflation there, but fixed staying flat with inflation is a big driver. So as you grow revenue, you see margins expand. Variable will grow where we see opportunities, marketing will grow where we see opportunities. But fixed cost leverage is an important one. And then macro recovery helps. So we did an estimate if we had the 6 million homes sold in the country in 2025, what do we think our margin profile would have been, and it would have been mid- to high 30%.

So there's not that macro is going to matter as well. And it's -- we want to be very clear about that in the mid-cycle targets. There's a lot of margin expansion to go without macro, but macro also helps. And when we build all that out, we're not that far away in a normalized housing cycle.

But we're at the point now where we should think about pretty healthy incremental margins from this business?

Yes, I mean, you've seen it in the last few years, and we expect to continue to do so.

Closing question for me is just what do you want to leave investors with? What should investors continue to expect of Zillow from here as you look out over the next few years? We'll leave it to you to and set the stage.

Yes, it's an interesting time to ask that question. I think strategy feels very sound. Execution has been very good. We expect it to be very good. And we see AI as a meaningful accelerator because of the complexity of the real estate industry, all that we've built all the proprietary tools that we have, all the proprietary data that we have and the brand that we are. So we're really excited about the future and excited to chat with you.

Great. With that, we will leave it there. Jeremy, thank you so much for your time. Thanks, everyone, for listening in as well.

Hello, and welcome to Zillow Group's Fourth Quarter and Fiscal Year 2025 Financial Results Call. [Operator Instructions] Also, as a reminder, this conference is being recorded today. If you have any objections, please disconnect at this time. Brad, you may begin.

Thank you. Good afternoon, and welcome to Zillow Group's quarterly earnings call. Joining me today to discuss our results are Zillow Group's CEO, Jeremy Wacksman; 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 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 updated investor presentation, shareholder letter and earnings release, all of 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.

Good afternoon, everyone, and thank you for joining us. Q4 capped a year of strong execution for Zillow and continued progress on our long-term strategy to make moving easier. We delivered excellent results across the business and achieved all of our reported financial targets for full year 2025, including full year profitability, and we're carrying that momentum into 2026.

This week marks 20 years since zillow.com launched with a simple idea, to give consumers access to clear information in a process that often lacked it. What started as a way to see what homes were worth evolved into the place to search and discover listings for sale and for rent and is now an integrated ecosystem spanning the entire experience of buying, selling, renting and financing.

Zillow's evolution reflects 2 decades of relentless product innovation, grounded in consumer advocacy and strong industry partnerships. We're solving problems on behalf of consumers in a category unlike almost any other. Residential real estate is highly regulated, deeply local and organized around independent licensed professionals operating in hundreds of distinct markets. Transactions are high dollar, high stakes, highly personal and for most people, they happen only a handful of times over their entire lifetime. That combination makes real estate an especially difficult end vertical for general purpose AI to disrupt. Success requires trusted partners and systems that reliably support complex journeys that unfold over months, not moments.

Zillow is built for that reality. We're not optimizing for leads alone. Our products facilitate the entire transaction. That means supporting everyone involved, buyers, sellers, agents, loan officers, renters, property managers. And enabling the essential workflows that move people from interest to action and from action to closing.

What differentiates Zillow is the combination of assets we bring together at scale. We have a trusted brand and deeply engaged consumer audience with roughly 80% of our traffic coming directly to us, and we provide best-in-class software that professionals rely on every day to run and grow their businesses. Agents who use at least one of our products touch an estimated 80% of residential real estate transactions. That put Zillow in a unique position to improve outcomes for consumers and partners. Professionals make repeated decisions as they engage with clients at every step of the transaction. So even small improvements in workflow, timing and clarity compound over time.

Helping professionals deliver better service more efficiently, helps us reduce friction for consumers throughout their journey. We are rapidly executing on an ambitious multiyear strategy to integrate and digitize the many disparate pieces of the real estate transaction for consumers and for the professionals who serve them.

Our software is deeply embedded in daily workflows and helps agents manage tours, financing, listing strategy and client communication more effectively that includes broadly used industry platforms such as ShowingTime, which enables 90% of all tours of homes for sale in the U.S. and Follow Up Boss, our customer relationship management software that powers daily activity for more than 80% of the highest volume teams in the country. These capabilities reflect years of deliberate execution, building technology that works across hundreds of markets, millions of consumers and a wide range of professional needs.

Zillow has been applying advanced technology in this category for 20 years. From natural language search and the Neural Zestimate powered by machine learning to personalized discovery, to rich media and virtual touring to workflow automation and coordination and now generative AI. Our focus is on building what matters most, improving customer experiences, boosting productivity for real estate professionals and strengthening transaction outcomes over time for them and for Zillow. It's working. I'll walk through how this shows up in our results now, and then I'll share more detail on how our strategy and product innovation play out in real transactions and positions us for continued progress.

Zillow's Q4 and full year 2025 performance reflect excellent execution and meaningful progress across the business. In Q4, total revenue increased 18% year-over-year, coming in near the top of our outlook range. And I'm proud to share that for the full year, total revenue grew 16%, consistent with our mid-teens growth outlook. We also expanded full year EBITDA margins by nearly 200 basis points year-over-year, in line with our outlook. And in an important milestone for the company, we reported $23 million of GAAP net income for the full year, delivering on our expectation of full year profitability.

In For Sale, revenue grew 11% year-over-year in Q4 with 8% growth in residential revenue and 39% growth in mortgages revenue. For the full year, we delivered $1.9 billion in For Sale revenue, up 9% from 2024. Our For Sale performance continues to outpace industry transaction trends and reflects our ability to convert more high-intent movers already in our funnel and to improve outcomes for agents and loan officers through a more integrated experience.

In Rentals, Q4 revenue was up 45% year-over-year, driven by 63% growth in multifamily revenue. For the full year, Rentals revenue reached $630 million, up 39% from 2024. Multifamily revenue grew 58% for the full year. Taken together, our results show we're executing a clear strategy, gaining share across For Sale and Rentals and building a platform designed for durable growth across market conditions.

In For Sale, we're creating a more connected experience across search, touring, financing and agent collaboration, which continues to deliver meaningful growth for Zillow and positive outcomes for consumers, agents and loan officers. Our focus is on reducing friction and uncertainty by helping all participants in the transaction work together more effectively regardless of whether their relationship begins on Zillow. Leveraging technology to improve speed, clarity and coordination while supporting the human judgment and local expertise that ultimately move transactions forward.

For Sale revenue totaled $1.9 billion in 2025, up 9% year-over-year. Cumulatively, over the past 3 years, For Sale revenue grew 16%, while the housing market shrunk as existing home sales were down 19%. We continue to expand existing products, broaden our reach, convert more customers already in our funnel and integrate the experience more deeply. This strategy is clearly working, and we believe we are well on our way to achieving our $1 billion incremental revenue target in For Sale.

Our success in For Sale is largely driven by continuous improvements to our customer experiences and growth in our enhanced markets, where the integrated experience comes to life as we bring together buyers, agents and loan officers in a more coordinated way. In Q4, 44% of our connections came through enhanced markets, up from 21% a year ago and well on our way to our intermediate target of at least 75%.

Across these markets, Zillow Home Loans has averaged double-digit adoption as consumers see value in our offerings. We help buyers understand what they can afford and provide a convenient application with fast loan officer responses, free appraisals to eligible buyers, free access to credit monitoring and competitive rates, all of which is driving strong growth in purchase originations.

As we continue to grow, we are also improving our processes and offerings. In 2025, we saw an 11% increase in loan officer productivity, even as we added 40% more loan officers, who take time to ramp up. At the same time, we grew total purchase loan origination volume 53% year-over-year. We also improved transaction conversion rate among Zillow Preferred agents in 2025, while expanding the integrated enhanced market experience to more customers and more partners.

Throughout 2025, we not only rolled out more enhanced markets, but also rapidly innovated on our products along the way with a focus on improving connection quality, engagement and productivity. BuyAbility, a tool from Zillow Home Loans that helps buyers understand what they can realistically afford before they take a tour or make an offer, has enrolled 3.6 million users, up from 2.9 million at the end of Q3. We've more tightly integrated BuyAbility with Zillow Home Loans and with Follow Up Boss. In that same vein, we recently rolled out custom pre-approval letters directly within Follow Up Boss, allowing agents to generate offer-specific updates and collaborate faster and more seamlessly with our systems.

Based on early tests, messaging within the Zillow app, powered by Follow Up Boss, is driving more frequent communication between consumers and their agents, helping them stay aligned at key moments, communicate more consistently and focus on delivering for clients instead of managing tasks. In 2025, Follow Up Boss smart messages scaled from a small pilot to a nationwide feature with agents sending more than 7 million of these AI-powered messages. Zillow's in-app messaging is fueling an increase in engagement between customers and agents which we believe will translate to better conversion and more transactions. All of these agent software improvements build on the solid foundation of unique assets that already put Zillow at the center of so many real estate workflows.

We're also continuing to expand Zillow Showcase, our immersive listening experience that helps agents win listings and give sellers a more compelling way to market their homes. Showcase enhancements like SkyTour and virtual staging, have not only given buyers a better shopping experience, they've made Showcase even more attractive to agents and sellers and adoption continues to grow. In Q4, Showcase was on 3.7% of new listings, up from 1.7% a year ago, and we see significant room to expand from here.

Furthermore, in Q4, we announced Zillow Pro, a comprehensive suite of offerings that helps agents manage all of their clients, including those sourced outside of Zillow in a single connected system. Over time, we expect it to reinforce Zillow's role not just as a marketplace but as a long-term partner helping real estate professionals operate more effectively and grow their businesses. We are currently beta testing Zillow Pro and plan to expand nationwide over the second half of the year. While in its early stages, we're encouraged by the initial feedback from agents and believe Zillow Pro creates exciting future growth potential for the company.

All of these efforts reflect a consistent theme: integration improves outcomes. We're helping consumers move forward with more confidence, helping agents and loan officers be more productive and capturing more of the opportunity already flowing through our funnel.

In Rentals, we're executing against a significant opportunity and seeing some of our strongest growth as we deliver clear value for both renters and property managers. The Rentals category is highly fragmented with no single system that brings together comprehensive listings, high-intent demand and modern transaction tools.

As a reminder, our strategy to address this is twofold. First, we're building a comprehensive two-sided marketplace of homes for rent, giving renters a single trusted destination to find every type of property from single-family homes to large apartment communities. Second, we're modernizing the rental transaction itself, streamlining how renters and property managers connect and manage applications, leases and payments.

This strategy works because it solves real pain points on both sides of the market. Renters get transparency, efficiency and trust. Property managers get more visibility for their inventory, better qualified applicants and higher return on their marketing spend. And because renting is where nearly every mover starts, our progress in Rentals continues to expand the top of Zillow's housing funnel and create durable growth across the business.

In Q4, Zillow had 2.5 million average monthly active rental listings, ranging from single-family homes to large apartment buildings. In 2025, we estimate our share of rental listings increased to 63%, up from 54% in 2024. Zillow Rentals attracted 31 million average monthly unique visitors in Q4 and because of our relentless focus on the consumer experience, renters rate Zillow as their #1 preferred platform.

High-quality audience engagement translates into strong outcomes for our partners. Property managers tell us Zillow delivers the highest return on marketing investment in our category, which is driving wallet share as more large operators choose to advertise and upgrade their presence on Zillow. As a result, Rentals revenue grew 45% year-over-year in Q4 and 39% for the full year 2025.

Multifamily Rentals revenue continues to be a key driver. We're adding more properties as we expand packaged offerings for property managers, encouraging them to list more of their portfolios on Zillow. As we continue to scale in Rentals, we're coupling revenue growth with thoughtful investment and we see a clear path to $1 billion-plus annual revenue opportunity. We're getting there by improving the renter experience with clearer pricing, more streamlined applications and more transparency, while delivering strong, measurable ROI for property managers. It's a winning combination that has allowed us to grow Rentals revenue at an average of 32% annually since 2022, significantly outperforming the 14% annual rate we estimate for broader rental advertising demand.

Zillow Rentals reflects the same core strengths that show up across Zillow, a trusted brand, a large and engaged audience and product innovation that solves real problems for both sides of the market, consumers and industry professionals. The trajectory we're seeing in Rentals reinforces why it continues to be one of our most compelling growth opportunities.

Before I wrap up, I want to briefly address the legal matters that have been in the headlines recently. We are confident in our positions and approach, and we do not expect these matters to have a material impact on our financial position or long-term strategy.

We believe deeply in our strategy, which is guided by a few core tenets: consumers want an easier, more transparent way to rent, buy, sell and finance their homes. Industry professionals want to scale their businesses, serve their clients more effectively and help them get the broadest possible exposure. Our business decisions consistently focus on delivering products and experiences that do both.

That focus doesn't change based on market conditions or other external factors. We believe Zillow will continue to thrive by innovating and delivering what consumers want and industry professionals want and need. We expect to continue growing across our business and further enhance the comprehensive marketplaces that consumers and the broader industry rely on. Our audience and engagement are strong and consumers and partners keep choosing Zillow because of the scale, transparency and experiences we offer.

You can see the impact of our steady focus and consistent execution in the results we've reported today. Our multiyear strategy is designed to perform across market conditions and the momentum we carried through 2025 has set us up well for 2026.

As we mark Zillow's 20 years of building in this category, we continue to shape what's next. We spent 2 decades earning consumer trust by investing in technology that brings transparency and efficiency to a complex process, and we are the company focused on delivering sustained value to agents across their businesses. That foundation positions us to lead in the current era and define the next era of real estate.

With that, I'll turn the call over to our CFO, Jeremy Hofmann.

Thanks, Jeremy, and good afternoon, everyone. We delivered strong results in Q4 and are well positioned to continue delivering strong performance as we execute on our strategy in 2026 and beyond.

Q4 2025 revenue was up 18% year-over-year to $654 million, near the top end of our outlook range. Our revenue performance, combined with effective cost management, delivered EBITDA of $149 million, near the midpoint of our outlook range. Q4 EBITDA margin was 23%, 260 basis points higher than a year ago. Our full year 2025 EBITDA grew 25% year-over-year as we continue to scale revenue and control costs. Importantly, as a result of these efforts, we reported positive GAAP net income in Q4 and for full year 2025.

For Sale revenue grew 11% year-over-year in Q4 to $475 million, approximately 800 basis points above the 3% residential real estate industry growth as reported by NAR. We estimate purchase mortgage origination volume for the industry was roughly flat year-over-year in Q4, which is noteworthy given the majority of buyers transacting with Zillow purchase their home with a mortgage.

Within the For Sale revenue category, residential revenue was up -- $418 million, up 8% year-over-year and in line with our growth outlook. Residential revenue growth was driven primarily by our agent and software offerings and our new construction marketplace. Agent offerings include Zillow Preferred, market-based pricing and Zillow Showcase. Software offerings primarily include Follow Up Boss, dotloop and ShowingTime.

Within the For Sale revenue category, mortgages revenue increased 39% year-over-year in Q4 to $57 million. This was better than our outlook for approximately 20% year-over-year growth as we saw better-than-expected conversion rates from customers in our mortgage funnel. Purchase loan origination volume accelerated to 67% year-over-year growth in Q4, which was the main driver of our mortgages revenue growth. It is clear from our results that Zillow Home Loans has an attractive value proposition for buyers, and we are quite pleased with the strategy and execution.

Turning to Rentals. Q4 revenue was $168 million, with growth accelerating to 45% year-over-year. Rentals revenue comprised 26% of our total revenue in Q4, up from 21% a year ago. This growth was driven primarily by our multifamily revenue, which grew 63% year-over-year. Our value proposition to multifamily property managers and execution by our sales force to both win new properties and upgrade to more comprehensive packages is evident in our Q4 results. We increased the number of multifamily properties on our apps and sites by 44% year-over-year, reaching an all-time high of 72,000 multifamily properties as of the end of Q4, up from 50,000 properties at the end of 2024.

As a reminder, we measure our Multifamily property count as 25-plus unit buildings and do not include our industry-leading long-tail properties, which is a significantly larger property count. When you include these long-tail properties, Zillow Rentals had 2.5 million average monthly active rental listings in Q4, the most in the category. The quantity and quality of high-intent renters on our platform allows us to continue to expand our wallet share with property managers, who tell us Zillow delivers the highest return on marketing investment in our category. We expect to continue to drive growth in Rentals towards our $1 billion-plus annual revenue target.

Q4 EBITDA expenses of $505 million were slightly above our outlook due to higher-than-expected legal expenses. We drove leverage on total fixed costs, which were flat year-over-year in Q4 compared to total revenue growth of 18%. This includes the impact of share-based compensation expense, which was down 20% year-over-year in Q4. The results of our cost discipline were evident in our expansion of EBITDA margins, which were up 260 basis points in Q4 year-over-year. Our net income margin expanded 990 basis points from Q4 a year ago.

Turning to full year 2025. Our execution throughout the year translated into 16% revenue growth consistent with our mid-teens growth outlook and ahead of our expectations at the start of the year. In 2025, the housing market grew by 3% according to NAR, which means our revenue outperformed the housing market by 1,300 basis points. When we evaluate our performance, we focus on our ability to outperform the market over annual and multiyear periods, which we have successfully accomplished in 2025.

Our For Sale revenue grew 9% in 2025, with residential revenue growing 7%, and mortgages revenue growing 37%. Rentals revenue growth accelerated to 39% year-over-year in 2025 from 27% year-over-year in 2024. We grew our multifamily properties by 44% in 2025 and property managers chose to expand their investments with upgraded packages, which drove 58% multifamily revenue growth year-over-year.

We combined our strong revenue growth with a disciplined cost management. We held our full year 2025 EBITDA fixed costs to approximately $1 billion, which resulted in fixed costs as a percentage of revenue declining to 41% in 2025 from 44% in 2024. Of note, total fixed costs for the company were up 2% for 2025.

While we controlled costs, we continue to invest for future growth. We thoughtfully grew variable costs with additions to our rental sales force and loan officers in Zillow Home Loans, and we expanded rentals demand with our Redfin syndication agreement. This combination of strong revenue growth disciplined cost management and strategic investments resulted in 2025 EBITDA margin expansion of 180 basis points year-over-year.

Share-based compensation expense of $390 million was down 13% year-over-year, which contributed to our net income margin expanding 590 basis points to bring us to GAAP profitability for the year.

We made meaningful progress towards our mid-cycle financial targets. As part of those targets, we have a goal of adding $1.5 billion of revenue before any increase in existing homes sold. In 2025, we added $347 million in total incremental revenue, well on our way to achieving the goal. This performance came against the backdrop of a housing market that remains far below normal, with existing home sales flat year-over-year at 4.1 million homes sold. We continue to expect a significant upside to our business when housing market conditions improve.

Of note, assuming a more normal housing environment of 6 million existing homes sold, we estimate that we could have generated EBITDA margins in the mid- to high 30% range in 2025 compared to our reported 24% EBITDA margins for the year.

In 2025, we continue to be active on capital management. We retired the last of our $419 million in convertible debt in Q2 and repurchased $670 million of shares throughout the year, which in aggregate is $1.1 billion of cash returned to shareholders. Our overall outstanding share count was down 2 million shares at the end of 2025 from the end of 2024. Total share repurchases through 2025 have been $2.6 billion at a weighted average share price of $50. Going forward, we expect our share repurchase plan will continue to be a core part of our capital allocation strategy as it has been since the end of 2021.

In 2025, we generated $420 million of free cash flow, a 36% increase compared to the same period a year ago. We ended 2025 with $1.3 billion of cash and investments. We also recently secured a $500 million revolving credit facility, giving us more flexible access to capital and strengthening our overall liquidity.

Turning to our outlook for Q1. We expect total revenue to be between $700 million and $710 million, implying a year-over-year increase of 18% at the midpoint of our outlook range. We expect For Sale revenue growth in Q1 to be in line to slightly better than Q4, driven by residential revenue growth in the high single-digit range and mortgages revenue growth of approximately 40%. Our guidance reflects our expectation that challenging housing market conditions will continue in Q1. We expect our Rentals revenue growth will be approximately 40% year-over-year in Q1, driven by further multifamily revenue growth.

For Q1, we expect EBITDA to be between $160 million and $175 million, representing 24% margin at the midpoint of our outlook range. This implies EBITDA expenses of $535 million to $540 million, up from $505 million in Q4. This is being driven primarily by a seasonal increase in payroll-related taxes and lead acquisition costs related to the Redfin syndication agreement. Additionally, we are increasing variable costs related to hiring of rental salespeople and loan officers in Zillow Home Loans as we continue to invest for growth.

Last, we have ongoing elevated legal expenses. Of note, we estimate year-over-year increases in legal expenses will result in approximately 200 basis points headwind to EBITDA margins in Q1. Year-to-date in 2026, we have continued to repurchase our stock as we take advantage of the recent market dislocation to buy back shares at what we believe is an attractive price.

Turning now to full year 2026. We expect to deliver mid-teens revenue growth. In Rentals, we expect approximately 30% revenue growth in 2026 after growing Rentals revenue by 39% in 2025 and 27% in 2024. We expect continued EBITDA margin expansion in 2026 as we leverage fixed costs and invest in variable costs. We expect share-based compensation expense to be down more than 10% year-over-year and to drive meaningful growth in net income.

Before discussing costs and the shape of our margin expansion story for the year, I will discuss our housing expectations for 2026. We are planning for the For Sale environment to continue to bounce along the bottom. However, the affordability picture has improved and is giving us some optimism. The share of median household income spent on a newly purchased home returned to 32% in December, down from its peak of 38% in 2023. We will be watching this closely as we expect further improvement will drive a broader housing market recovery over time.

With respect to costs, we plan to maintain our cost structure framework, including to continue to control our fixed cost base to drive leverage. We expect our fixed cost base of approximately $1 billion to grow with inflation and believe it is the right investment level as we execute our growth strategy.

For variable costs, we plan to continue investing for growth in Rentals as well as additional loan officers in Zillow Home Loans as we expand our enhanced markets footprint. Thus, we expect our variable cost base to grow ahead of revenue in the first half of 2026 and then trend towards in line with revenue growth in the second half of 2026.

We have consistently said we will be opportunistic with our advertising spend, dialing it up or down depending on where we see opportunities across the business. We see opportunities to grow marketing in 2026 versus 2025. We want to expand our awareness in our enhanced markets and continue to strengthen demand for our Rentals offering.

As you think about the cadence of our expenses in 2026, note that we expect to incur elevated legal expenses throughout the year which has an impact on year-over-year EBITDA margin growth, particularly in the first half of the year. Despite elevated legal expenses that result in approximately 100 basis points of margin headwind, we believe current consensus EBITDA estimates are reasonable for the full year.

We know share-based compensation has been on investors' minds. After delivering a 13% decline in share-based compensation expense in 2025 compared to 2024, we expect to deliver more than a 10% decline in 2026. With 90% of our share-based compensation allocated to fixed employees, we are seeing increased leverage as we strive to keep fixed headcount relatively flat. The decrease in share-based compensation expense helped drive positive net income in 2025, we expect it to contribute to further net income growth in 2026. Furthermore, we have used our cash position and operating cash flow to repurchase stock, which has mitigated ongoing equity grant dilution, resulting in ending share count down 2 million shares year-over-year.

As we look ahead, we are confident in our mid-cycle targets for $5 billion in revenue and 45% EBITDA margins in a normalized housing market. 2025 showed good progress towards these targets. We expect to make further progress in 2026 as we continue to execute our strategy, which is for more than 75% of connections to have the enhanced market experience, to increase Showcase adoption toward our intermediate-term target of having Showcase on 5% to 10% of total active listings and strong growth in Rentals with continued increases in multifamily property count and upgrades in packages.

And looking even further beyond 2026, we are excited about Zillow Pro's future prospects to meaningfully expand our serviceable addressable market and help agents serve all of their customers.

To close, we are successfully executing on our strategy and are very excited about the opportunity ahead of us. We have the right investments in place to support our strategy, and we are delivering strong growth while maintaining a disciplined cost structure that is driving expanding margins and positive GAAP net income.

And with that, operator, we'll open the line for questions.

[Operator Instructions] Our first question will come from Nick Jones with BNP Paribas Security Corp.

Great. I have two, one on Rentals and one on AI. Can you elaborate a little bit on rental trends? You're gaining share in the long tail, you're gaining share with multifamily, driving 30% annual growth. So I mean what are you kind of hearing from the multifamily side as far as product market fit goes and how much more opportunity or wood to chop do you see there kind of maybe this year and beyond? That's the first question.

And the second question, you had a great slide on your positioning for vertically-integrated AI. You're partnered with OpenAI today. Can you talk about how you see kind of a vertical AI future and Zillow's place in it, to the extent you can kind of share what you're excited about?

Yes. Thanks, Nick. Maybe I'll start and Jeremy add on anything you want. I think on Rentals, I mean, the growth you're seeing in the business, it's really just our strategy working, honestly. It's the -- as we talked about, we have a pretty unique strategy in Rentals in that we're the marketplace that's focused on trying to organize all of the types of supply, not just the big apartment communities, but the long-tail single-family listings.

And as Jeremy talked about, more than -- or 2.5 million on average in Q4 listings, we think that's the most in the category. That's what drives the audience, right? I mean the 31 million unique visitors per Comscore, that lead is widening because we're solving their problem. They want to find as much inventory as possible in one place, and they want a digital transaction, right? Having portable applications, being able to sign custom leases, be able to make rent payments, report credit -- report rent to build credit, all those things. Those are tools the renters want. And then once you satisfy and delight the demand, that's when the advertisers really want to get access to that demand.

So when you have this high-quality audience, increasingly multifamily advertisers want to bring more of their portfolios online. That's why you see the building growth and the revenue growth accelerate. And as Jeremy talked about, the ROI is really the signal there. we consistently hear we're the highest ROI advertising spend of all their sources of advertising spend, and they spend in a bunch of places. So that's really what's driving the revenue growth you've seen, you saw in Q4. It's why we expect revenue growth to continue, as Jeremy talked about. We feel very confident in our ability to get to that $1 billion-plus revenue target that we've put out for you all in Rentals.

And it's important to remember as we get closer to that target, we don't think that's the end. We think there's a very big Rentals opportunity to go after beyond that $1 billion-plus mile marker. But for now, we're really excited to just make progress towards it.

And then on the AI question, I mean I think -- I talked about it in my prepared remarks, I think it's really -- this is just a unique category, and we have a really unique strategy that I think is going to benefit from AI, right? Residential Real Estate, it's highly regulated, deeply local, it's organized around millions of independent licensed professionals. And then the consumer experience, it's not a one-visit transaction. It's high dollar, high stakes, takes place over months or sometimes years. And the average buyer buys once every 14 years at this point. So you're turning to a professional team and you're turning to a vertically-integrated experience to really help you with that. That's something that where we think AI is actually an ingredient to us building this vertical rather than a threat or something and why we lean into it.

And I think that's also why we're so confident that we're going to be the ones to help deliver that. Our strategy to build this vertically-integrated experience is what we've been doing for years now and we're the ones with deep industry expertise and the proprietary assets and data at scale, right? So yes, of course, we have the audience but the industry software tools and the data and the transaction workflows and the trust of the professionals to help build this integrated transaction is what we're focused on.

And when AI comes into the category, we think it's going to help make that vertical experience even better, right? Elevating the professionals, taking away the busy works so they can convert more transactions, so they can be more efficient and delighting our shared customers. That's what we think the end of this rainbow looks like, and we're excited to go deliver it.

Our next question will come from Brad Erickson with RBC Capital Markets.

I have two. First, I think we all know kind of Zillow's stance on listing distribution requirements. But just curious how you think about maybe any effects from some of this recent consolidation going on in the industry and private listing networks and all that. Does that represent any kind of risk to the business from your perspective? And then I have a follow-up.

Thanks, Brad. I mean the short answer is no. We don't really expect any risk or impact to our business. Despite all the noise and questions, we are talking about a pretty small number of listings overall, I think, 1% or less. And the reason it's small is the vast majority of sellers and agents don't want that, right? Agents don't want to limit exposure and have a home take longer to sell or not maximize price, and they especially don't want to do that if to do so, they'd have to trade off access to Zillow's broad audience, right?

What consumers want is more transparency. They want to sell their homes fast. They want to sell their homes for the most money, and they want to market them broadly. And we hear that from both sellers and agents. And that's why I think you've historically seen these types of approaches be a very small share of listings. There are a very small share of cases where things don't sell broadly on market, and we expect that to continue.

Got it. And then just a follow-up on the RESPA case, recognize you probably can't comment too much on the case itself. But just curious if that's creating any sort of adverse effects or friction on the ground for you as you go to market with ZHL or even just the enhanced market strategy overall?

Sure. Yes. I mean on that, no, it's not, right? Our long-term strategy here is based on consumer choice and building this integrated end-to-end transaction and helping buyers understand [ what ] they can afford when they're on Zillow, providing them a convenient application, giving them great loan officers to work with and then helping agents see that Zillow Home Loans is a great option for them and earning the agent's trust with Zillow Home Loans so that they want to use it for some of their customers, that's really the strategy here. And you're seeing the results of that play out in the mortgage growth, I mean really strong mortgage growth in Q4, 37% in 2025, and we're expecting continued strong mortgage growth into 2026.

And the double-digit adoption rate you're seeing of Zillow Home Loans across our enhanced markets, I think, is a great barometer for continuing to methodically grow the ZHL experience and expose it to more agents and more customers.

Our next question will come from Ron Josey with Citi.

Maybe a quick follow-up on Brad's just now with all the legal challenges that are out there, maybe Jeremy, talk to us about just is there any change in approach to Zillow's business strategy that has to happen because of these challenges or anything that you feel needs to change just because of the multiple suits out there?

And then maybe for Jeremy Hofmann, just a modeling question. There's lots of moving parts in terms of newer products ramping like Rentals and ZSL and mortgage is doing better. And then we have newer products launching like the rollout of Pro in the back half of the year. Just talk to us about the framework you're using as we build out revenue throughout '26. Obviously, we have 1Q guidance and we have EBITDA, but would love your thoughts on how you frame sort of the contributions of these newer products and enhanced markets throughout 2026.

Yes. Maybe I'll take the first one. I don't know if -- you can take the second. I mean the answer to your first one is pretty short. No, we don't expect any change. We're not making a meaningful change to our business that results in any issues, and we're really confident in our positions and approach. We don't expect the issues to have a material impact on our long-term strategy or our financial position.

Yes. And then on guidance from a revenue perspective, at the full company level, we're expecting mid-teens revenue growth. On Rentals, we're expecting 30% revenue growth for 2026. And that's on the face of a 39% revenue growth in 2025 and 27% in 2024. So continuing to see great -- or expecting to see great growth there.

With respect to contributions on the For Sale front, it's going to be more of the same, which will be some combination of enhanced markets continuing to grow, Zillow Showcase continuing to roll out, Follow Up Boss getting in the hands of more folks, Zillow Home Loans adoption continuing to grow nicely alongside the enhanced market expansion and then our new construction business continues to grow nicely. That's all coupled with a Rentals business that we think is really well positioned, has executed well in the last few years, and we expect it to continue to be the case in 2026.

Our next question will come from John Colantuoni with Jefferies.

Okay. Great. I wanted to start with Zillow Pro, update us on where that rollout stands and any early learnings into how it's impacting lead conversion and agent adoption of your CRM tools.

And second, on guidance, you've come in closer to the high end of your guidance in the past couple of quarters, which compares to more consistently delivering upside to the high end in recent years. Has your approach to guidance transitioned so you're looking to sort of get closer to the high end rather than beat the high end?

Maybe I'll take the first, and Jeremy can take the second. On Pro, we're really excited about Zillow Pro, it's in beta test now and we're planning for nationwide expansion kind of second half of the year. And a reminder, Pro is really a membership bundle, it's an offering to help the agents -- all agents, not just current Zillow customers, run their whole business and help them convert all of their customers, not just Zillow customers. And that includes, you mentioned our CRM, Follow Up Boss, that includes premium agent profiles with curated media, it includes branding and includes expanding the My Agent feature, which is something of particular interest for agents, helping the rest of their client database, get insights from Zillow about what those clients are doing. It includes all of our AI-powered follow-up tools, and it becomes a pathway to Zillow Preferred, right?

So as more agents are on Zillow Pro, that becomes a place where they can raise their hands and try and become eligible for Zillow Preferred.

And to your question on our CRM, because Follow Up Boss is a key part of the bundle, we expect as more folks eventually sign up for Pro, it will help Follow Up Boss growth and adoption. But I think equally exciting will be for existing Follow Up Boss customers, it's going to help increase the usage and the efficacy of Follow Up Boss because we're going to be bringing more AI and more insights to the part of their business that is not Zillow customers. And so many of them have great databases, great clients, great lead sources that are off Zillow and helping supercharge that and improve conversion. To your question, we expect that to help them get more efficient and improve both customer service and ultimately, conversion of more transactions.

So again, we're really excited about it. I think it's a fantastic next step in helping really grow the SAM of our For Sale business. But I will say it's early, and that's why we're in beta, and that's why we were really clear on timing that we're going to learn a bunch with our beta customers in the first half of this year, and we're going to march onward in the second half.

Yes. And then, John, on your question around guidance and what we're trying to achieve there. I think the answer is we've always tried to be as close to the pin as possible. We've gotten better at forecasting conversion, in particular, in PA. So that's allowed us to get closer these last few quarters than maybe the magnitude of beats you've seen previously, but always trying to get as close as possible.

And then with respect to Q4. The big difference on the cost structure was really around legal expenses and that was higher than we anticipated coming into the quarter and was ultimately 180 basis points of margin drag for Q4. Obviously, we laid out what we think for 2026 from a legal cost perspective as well, and it will be a drag, but it's not stopping us from expanding margins, which we expect to do throughout 2026.

Our next question will come from Mark Mahaney with Evercore.

Maybe two questions. You talked about getting to 75% of connections coming through enhanced markets. What are the biggest obstacles to go in from 44% to 75%? And when you talked about that as a medium-term goal, medium like 2 to 3 years? Is that how we should think about it?

And then on Zillow Pro and that contribution. So we should start to see an impact of that in the second half of the year? And where in the revenue streams would that show up?

Yes. Thanks for the questions, Mark. Maybe I'll take the first, and Jeremy, you can take the second. On enhanced markets and the connection share, we haven't put a time frame on 75%. I mean you should expect the rollout will continue to look similar, right? It's both more geographies and then depth in those existing geographies. We did that this year. And maybe think about pacing to be a similar clip of growth to the last few years. So it's on the horizon.

And again, remember, 75% was just kind of a mile marker. We'd like to get it to as many connections as possible and so once we got from 20% to 44% last year, we'll keep growing, we're going to find ways to bring that experience to as many customers as possible, just as we get over half and into -- more into the future years, it's going to be broader and deeper in even more places. And that's to your question on what the governor is, it's operational lift and scale and it's training partner teams and making sure our partner agents have the right capacity and quality and then ultimately, Zillow Home Loans officers.

So you have to build all those things to go grow. We're really proud of the work we did in 2025, more than doubling that. And you're seeing the incremental revenue that's coming from this strategy coming to life even against the flattish housing market, and that's why we're so confident in the $1 billion-plus incremental revenue in our For Sale business just from getting this experience in more people's hands over time. So no explicit time frame, but we feel great, and we're well on our way.

Yes. And then, Mark, with respect to how to think about it for 2026, I would not expect it to be meaningful even in the second half of 2026 as we are rolling it out more nationwide. I think 2026 is really a year for learning, adoption and figuring out where the key value props are. So I would think about it that way for 2026, not a financial contributor but one where we really learn a ton. It will sit within residential as the revenue comes in. And today, we're offering it as a monthly subscription that's priced for adoption.

Our next question comes from Nikhil Devnani with Bernstein.

I wanted to ask about margins. So on the last earnings call, you had kind of anchored to the last couple of years, which implied roughly 200 basis points or so of opportunity in margin expansion for 2026. So I just wanted to clarify, is that still how you're thinking about margin expansion this year?

And then considering the 100 basis points of headwind you're calling out from legal, does that mean that your underlying margin expansion is actually getting better than what you've seen in the past couple of years as the business scales and you get a stronger handle on the various cost buckets you've already talked about?

Yes, sure. It's a really good question. First, I'd say consensus feels right for the year on EBITDA, and that implies around 200 basis points of margin expansion. We do think the underlying margin profile is better than that, and there's a legal drag associated with the cost there of 100 basis points. So you're right to point that out that the cost structure and the leverage on the business model is getting better and then we have those legal costs to contend with.

As you think about the shape of the year, the first half of the year, we're going to continue to hold fixed costs flat with inflation. We'll continue to invest in variable across rental sales, the Redfin syndication agreement and ZHL loan officers. And then we're expecting variable costs to run closer to revenue growth during the second half of the year as the sales forces mature and we lap the comps on the Redfin syndication agreement. Legal will be a drag. It's a 200 basis points drag in Q1. It's a 100 basis point drag for the year. But overall, we still expect to expand margins similar to what we've done in 2024 and 2025.

And I'd be remiss if I didn't say stock-based comp will be down, we expect to be down more than 10% again, which should drive further expansion in net income. So I think it sets us up for another good year of execution. We're expecting strong revenue growth, we expect EBITDA will grow faster than revenue, and we're expecting net income will grow even faster than both revenue and EBITDA.

Our next question will come from Trevor Young with Barclays.

Great. On mortgages, years ago, when you had disclosed segment EBITDA, I think it was approaching EBITDA breakeven when the business was around about $250 million in revenue, so a bit bigger than where we're at today. Is mortgages EBITDA profitable today? And how should we think about margin here in the recovery scenario as we bridge to that mid-cycle 45% EBITDA margin bogey?

And then second question, just to clarify the cadence of EBITDA of this upcoming year. It sounds like legal expenses were kind of outsized here in 4Q, embedding a bit more for the full year, 2 points hit in 1Q, 1 point hit for the full year. Should we lap that by 4Q such that we'll see that uptick in margin really hitting in 4Q?

Yes. Thanks, Trevor. I'll take those. On mortgages, we don't break it out, but we love the long-term opportunity in mortgage for growth and profits. We look at a landscape there that purchase mortgage is still very, very fragmented. And we think that in a more commoditized product like mortgage, brand and distribution tend to do quite well. And we have a great brand and we have great distribution as well. So we love the opportunity there, and we're seeing it play out in the results, right?

Mortgages grew 39% in Q4. Zillow Home Loans purchase originations grew 67%, and we're expecting the category to grow 40% in Q1 as well. So I feel quite good about all that. And hopefully, that helps you give -- helps give some context on where we're headed on the mortgage front.

Our next question will come from Dae Lee with JPMorgan.

I have a question on macro. So could you elaborate on the improvements you're seeing in affordability versus your expectations for housing markets to bounce along the bottom. Are you seeing anything that might be curbing some of the optimism warranted by the affordability improvement?

And separately, I guess, related to the -- are any of your investment plans meaningfully sensitive to the housing market growth? Or should we expect your expense framework to be less correlated to the housing conditions?

Yes, I'll take that. So on the macro front, we planned the cost structure, we plan the revenue for housing to not do much this year. We are starting to see affordability get better, but not necessarily seeing it play out in homes being sold faster or anything like that. We're just pointing out the fact that housing or housing expenses as a percent of total income is down to 32% versus at its high in 2023, it was 38%. So we think that's a good sign that should drive a broader recovery over time. We're just not necessarily planning for it in 2026.

And just remind me, your second question was what exactly?

If your investment plans are meaningfully sensitive to the housing market growth? Or if your expenses framework should be less correlated to that?

I would think about expense framework as consistent regardless of the macro environment. I think macro is a real positive for us when it comes back, but our expense framework is going to be consistent regardless of what housing does.

Our next question will come from Lloyd Walmsley with Mizuho.

Great. Two, if I may. First, just can you give us a sense of if you're planning to step up enforcement of Zillow listing access standards to just sort of ensure that broad distribution of listings?

And then secondly, when we look at the sort of percent of leads coming from enhanced markets, it was a big sequential step-up relative to what you've been seeing this quarter. So can you just help us understand like, I think you recognize a lot of the revenue at the time of the lead. But like is there a leading indicator component of that at all? And like are underlying lead volumes also accelerating as enhanced market scale up? Anything you could say there would be great.

Yes. Maybe I'll take the first one, and then Jeremy can take the second. Thanks, Lloyd. I mean on the listing access standards, there's nothing to step up. We're enforcing them now. Remember, this is really about education. What we find is when we educate an agent that might have been miseducated that there is a violation that would result in a listing not being broadly marketed and not being on Zillow, most folks don't want to do that. And so we end up helping them understand, hey, there's a trade-off to make there and they want their listing on Zillow.

So that's been working well. It's why you continue to see this be a pretty small thing because most sellers and most agents who are helping sellers want broadest possible exposure for listing to sell their home fastest and for more money.

Yes. And then on the enhanced markets question, what I would remember or just remind you is the Zillow Home Loans revenue that tends to come alongside the enhanced markets expansion. And when we start to see more mortgages come through, that lags. So I wouldn't think about it as 1:1 as we increase the amount of connections and enhanced markets, it will go 1:1 with the overall for-sale business.

Our last question will come from Dan Kurnos with Benchmark Company.

Yes, great. Can we just touch on the opportunity to grow marketing in '26 that you guys called out? Obviously, you've got competitors still spending pretty aggressively, although traffic seems to be accruing to you rather than them. We saw Redfin advertise during the Super Bowl. And so just curious what channels you guys are looking to press and why you think this year is a particularly good year to step up on the marketing spend?

Yes, Dan, I can take that. I mean I think for what we're doing, which is a modest increase, it's more about being opportunistic, which is what Jeremy has always said, we'll be opportunistic, we see a little bit more room in enhanced markets and in Rentals. And so you'll see a slight increase, which I think is a little different than what maybe some competitors are doing with volumes of spend and where they're spending.

And as you pointed out, I think the reason we can do that is actually implied in your question, as the category leader with such strong not just brand awareness, but brand preference, we tend to benefit when others in the category advertise. We saw that even this weekend and we'll continue to find the right places to teach people what we do, help make them aware of our new things, things like enhanced markets, to try and deepen engagement and earn the right with them to offer them more services. That's really what our focus is in our advertising spend and you'll see us do that this year.

So no change in strategy in terms of how we think about advertising. Jeremy Hofmann has always talked about it as we want to be opportunistic with our parts of the business. And that's what we're doing this year is finding the right places to really pour a little bit more gas on because we think it really helps the business.

Does that imply channel shift at all?

No, nothing specific on channel shift. We've been really great, really efficient advertisers at driving both top, mid and bottom funnel. I mean, our marketing team does a great job of kind of branded response where we're building brand and reinforcing brand preference while also driving great performance into the funnel and into our businesses, and the team will continue to do that.

This completes the allotted time for questions. I will now turn the call back over to Jeremy Wacksman for any closing remarks.

Thank you all for joining us today. We really appreciate your continued support. We are excited for what's ahead and look forward to speaking with you all next quarter.

Thank you for joining Zillow Group's Fourth Quarter and Full Year Results Call. This concludes today's conference call, and you may now disconnect.

Okay. Great. I have the thumbs up there. So good morning, everyone. My name is Trevor Young. I'm one of the Internet analysts here at Barclays. I'm pleased to be hosting Jeremy Wacksman, CEO of Zillow Group. This is the first time that we've had you guys at the conference. So thank you for the opportunity.

Absolutely. Happy to be here.

So we'll dive right in. First, let's start with some high-level ones. Big picture, Zillow for a long time has been known for its brand and large audience. The big question has historically been how would you leverage into building a big, sustainable, profitable business from that audience. You've obviously been successful at executing on that. But can you bring us along and talk about where you are in that journey with the housing super app?

Absolutely. Yes. Thanks for being here. Happy to be here. Thanks for having me. Zillow is the brand that everyone knows for shopping, right, for dreaming and shopping. And for the first kind of decade plus of our company, that's really what we were. We were an advertising marketplace, right? We were a place to shop and start your home search, but we weren't really a place to transact.

So the housing super app we talk about is really what our business strategy has been for the last 5-plus years, actually helping more buyers, renters and sellers transact, right? Use our software, use our loans, use the agents that you find with Zillow and participate in more of those transactions. And that's the business growth you've seen from Zillow has been really realizing that strategy more and more because while so many people know the brand and the audience share is so large, the transaction share is still single digits, right? And that's our big growth opportunity is simply to help convert more of the homebuyers and sellers to use Zillow services, the professionals they need on Zillow and the technology that we provide.

Got it. So don't just monetize the traffic, but actually get them to use some of your service.

That's right.

Got it. So that's actually probably a good setup to dive into the for-sale residential real estate segment and the big brand. Zillow is obviously synonymous with residential real estate, so much so that sometimes I do think the investment story does get a little bit conflated with broader residential housing market trends.

I appreciate that you're laughing about it. I'm sure you hear the same questions. Can you help investors understand the strategy within your for-sale business and how that enables you to drive revenue growth irrespective of...

Yes. So we talk about a housing super app. What that really is, it's an integrated software system for a buyer and a seller and all the professionals they have to hire, right? That's what a buyer and seller want. So that's what we're building. That allows us to then help participate and help more of them buy and sell and rent with our software.

We have to do that on both sides. We have to do that with the consumer. So you build great touring experiences, virtual touring, physical touring, real-time booking, you build great financing experiences, helping them get preapproved and eventually originate a loan for them. But you also have to build that for the professional side, almost like the other side of the glass that a buyer or seller is using is software we provide to agents and team leads and brokers really powering the industry with software. That spits out a transaction platform that becomes more desirable and more efficient for both the buyers and sellers who use it and for the agents.

And that's what drives the growth you're seeing. That's -- when we talk about a super app, that's why we talk about it that way is it's trying to pull together all these disparate services for both sides of the marketplace.

Got it. That makes a lot of sense. One of the narratives that you've dispelled in recent years is around your ability to grow revenue despite category weakness or as you said, a market that's kind of bouncing along the bottom here. At present, the path to lower interest rates still remains a bit unclear. But despite that, you do expect to deliver mid-teens revenue growth and expanding margins once again next year. Can you talk about the building blocks that you envision there between residential mortgages and rentals, kind of the 3 key segments?

Absolutely. So yes, this year, our goal was mid-teens revenue growth and margin expansion and getting to net income profits, and we're on track to do that this year with the guide we put out Q4. And you've seen accelerating growth in rentals. You've seen really strong growth in mortgages as part of our for-sale revenue.

And as you point out, we've been able to outgrow the category. The category really has been flattish for multiple years. We do about 4 million homes, existing home sales seasonally adjusted in '25 and '24 and I think in '23. And the reason we're able to outgrow, I think, on a 2-year stack, like last 8 quarters, we've grown -- outgrown the category by 20%. It is really the strategy.

Again, everyone thinks of the brand as a big huge brand and it is, but our market share of transactions is single digits. And so it's easy for us if the strategy works and we can roll it out to more customers and more agents, we can grow share even in a flat market. And that's what you've seen us do this past year, and that's what we expect to continue to do.

Right. Many people use Zillow to browse homes even though they're maybe not ready to buy or even rent. You get roughly 2.5 billion Zillow site visits just in 3Q alone. That's versus a run rate of the 4 million EHS that you mentioned. This behavior is a great tailwind for like the brand strength and marketing leverage. But at the same time, it does seem like a bit of a disconnect between all of that traffic versus ultimately the transactions.

And maybe there's even a missed opportunity here to better monetize that traffic. Are there other ways to monetize the Zillow asset and traffic? Or would that risk the core value proposition to both end users and agents that you just outlined?

Yes, it's a great question. We get it a lot. The category is a really unique one. And part of what makes Zillow so successful is we basically welcome all comers, right? 10 million to 20 million people will make a move, more renters than buyers. We're happy to be a place for all them to shop, whether or not they raise their hand to transact. That's what -- that's basically our acquisition every year. So that's great, and we're growing our share, as we talked about, of that audience.

There is on top of that an opportunity, I think, to grow our share of transactions, not just from the folks that are raising their hand on Zillow, but from those folks that already have an agent. And we talked earlier this year about the launch of Zillow Pro, which is really an evolution of all of our software offerings that we offer the industry into a subscription that allows them to grow their business. And what that does is really marry those 2 things together. It marries, okay, I might want to grow by working with Zillow buyers and sellers, people who raise their hand on Zillow and connect with a professional.

But I also want to try and grow by converting my database of clients, my referrals, my previous clients and we provide them software and tools to help them do that. And so for Zillow, that's a way for us to just offer this super app to all customers, whether they're Zillow customers or not. For an agent, that's a way for them to grow both ways, right? It's a way for them to grow by accessing more customers from Zillow or by doing a better job with their existing customers.

And so that's a way into that kind of TAM expansion in a way. And it is -- it remains this great opportunity where we kind of don't care if you're going to raise your hand on Zillow or not. We just -- when you're ready, we want to be there for you.

You want to be there.

And we want to help convert more of those customers.

Got it. Okay. Since you mentioned Zillow Pro, let's hit on that a bit. I think the initial launch is expected early '26 and nationwide, call it, maybe midyear or something like that. What is your big picture goal with this? Like how do we think about monetization and any incrementality of that versus what you offer to agents today? And what other future offerings within that are you really excited about?

Yes. I mean I think the road is really long and exciting for the software we can provide the industry. I'll just kind of give 2 examples, especially for folks who don't spend as much time with us.

So think about we have 2 real offerings for agents, Preferred and Pro. And what Preferred is, is those are the agents that we are trusting to deliver this integrated experience for Zillow buyers and sellers. That organic growth path you see in our for-sale business that we talk a lot about, that's coming on the backs of just bringing more customers to Preferred and getting more agents to Preferred and driving transaction growth there.

So the incremental for-sale revenue we talk a lot about just comes from that. We're only at about 34% of our customers get that experience today. We want to get that to at least 75%, and we think more over time, so that's one piece.

That's going to be a subset of agents, right? It's not going to be all agents. It's going to be the best agents we can find, the ones that really want to work the way we want them to work, and we want to work with them. But there's a lot more agents out there that are trying to grow their businesses. And Pro is really the software platform for any and all. And so it allows them to use CRM, use digital marketing tools, use an integrated offering to be more efficient, to be better for their customers and grow their business. Well, again, whether that lead is a Zillow customer or not.

It also allows us to really find the next great Preferred agents. So it's a software platform that provides value to them that we charge for, but then it's also almost like a proving ground for the next set of Preferred agents because as we get from 1/3 of our customers to as many customers as possible in Preferred, we're going to need a lot more agents to do that.

Got it. So it's kind of an onboarding mechanism. Got it. Okay. Let's shift to AI a little bit. Zillow was one of the few players included with the initial in-app integration with ChatGPT. Can you speak to the opportunity and how you balance folks assessing the Zillow experience in these nascent surfaces versus the desire to keep folks coming directly to your app and to your site?

We think about both of those as really exciting. One, these horizontal platforms are going to continue to grow and evolve and take time and attention the way search did forever, and we want to be there. And so you see our integration with OpenAI as just an example of us leaning in and innovating on what does that look like. I think you should expect to see more of that innovation from a lot of these platforms over the next couple of years. And we'll just want to make sure we're there.

If there's a real estate question to ask, they're already asking it, and they're asking it and they're usually asking about Zillow and so how can we delight the customer even before they get to Zillow. But the other side is equally interesting to us, which is how do we actually build that kind of capability inside of Zillow. And we're working on that all the time, right? How can we make Zillow smarter and better because the real estate category is a really unique one. You asked earlier about the -- well, you have this huge audience and the small transactions here. That's because it takes about 6 to 9 months to move from I might do something to I'm actually going to transact.

And you spend months and months and months on Zillow and sites like ours you spend even more time thinking about it. So it's not a one-click visit experience. It's a 1-year journey. And so AI's ability to be smart for that customer, learn from what you did, make the real estate experience better, like we get as excited about the potential inside of Zillow as we do as -- think about that as like traffic acquisition.

Right. So let's hit on that, the piece inside of Zillow. I think between Sky Tour, Virtual Staging, AI assistant and frankly, a handful of other tools that I'm probably not hitting on, Zillow, does have some rather interesting compelling tech features rolled out just in the last year alone. How are you using AI to achieve the steady cadence of product innovation, both internal tools as well as kind of outward facing while also being able to expand margins?

Yes, it's funny. We talk a lot to the agents in the industry about we help them analogize AI to mobile as this technology revolution that came that was foreign before and then became the default. And it's a little understates, I think, the potential of generative AI, but it's helpful as a framing mechanism. And what's interesting about that analogy is when Zillow -- when mobile came, Zillow knew nothing about mobile, and we had to really pivot our whole company and learn mobile quickly.

AI is different. We've been doing AI for 20 years. So we have tons of great features that are AI-powered today. And so when Gen AI up on the scenes, we were able to really lean in and take advantage of it. And we've been doing that for a while, as you pointed out. So everything from the consumer features you all know, how does generative AI make the decimate better? How can you ask Zillow questions about the estimate, how can we consider more data to generating interactive media. So our Virtual Staging, our interactive drone flyarounds called SkyTour, that's all generative AI.

So you get lots of those capabilities quickly because you're able to really pivot your engineering efforts to think about how to best take advantage of these things. But the part that I think goes less understood is, again, on the other side of that glass on the professional side. Because at the end of the day, the real estate transaction, you're spending a lot of time with the professional. And if we can make them more efficient, smarter, better, faster, that is better for the customer, and that's actually better for them to convert as well.

And just to give a very simple example, we provide a real estate CRM called Follow Up Boss that hundreds of thousands of agents use, and they're using that to try and win clients and delight clients and respond to clients and follow up. There's a whole bunch of busy work in there that AI can start to automate. We rolled out something called Smart Messages, something incredibly simple. Hey, rather than you having to figure out how to follow up with that customer after you hung up the phone, let's generate a message for you and you can edit it and hit send.

Millions of those are getting used every month now because it just helps them save time and effort. It helps them be a better professional. It seems very basic, but even those small capabilities of generative AI, it just lifts the floor of like what's the transaction experience like, which helps convert more customers.

Right. And I would imagine tools like that help agents not only be more productive, but also not miss out on that opportunity, that touch point where if they don't respond to that person, they may go with a different agent.

That's right. That's right. The leakiness of the funnel is typically not knowing who to respond to, not knowing what to respond or just not doing the job responding...

Yes. Got it. Okay. Let's shift gears a little bit. I do want to hit on some of the lawsuits. You've had a number of lawsuits this year. We appreciate this can be a little bit of a sensitive topic to hit on publicly, but is there anything that you want to share with the investment community regarding some of these ongoing cases?

I mean nothing new, just thankfully, it ends up not being too much of a distraction for the team, and I think you see that in the results.

We're incredibly fortunate that the strategy we have is pretty unique and it's pretty durable and you're seeing growth of it, right? Build great software for buyers, renters and sellers, build great software to the professionals, marry those up and participate in more transactions. And we're able to stay focused despite the noise around us. And there's been noise in the industry in the past with commission lawsuits and with COVID mortgage rate -- radically changing mortgage rates. So we're able to stay focused through all those periods and keep growing, and we see that in the results, and that's what we plan to continue to do.

So trying to ignore some of the noise.

Yes.

Got it. Okay. Let's shift gears and hit on rentals, which frankly, in my view, is an underappreciated part of the business. It's been a real growth engine for Zillow and revenue is guided to accelerate further in 4Q on the back of both the syndication with Redfin and broader multifamily property expansion. How should we think about that rentals business going into next year as you potentially lap some tougher compares?

Yes. It's -- I think investors know Zillow so much for for-sale and the brand is so -- they don't realize that Zillow is actually the most beloved and known brand for rentals as well. We are the largest rentals marketplace.

And I think the other thing that's less understood is how unique the strategy is in rentals. The rentals marketplace for those who haven't spent time in it, there is no commoditized database of all listings. We have that in for sale, which is a fantastic consumer benefit, but it commoditizes the supply everywhere. In rentals, that doesn't exist. And that ends up being a problem.

When you're a renter, you scour the Internet because no one has all the listings. So our strategy was let's try and organize as much of the supply as possible, and we've done that, right? We now have the most listings. We don't have them all. No one has them all, but we have the most, and it's growing all the time. So 2.5 million rental listings on our rental network. That's the most out there. That's what drives the audience and the brand.

So we are the #1 brand and the largest audience because that's what people are looking for when they come to search and they find it and they like it. And that's the setup then that allows us to drive revenue growth, right? The multifamily revenue, which is the largest source of our revenue, the big 25-plus unit buildings that are advertising and trying to manage and fill vacancies, well, they want to tap into that audience. And they're trying to find leases, and we have the highest quality and most folks for them to find. So that's what they want to tap into.

So that's the organic growth setup, and we're now then able to take that and extend that value prop to partner sites. We did that with realtor.com a while back and now with Redfin sites, which are really well known in the industry as well. So what you see now is you see these large property managers telling us that we are the best ROI they have of all their advertising sources because we have this growing audience, we have this diverse audience. And again, that's the #1 problem they have. And that's what's driving the revenue growth you've seen this year and the acceleration.

And so as we look ahead in that rentals business, given that inertia that you have, it seems like you should be able to continue to put up really solid growth irrespective of tougher compares.

Yes. We feel great about the growth potential for rentals now and into next year. Obviously, the partnership we roll out with Redfin provided a nice boost, but we were growing incredibly nicely before that, and we're growing nicely now. And again, it goes back to that ROI. I mean that's the #1 thing we look at is, okay, are we delighting the renter? Yes. Are we delighting the property manager with the advertising packages we have and with the ROI we provide, and we hear resoundingly yes there as well.

Okay. So sticking with rentals for a second. Investors do ask a lot of questions about competitive dynamics in the multifamily subset of rentals specifically. Can you talk about how you differentiate yourself to drive that strong growth and how you think you can continue to compete in this market over the medium term?

Sure. I mean it does go back to that strategy differentiation. When you set out to organize as much of the supply as possible, you end up with the most engaged renters, and that is ultimately what a property manager wants. They need leads, but they want leases and leases are a high-quality audience. And Zillow is able to be the highest ROI source for them because we have the highest quality audience.

And now with the partnership, we have a growing volume of that quality of audience as well. And you see that in the results. We regularly survey our property managers. The folks that are doing this at scale, they're very sophisticated marketers. And they're spending, yes, on apartments-focused sites, but they're spending on Google and Facebook and TikTok and they're remarketing their property websites, they're doing what great marketing teams do.

How can I efficiently take my advertising dollars and attract customers I need? And they are the ones that routinely tell us, you guys stack up at the top. And so that to us is the ultimate signal that the organic growth that we've been able to build, will continue because we are delivering the ROI that they're looking for.

Right. That makes a lot of sense. Let's shift gears to kind of the margin side of things. You've guided to similar EBITDA growth and margin expansion next year for '26 versus '25. Can you walk us through that progression and what you see as the key drivers of margin expansion persisting, particularly when contemplating some of the investments that you've been making?

Yes. So we've been growing nicely. I think mid-teens revenue growth is the expectation for this year with 4Q guidance. And we've started to talk about next year. I know Jeremy did, and we'll talk more about it in February. But the growth formula is really similar. And the reason for that is the strategy is working. Rolling out these enhanced markets, rolling out more enhanced markets, right, more customers on this integrated experience, more preferred agents. That is organic for-sale revenue growth. That's mortgage and residential revenue growth.

We talked about rentals and why rentals is going to grow as well. And we're doing that, and we're able to hold our fixed costs largely flat. So we've done that the last couple of years. It grows modestly with inflation. We expect that again next year. And so when you're able to grow your revenue and hold your fixed costs largely flat, with variable costs growing ahead of the revenue growth, that provides leverage. And that's what you're seeing in the P&L in this year, and we expect a similar formula for next year.

Okay. And let's take a step kind of more longer term. You have mid-cycle revenue guide of about $5 billion and a 45% EBITDA margin. That's predicated on getting to upwards of $6 million in EHS relative to what you did in 2024, where you did about $2.2 billion in revenue and EBITDA margins kind of in the mid-20s percentage territory.

What needs to go right from here to achieve those mid-cycle targets as we bridge from that $2.2 billion last year to $5 billion? And can we parse out how much of that would come from category recovery versus factors that are really within your own control?

For sure. Yes. I mean it's definitely both. We put those targets out. We were in a normalized housing market of 6 million existing home sales, and we thought that was a nice conservative baseline. So how much has changed. But the good news is the growth formula is as much us as it would be macro recovery in that formula. You can think about it as there's about $1 billion of organic for-sale revenue go get just from rolling out this preferred this enhanced market experience from what is a little more than 1/3 of our customers today to 75%.

So more transaction conversion, more adoption of things like Zillow Home Loans, that drives that organic growth, again, regardless of macro. And then rentals, we talked about, when we put that -- those targets out, we talked about getting to $1 billion in rentals revenue. So there's another $0.5 billion of rentals growth there. Then we said the rest would effectively be macro recovery.

You get back to a more normalized housing market, our share against the bigger market. It's important to note though, we put all that out before we really started thinking about the SEM expansion of Zillow Pro. So you can think about Pro and the ability to tap into the rest of the transactions out there over time through our agent base as an additional lever of growth on top of that.

Okay. So it sounds like a lot of levers within your control, certainly, a component to get to that mid-cycle target would be a category recovery. I think some of the reasons why existing home sales remain under pressure seemingly well understood. That said, like many -- we and many other industry participants do wonder what will that recovery look like at some point? Not asking you to prognosticate when it happens or anything like that. But I'm presuming you spend a lot of time thinking about that. When does the recovery happen? What does it look like? What do you envision that path to look like from here over some...

I could predict that, I'd have a different job. But our economists spend a lot of time trying to best guess. And I think our point of view is that the recovery will come kind of slowly and more measured. It's not going to be some snapback. And it's exactly what you alluded to, it's a little bit of rate relief, a little bit of unlock of sellers wanting to -- not wanting to trade out of their mortgage, which helps ease inventory, prices moderating and staying flat so that wages can catch up, so volumes start to grow up. And you're starting to see that happen on the margin, right? There are markets where prices are actually down year-over-year because supply has come up enough.

And so like you -- I think you'll start to see this coil unspring. We just think it's going to be sort of slow and measured. And that's what our economists are seeing in the data right now. I think we are seeing as many homes have home prices going down right now is going up, which is actually a very good thing, right? If you think about nearly 100% home price run-up from pre-pandemic, flattening out or staying stable or even easing a bit is going to help with affordability. And the demand of buyers is absolutely there and the demand of sellers to want to finally sell as opposed to being locked into their mortgage is there. So stability in the market, I think, will help lubricate the market, but we think it's going to be slow and gradual.

Okay. So just to summarize, you're seeing maybe some green shoots there, but you're also not expecting this major snapback. But to your comments in an earlier question, you also don't need that recovery to start making continued progress on your goals, both in '26 and medium term.

And I think that's the most important point, at least for this room is it sort of doesn't matter what macro does. It will be a tailwind when it comes, but our growth formula, which you've seen over the past couple of years, you've definitely seen this year and you should expect again is to grow against what we expect to be a fairly flattish housing market. Even if you start to see some recovery in the market, that ends up just being a tailwind for everybody.

Yes, just enhances things. Yes. Got it. Okay. Zillow in general, has been a CapEx-light business historically. How should investors think about the balance sheet structure and capital allocation from here?

I mean we've always been opportunistic. I think the way we think about it is we want to have a minimum net cash balance to be opportunistic, dry powder. You've seen us be very acquisitive when it makes sense for M&A. You've seen us use and tap our balance sheet for share buybacks when that's appropriate. So we'll always be, I think, strategic and opportunistic with the kind of guardrail of there's a min cash balance we want to maintain to just provide operational flexibility.

Okay. One last one before we wrap up here. We're just a few weeks away from 2026. What's the message that you'd like to leave folks with the Zillow story? And what are you most excited about for next year?

Yes. I mean we're really excited about 2026. Again, despite maybe a long, slow recovery in the housing market, what we get most excited about is the growth formula is working. And every year, I think those of you just spend some time with us see that because you're seeing it show up in the results. You're seeing it show up in the anecdotes when you talk to our partners. You're seeing it show up in the experiences we're delivering. And so the idea that we can get from 1/3 of our customers to 75% of our customers over time. That's a really great one for revenue growth and for mortgage growth.

The idea that we can get Zillow Showcase, which is now 3.2% of all new listings, which is double what it was a year ago, more towards that 5% to 10% target and become more of the expected way that you list your home is an exciting one. The idea that rentals is going to keep growing on the back of this real great expansion organic plus partnership story we had this year is an exciting one.

So there's a lot of exciting ways that Zillow is going to go grow next year. And we get excited about that to your prior question, kind of regardless of the fact that we're not expecting much macro help. And then you can think about the increasingly diversified ways we have to grow as working together in any market.

Yes. It sounds like a lot of levers across the business, frankly. And then once that macro recovery happens, it only enhances things.

That's right.

Okay. Great. Well, let's wrap it up there. Jeremy, thank you so much.

Yes. Thanks for having me.

All right. I think we're live. All right. So we're going to go ahead and get started. I'm Stephen Ju with the UBS Internet team. Sitting to my left and to your right is Jeremy Hofmann, who serves as the CFO of Zillow. So welcome to the conference, Jeremy, and thanks for joining us.

Thank you for having me.

All right. Awesome. So let's just kind of start at the top. So Zillow, for the longest time, has been known for its brand and large audience and engagement assets. So the big question has always been, when and how you would truly leverage that into building a big, sustainable and profitable business. So perhaps you can touch on the arc of the story so far and where you are in that journey with the housing super app.

Sure. Yes. So Zillow has been around for almost 20 years at this point. I'd say the first 15 or so years, the big focus was really building a brand, building an audience, building something that we thought consumers would love and also attracting real estate professionals to meet those consumers. So that was really the focus for the first 15 years or so, and we monetized via traditional lead generation primarily.

Over the last, call it, 5 years or so, we've really focused on trying to make transacting easier. So that's renting, buying, selling and financing. And we're doing that for a few reasons. One, we think the consumer experience is better when you have a more digital, more seamless, more integrated transaction, both on renting and in for sale. And two, it's a pretty big business opportunity. A lot of the dollars end up being changing hands at the transaction. So the combination of both of those things has made us focus on really helping movers move more easily. And it's translated to really good financial results.

So Q3, we grew total revenue 16% year-over-year. And that was in a really bad housing market, which has been persistent for the last few years at this point, but at some point, will change. But we grew revenue 16%. We grew our for sale revenue, which is a combination of residential and mortgages. We grew that 10% in the credit housing market, and then it was coupled with 41% growth in rentals. So the combination of the business that we've built is far more diversified than it was 5 and 10 years ago. And it's really a nice growth algorithm, not just in 2025, but well into the future. And we're doing all of that with good cost discipline. So we grew revenue 16%. We also expanded our margins by 200 basis points in the quarter.

When I hear super app, when I hear companies talk super app. I always think there's multiple ways to skin the cat. Yes, so you probably can't talk about the entirety of your product development road map right now, but there's probably other things coming forward because you have a large amount of intent-driven traffic that's already there, right?

Yes, that's right. And we feel really good about what we've done over the past 4 or 5 years. We think the growth algorithm is well set to hit the midterm targets we put out earlier this year. We're also not stopping there. Like we do believe that the brand that we are, where we live with consumers affords us the opportunity to do far more than even we're doing today. And we're setting up the company to grow, not just through this mid-cycle environment or mid-cycle targets but well beyond that.

We announced a product called Zillow Pro probably 1 month, 1.5 months ago at this point, which is basically taking all of the goodness that we've started to build for consumers and agents in our Enhanced Markets and bringing those further out to all agents and all customers. So that starts to get exciting well beyond even the stuff that we're talking about.

Yes. I mean within Zillow Pro, I mean there's the concept of sphere of influence, right? So can you talk about that a little bit and how you're expanding to support an agent's sphere of influence, yes.

Yes. And Zillow Pro is really early. Again, we announced it about a month ago, and we're in alpha, not even beta yet. So there's a lot to learn. But what we're trying to do is we've done quite well building great consumer experiences for folks that come to Zillow and great -- partner with great agents to fulfill for those consumers. Zillow Pro effectively allows us to do that for all agents and all consumer types.

So it's Follow Up Boss, which is a leading CRM that we acquired a few years ago. We're taking that as the underlying product. We're adding agent branding and premium profiles. We're adding the ability for agents to connect with not only customers that they met on Zillow, but also customers that are in their sphere of influence, which is outside of Zillow and use all the tools that we've offered now bring it to your entire customer set. And that's pretty powerful, right? And you basically step back, and Zillow will be continuing to provide great consumers, transaction-ready consumers for these agents. And now we're also giving them tools to really run their entire business.

Okay. So you're serving as sort of their digital agency. Is that too presumptuous a term or?

I think that's probably -- that's not how we think about it. I think let's provide great consumers folks that are looking to transact and then let's give you great tools to run your business.

Okay. Understood. I think Zillow has been executing pretty well on the housing super app and rolling on Enhanced Markets during what we've called, I think, term that bouncing along the bottom in the housing market, revenue growth, like you said, in the mid-teens, EBITDA margins are expanding. Rentals accelerated to plus 40% growth year-over-year and GAAP profitability. So what's driving the outperformance versus the industry?

It's been a really good couple of years for Zillow despite a challenging housing macro. And housing in the last 3 years, we've been stubbornly around 4 million homes sold per year and we're looking at the lowest level of housing turnover in the past 40-plus years. So it's been about as challenging environment for us to operate in, yet we are doing quite well, growing mid-teens, expanding margins. And the way we're doing it has been very consistent, and it feels very repeatable.

So across our for sale business, we're continuing to expand these enhanced markets that's driving growth, continuing to expand Zillow Home Loans on the back of that enhanced market expansion that's driving growth, putting Follow Up Boss in more people's hands. Listing Showcase, our premium listing product has grown really nicely. That's up -- that's more than double in terms of new listings versus a year ago, and then that all comes with our new construction business, which is performing quite well.

So across for sale, it feels like there are green lights everywhere. We're able to outperform the market. And then you couple that with the rentals business that is growing really nicely. That business has accelerated throughout this year. So we grew -- Q1, we grew 33% in rentals; Q2, 36%; Q3 was 41%, and we expect 40% plus growth for all of 2025. So when you put that all together, the growth algorithm feels really good, and it's one that we think is sustainable beyond 2025 as we look into 2026 and towards our mid-cycle targets.

Got it. Hitting some of those products one-by-one, I think, Enhanced Markets climbed to 34% of connections in the third quarter. And so what's been the hardest part of scaling that experience between product readiness, operational consistency or agent enablement? And what milestone signals should investors be looking for?

Yes. So our Enhanced Markets are effectively the go-to-market motion where all of the great consumer experiences and all of the great agent experiences come together. That's -- it's in these Enhanced Markets. We started this 3-ish years ago. It was in 4 markets for a while as we were just testing. We are now at a place where as of the end of Q3, we're at 34% of all of our connections are going through this experience. So we've scaled it quite nicely over the past few years, but there's plenty more for us to go do.

I think a good mile marker for you all is just understanding what is the percentage of connections that is going through this experience, 34% in Q3, we expect 35% plus by year-end. And then our mid-cycle target -- midterm target is 75% plus. So we have more to go as we roll these out, but we're quite pleased with the ability to have moved faster than we were 3 and 4 years ago.

From here, the governor to expansion is really making sure we're building the relationship between the Premier Agent partner and the Zillow Home Loans loan officer. That relationship has to be really good. And that's really incumbent upon us at Zillow to build a great mortgage experience. So that has to be a great consumer experience. It has to be a great partner experience. And you really only get one shot to make a first impression in mortgage, particularly in a housing environment that is as bouncing along the bottom as we've seen. So we've been really thoughtful on how fast we move to make sure that we're delivering on that mortgage promise.

Okay. I mean the home loans, the purchase originations rose 57% year-over-year, right? So is the primary driver of that growth what you just talked about? Or are there other factors that you can -- or leverage that you can pull to drive that growth?

I'd say the primary growth driver has been the Enhanced Market expansion. So as we turn more of the base of connections into this Enhanced Market experience, Zillow Home Loans comes alongside that and continues to grow quite nicely. We're seeing double-digit adoption rates across the entire Enhanced Market portfolio. So that is great. We're still pretty small, though, 57% year-over-year growth is excellent. We're thrilled to be able to do that in a tough housing market, but there's a lot more to go do from here. And the levers for growth will be continued Enhanced Market expansion, continuing to build really good affordability tools and finance first tools, folks that come to Zillow to get prequalified or preapproved before they go meet a real estate agent. That's another really interesting lever for growth. And then the Nirvana would be, we're doing really well with Zillow specific customers, and we start to get the opportunity to win business amongst real estate agents, their sphere of influence and the folks that they actually meet outside of Zillow.

Got it. Okay. Follow Up Boss, is that right, that has evolved into the CRM backbone for Enhanced Markets. And so what are the AI capabilities within Follow Up Boss that get you excited?

So we bought Follow Up Boss about 2 years ago now. It was a leading CRM and what we thought was the best CRM when we bought it back in late 2023. And we've just tried to supercharge it. So back then, I'd say there were probably about 50% of our Premier Agent preferred base was using Follow Up Boss. So obviously, a great installed base before we bought it. And we're now at a point where virtually everyone in preferred is using Follow Up Boss. So when you say backbone, that's right. It's really the underlying software that's powering our preferred partners and our Enhanced Markets.

What we've been able to do, I think, is probably 2 things. One, we've really supercharged the product development with more AI features. And it's all around making an agent's life easier. You think about a real estate agent, they want to be closing deals. They want to be transacting. They want to be out with clients. They don't want to be doing menial tasks. They don't want to be writing call summaries. They don't want to be organizing task lists. They don't want to take notes on the call and then have to go write those down and put it in their CRM. We do all of that for them now via AI.

So you have a great underlying feature set. You have a whole bunch of productivity tools that we've developed using AI. And then what's coming is starting to marry their Follow Up Boss data set with our Zillow consumer data set. When you put all those things together, it's a pretty compelling pitch to a real estate professional to be able to say, great CRM, a bunch of really cool AI features to make your life easier, and you can now start to use Zillow data to help you even further better understand your customer base.

Got it. All right. So rentals revenue, that grew 41% year-over-year. I think multifamily growth was 62%, I believe. Yes, so which drivers matters more for momentum carrying into 2026? Is it going to be a matter of just expanding the property count? I think you're now at, what, like 69,000 multifamily? Or is it a matter of you deepening the wallet share through upgraded ad packages or other products? Yes.

I think maybe just to step back on rentals and just what are we doing strategically because it is unique to the category. We're effectively trying to find and amass all of the rental listings in the country. And that's single-family homes for rent, that's apartment buildings as well. That is -- there's no MLS in rentals, right? There's no organizing central force to distribute content. So we're trying to be that. We're at a point now where we have 2.5 million active listings as of 9/30. That's the most in the category. But we still probably have 35%, 40% of all inventory to still go get. So we've amassed more than anyone else, but we're by no means complete on supply.

That strategy, I think, is really compelling though because what the renter wants is to be able to see all the inventory, you see it all in one place. That's what we're trying to do. That's what we've been marching along for a long time now. And as you build that supply and you build that differentiated listing set, you can start to build differentiated consumer demand. So you start to see a 2-sided marketplace form as a result. And I would say the results that we are seeing in rentals are on the back of that 2-sided marketplace starting to spin. And the results, I think, have been strong throughout the year. We did grow, yes, 41% in rentals in Q3. Our property growth in multifamily, which is the big apartment buildings grew 47%, and our multifamily revenue grew 62%. So all of that is great.

From here, we think we're still scratching the surface. So the opportunity continues to be add more supply. There's a whole bunch of multifamily buildings and homes for rent that we don't yet have on Zillow. We need to do that. We need to continue to deliver really good ROI to these partners in a way that they are interested in spending more money with us. So we will continue to do that as well. And then on the consumer demand side, just build product that allows renting to be easier, like that's still -- renting is a pretty hard process, and we should and are planning to develop programs to make renting -- product and programs to make renting easier for consumers as well.

Got it. So let's roll what we just talked about into, I guess, the forecast and expectations for next year. So I think you're projecting mid-teens revenue growth and margin expansion again next year despite the muted housing backdrop. So what's the underlying formula that makes all of that possible? And what are the more durable, I guess, levers in that algorithm that we're talking about? And how are you setting the stage for the next phase of Zillow's growth?

Yes. So what we said on the November call was we expect a similar formula for 2026. We'll obviously give updated guidance in February, but I want to at least give investors some flavor for what 2026 can look like. And the formula is pretty consistent, like we expect continued growth in for sale on the back of enhanced market expansion, Zillow Home Loans expansion, Follow Up Boss expansion, Showcase expansion. So that will sound boring in some ways because it is really just a continuation of what we've put in place. And then you couple that with a really good rentals business that continues to grow quite well, that allows us to feel confident that 2026 will look good regardless of what macro does and that's what we're planning for.

That, I would say, is on the revenue side. And then on the cost side, we've been very consistent in the past 3 years that we think our fixed cost base is at a good place at this point. And we are basically saying, we are going to stay flat plus some inflation that inevitably comes in between salaries and software, et cetera. We've done that well in the last couple of years. We've done it well in 2025. We expect to do it well in 2026. And if we are disciplined on the fixed cost base, we continue to grow revenue. We are able to grow profits faster because so much of our cost base is in that fixed bucket.

Yes. A sort of a sideways question here, the eternal optimist that I am. I want to think about a housing market that's not kind of bouncing off the bottom here.

You and me both.

Yes. So what does that look like if we start to see some sort of recovery and the macro helps you instead of being sort of a hindrance?

Yes. I think it's an accelerant, too, for us. I won't say -- we wake up every morning and we expect to grow because of what we can control. And the team is really clear, we're really clear that don't wait for macro. Let's just keep growing, keep doing what we're doing. And mid-teens growth in a challenged housing market, we're really proud of. If and when the macro does come back, that's an accelerant. So maybe a way to think about it with respect to our mid-cycle targets, which we laid out earlier this year, we said there was $1 billion of organic revenue in for sale based on the strategy that we have without any macro recovery. We think there's $500 million plus of rentals revenue to go get based on the strategy that we're at right now. So that gives you $1.5 billion of organic. And then if and when housing gets back to a mid-cycle environment, we think that's another $1.3 billion of incremental revenue to us that would supercharge us, but we obviously like what we're doing regardless of what the macro does.

Got it. All right. So this is a tech and AI conference, so we got to talk about AI. All right. So I think all of us have seen Zillow as being the first real estate app being integrated to ChatGPT or a part of the slide deck that they presented. So how are you thinking about -- I guess that's another doorway for traffic to arrive on Zillow. What are the incremental opportunities there? And what should we be worrying about in terms of potential disruption?

Yes. We run very hard at new technology and any paradigm shifts, we will run at all of them. We did that with OpenAI. They had called us. I'm not going to get the date exactly right, but I want to say mid-September, maybe a little earlier than that and said, "Hey, we're going to have a demo day on October 7. We're giving you 5 weeks. Can you hang with us?" All right. Well, let's scramble the jets, get some of our best people on it, and we were able to do so. There were only a small handful of folks that were able to actually keep pace with them to get to that demo day. I think they started with north of 20, and they got whittled down to a small handful. And that speaks to me, not being a product manager or an engineer, just that the quality and speed that we can work with that we're able to develop at a pace that OpenAI is doing so. So we're really proud of that.

When we think about the potential for what OpenAI, ChatGPT and other LLMs can do, we see it as opportunity. We think we have unique data, a unique strategy around transactions, a great brand and an engaged audience. And we think we work well with these folks rather than seeing it as a disruptive threat. Some of that is what I just articulated, and some of that also is real estate is a really complicated end vertical, right? It is a long shopping cycle. It is heavily regulated. It is very local. And it is a very infrequent transaction. So when you put all of that together, we feel really good that these -- like ChatGPT and the like are going to be opportunity for us to meet more customers. But ultimately, what we can provide within Zillow is far more powerful than what you can do off of Zillow.

And then last but certainly not least is as we work closer with OpenAI and ChatGPT, we can take those learnings back and put them natively into Zillow sites and apps, too. So you can feel like the search experience, the transacting experience is far more LLM enabled than it was 1 year, 2 years, 3 years ago.

Yes. And speaking of what you're bringing in-house, right? So how are you deploying AI internally at the company with employees, not just external consumer-facing? And where do you see internally some of the benefits from this technology?

I think internally, we focus -- consumer features, operator features and employees are kind of our 3 big buckets of workflows. For employees, we're just making folks more efficient. And we're seeing that across the org, like each of -- within each function at the company, we have AI champions, and those folks are -- work very closely with our technology team to figure out where the best use cases. But ultimately, we find ourselves more efficient across the board. And that's really powerful, especially in an environment where we're rapidly developing product. Things are changing dramatically, and we're finding ourselves getting speed everywhere. So it's been a huge enabler there. And then internally, we also spend a lot of AI efforts on making our loan officers more productive. And we don't employ real estate agents, but we work very closely with the real estate agents. We look for ways to make AI more efficient for them to like the stuff we were talking about in Follow Up Boss.

And I think you hinted earlier that you're going to endeavor to keep the cost base, the fixed cost base at a relatively flat level. So is this a help in that regard?

I think it's a help, yes. I think it's been an enabler of more speed, more than I'd say we're taking cost out as a result. But it's definitely been a help to be able to look at these AI tools and know that everybody is getting faster and doing more work with the help of these tools.

Okay. So it makes it more agile. Yes, okay. And I think switching gears a little bit to the cash flows, I think you introduced a new free cash flow metric in the third quarter. So walk us through the thinking there.

Yes. It's just natural evolution of a company that is becoming a sustainable, profitable company. We wanted to make sure it was clear and investors had a clear visual on what our -- what cash we're generating, and we produced $295 million of cash year-to-date this year, but wanted to just make sure that folks had that metric at their fingertips as well as we just get bigger.

Got it. And I think you've also settled all of your convertible debt as well. So walk us through your capital allocation philosophy and as well as your thoughts on the stock-based compensation.

Yes. So we, in May, we retired the last of our convertibles. We're convertible debt free now. That was Priority 1 for capital structure in 2025. Priority 2 was to ensure that we were more than offsetting stock-based comp. So with a share repurchase, we've repurchased $438 million year-to-date in share repurchases and have been really pleased because we've been more than able to offset dilution. And just generally, I think the share base -- or the share buyback has been a great tool for us. We've spent more than $2 billion lifetime to date on the program at less than $50 a share. I think it's been really powerful. It's one that we'll continue to be opportunistic on going forward.

When I think about how do we set up the capital base from here. We always want to have $1 billion-plus of net cash, just for opportunistic growth. And also for a rainy day if for some reason another pandemic happens or something like that. But then from there, we do look to use the share buyback as an important tool, particularly in times of dislocation.

Got it. Well, here's to hoping for a more cooperative macro going forward. But let's gaze into our crystal ball. So it's December of 2026. We're sitting here discussing what might have happened in the trailing 12 months, right? So what do you think we'll be talking about in terms of what Zillow has been able to accomplish in the trailing 12 months?

That's a good question. Very hard to put the crystal ball in times like this. But my hope is we're up here and a lot of what I've talked about today, we've made a ton of progress on. I feel like the strategy is quite sound. I think the execution has been quite good, but we also have a lot to do. So my hope and my expectation is we continue to grow revenues really nicely across for sale and rentals. We continue to do it with cost discipline, and we're sitting up here a year from now excited about what could come in 2027, plus all the new things we'll develop over the course of the next year.

Got you. All right. So we'll leave it there.

Awesome.

Thank you so much.

Thanks for the time.

Hello, and welcome to Zillow Group's Third Quarter 2025 Financial Results Call. [Operator Instructions] Also, as a reminder, this conference is being recorded today. If you have any objections, please disconnect at this time. Brad, you may begin.

Thank you. Good afternoon, and welcome to Zillow Group's quarterly earnings call. Joining me today to discuss our results are Zillow Group's CEO, Jeremy Wacksman; and CFO, Jeremy Hofman.

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 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, both of 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.

Good afternoon, everyone, and thank you for joining us. I'm pleased to share that Zillow delivered another excellent quarter, thanks to continued momentum across both our For Sale and Rentals operations. For Q3, we reported strong revenue growth, EBITDA margin expansion and positive GAAP net income. In the housing market that's bouncing along the bottom, Zillow continues to outperform both our outlook and the broader industry, showing the strength of our execution and the durability of our strategy. Delivering growth while managing costs keeps us on track toward our 2025 targets of mid-teens revenue growth, expanding EBITDA margins and positive full year GAAP net income.

Zillow has earned its success because we are a consumer-focused product-led company transforming the way people move. For consumers, that means a simpler, faster, more transparent way to buy, sell or rent a home. For real estate professionals, it means more effective tools to grow their businesses. And for our shareholders, it means sustained growth driven by innovation regardless of where we are in the housing cycle. We are delivering the seamless digital end-to-end experience that consumers and increasingly the real estate industry expect and depend on. And we deliver innovation quickly across our ecosystem and across the customer journey. In Q3 alone, that included adding virtual staging to the super listening experience in Zillow Showcase, enhancing messaging functionality and debuting the Zillow app inside ChatGPT.

I will dig into our latest launches in a few moments, but first, I'll walk you through our Q3 results, which show how well our strategy is working. Total revenue increased 16% year-over-year to $676 million in Q3, exceeding the high end of our outlook range. For Sale revenue increased 10%, outperforming the broader housing and mortgage markets, which continue to bounce along the bottom. Within For Sale, residential revenue grew 7% and mortgage revenue grew 36%. Rentals revenue grew 41% year-over-year with 62% year-over-year revenue growth in multifamily.

Together, this revenue growth, along with effective cost management helped us generate EBITDA of $165 million, above the high end of our outlook range and EBITDA margin expanded more than 200 basis points year-over-year. The combination of revenue growth and cost discipline also resulted in positive net income of $10 million in Q3.

Our consistently strong performance reinforces the fact that Zillow can grow regardless of what the market is doing. What drives our success and differentiates Zillow from everyone else in our category is consistent execution on our integrated transaction strategy, relentless product innovation and a focus on consumer and partner experiences.

Our success starts with our brand, which is loved and trusted by both consumers and real estate professionals. Our apps and sites had 250 million average monthly unique users in Q3, and we are a strong partner for the residential real estate industry. Agents who use at least one of our products, whether that's Premier Agent, Follow Up Boss, ShowingTime+, Showcase or dotloop, are responsible for an estimated 80% of U.S. residential real estate transactions. Our brand strength and quality product offerings feed our broader Zillow ecosystem and give our partners a powerful edge in building their businesses as they operate where consumers are and deliver the experience consumers want.

We take the strength of our brand and audience seriously, always looking for ways to meet consumer needs in an ever-evolving and competitive landscape. The latest demonstration of that principle launched this month, the Zillow app in ChatGPT. Consumers searching for homes in ChatGPT can explore listings, maps, photos and pricing directly in the Zillow experience and can seamlessly continue on to Zillow's website or mobile app to book a tour, connect with an agent or learn about financing. It's another new doorway directly into our ecosystem, just like when we built one of the first apps for mobile.

Being early matters. And as we learned then, first-mover advantage pays off when technology transforms how people use the Internet. We are currently the only real estate app inside ChatGPT, a testament to the speed and technical depth of our teams as well as our near 20-year track record of using AI to build innovative, data-driven consumer-first products responsibly. We are still in the very early innings of how AI will transform consumer experiences, but we strongly believe that the critical differentiators between those that succeed and those that get left behind in our category will be user experience, quality of audience, unique insights and providing integrated transaction services instead of just top-of-funnel lead generation. We feel incredibly well positioned to take advantage of the AI transformation given how unique our strategy is.

Now I'll dive deeper into how our consumer-first product forward thinking has shown up across our business and helped us grow in Q3, starting with For Sale. Our for-sale revenue is consistently outperforming the broader market as we deliver strong revenue growth and continue to drive share growth relative to the total industry transaction value. We're executing well on our sales strategy to make buying, selling and financing easier for consumers and agents alike. Zillow is built for where the industry is going, not where it's been. We've moved beyond home search and become a diversified transaction-focused platform that integrates the disparate steps of the housing journey, connecting with an agent, touring, exploring financing options and more and equips agents to successfully guide consumers through it.

We continue to scale our immersive listing experience, Zillow Showcase. More than 50 brokerages have adopted Showcase as a go-to marketing solution to help agents win more listings and sell homes faster. These enterprise partnerships spanning leading national brands, regional powerhouses and innovative independents reflect industry recognition that Showcase gives agents and sellers a measurable edge in today's housing market.

As of the end of Q3, Showcase was on 3.2% of all new listings in the U.S., up from 2.5% last quarter and more than double our share versus a year ago. And in Q3, we launched AI-powered virtual staging on Showcase listings. This new feature uses computer vision to restyle rooms instantly with just a tap, letting buyers picture a home's potential while giving agents who use Showcase another way to make listings stand out. Whether a buyer starts by virtually walking around homes with Showcase, instantly booking an in-person tour and connecting with an agent or exploring their financing options, Zillow provides the right support at the right moment in their journey.

With products like BuyAbility, a powerful tool from Zillow Home Loans that helps buyers shop based on what they can afford, we're making financing simpler and more transparent and improving how we identify high-intent buyers in the process. BuyAbility has enrolled 2.9 million people since it launched after surpassing 2 million last quarter. These buyers are more knowledgeable and ready to act when they connect with an agent through Zillow.

In addition, we introduced a verified digital pre-approval and began rolling out a new borrower application designed to get shoppers quickly to a real decision and improve loan officer efficiency. These updates are live now on our website and coming soon to our apps. We also just rolled out major enhancements to our proprietary messaging system that lets buyers communicate directly with their agent and with loan officers from Zillow Home Loans within the Zillow app, thanks to an integration with Follow Up Boss. Buyers can now co-shop with a partner or co-buyer right inside Zillow, sharing homes, comparing favorites and staying aligned in one place.

We expect keeping homebuyers better connected will deepen engagement, help real estate professionals provide better service to their clients and ultimately boost transaction rates. We are the company that is innovating rapidly to apply new technology where it matters most, improving the customer journey and helping real estate professionals succeed in the age of AI by giving them the tools and insights they need to serve clients better, work more efficiently and grow their businesses.

As part of that effort, we've continued to invest in a growing set of features within Follow Up Boss. Recent updates include real-time call transcripts, smart summaries that recap each connection's recent communication with suggested next steps and custom Zillow Home Loans pre-approval letters for buyers who request one, each integrated directly in the Follow Up Boss system, giving agents richer context and helping them communicate faster.

All of this innovation comes together and brings our for-sale strategy to life in our enhanced markets, where we're connecting high-intent movers with high-performing professionals and delivering a more integrated transaction. In Q3, 34% of connections came through the enhanced market experience, up from 27% last quarter and on our way to our midterm goal of at least 75%. Virtually all Zillow connections in the enhanced market experience are now managed through Follow Up Boss, enabling better collaboration amongst buyers, agents and loan officers.

We're also seeing double-digit adoption of Zillow Home Loans across enhanced markets, a clear sign the integrated experience is delivering value as we help consumers get home. As that integrated experience expands, we're updating our invite-only pay when you close program for top-performing teams. This month, we announced Zillow Preferred, the next chapter for our Flex program that recognizes partners for delivering outstanding customer experiences and provides them access to dedicated support and growth tools. Zillow Preferred builds on the foundation of Flex and the new name helps ensure shoppers know they are connecting with a preferred partner of ours.

As we expand the integrated experience in our enhanced markets to the majority of our connections, we expect our preferred program to grow in tandem. Earlier this month, we also introduced Zillow Pro, a membership that brings together Zillow's most impactful tools and services into an integrated AI-powered suite that helps growth-oriented agents scale their businesses. Zillow Pro helps agents more effectively serve all their clients in their sphere, not just those they connect with on Zillow. With features like My Agent, client insights flow into Follow Up Boss and agents can see what their buyers are eyeing on Zillow, invite any customer to connect on Zillow and keep their branding visible across Zillow as those clients shop.

Zillow Pro also enables real-time touring for clients an agent found off of Zillow, unified messaging and property sharing among co-shoppers and premium profiles that let agents customize how they show up on Zillow. Over time, top-performing Pro users become eligible for Zillow Preferred. Zillow Pro gives agents the data, tools and brand reach they need to uncover opportunities, work smarter, deepen relationships and drive more transactions. It also expands the serviceable addressable market of our housing super app to more agents and all consumers. Given that agents who use our products touch an estimated 80% of U.S. residential real estate transactions, we have a strong partner base to sell Zillow Pro into. We look forward to rolling it out across the country throughout 2026.

Now I'll update you on rentals, where we're seeing some of the strongest growth and momentum across Zillow. Just like in For Sale, we're focused on speed, transparency and innovation on behalf of consumers and partners. As a reminder, our strategy in rentals is twofold. First, we are building a comprehensive 2-sided marketplace of homes for rent, giving renters a single trusted destination to find every type of property from single-family homes to large apartment complexes.

Second, we are modernizing the transaction experience for renters and property managers alike, streamlining how they connect and handle applications, leases and payments. This strategy works because it solves real pain points. Renters get transparency, efficiency and trust, property managers get better qualified applicants and higher ROI. And because renting is where nearly every mover starts, our progress here is expanding the top of Zillow's housing funnel and creating durable growth across the business. We are executing well on this strategy and accelerating revenue growth as a result.

Rentals revenue increased 41% year-over-year in Q3, primarily due to a 62% increase in multifamily revenue. In Q3, Zillow Rentals had 2.5 million average monthly active rental listings, ranging from single-family homes to large apartment complexes. This includes 69,000 multifamily properties listed on Zillow. That's almost double the 35,000 we had 2 years ago, and there is room to expand with an estimated 140,000 total multifamily properties across the country. Multifamily is a key growth driver, and we're expanding both our property count and wallet share as more large property managers choose to upgrade to more comprehensive advertising packages with us.

As proof of the real value we add for our multifamily partners as we deliver high-intent qualified renters to fill their vacancies, Zillow Rentals ranks #1 in partner satisfaction in our category for return on marketing investment. Our multifamily listing syndication agreements with Redfin and Realtor.com are benefiting consumers and property managers by expanding the reach and visibility of rental listings online, helping more renters see more available units on more sites and helping property managers connect with qualified applicants more efficiently.

Beyond cultivating a comprehensive marketplace, we're innovating quickly to make renting simpler, fairer, more transparent and more affordable. This quarter, we expanded our cost transparency features across the Zillow Rentals network, showing renters a full breakdown of move-in and monthly costs and providing calculators to help them estimate total expenses before applying. This helps cost burden renters plan accurately and in turn, property managers get more qualified serious applicants. Many renters on Zillow can also reuse a single secure rental application across listings, saving time and cutting repeated fees, an example of how Zillow reduces friction and makes renting fair.

We also announced a new partnership with Esusu, the leading rent reporting platform to help renters build credit through on-time rent payments. This collaboration expands credit building access nationwide, allowing any renter, not just those who pay rent through Zillow, to have their payments reported to major credit bureaus, strengthening their financial footing as they prepare for the next step. This partnership is another example of Zillow's broader effort to help renters and buyers access and afford housing.

Finally, we recently launched Listing Spotlight, a premium listing option that gives single-family rentals and smaller buildings the highest exposure to this category available on Zillow. Building a better experience for renters and property managers has earned us strong rental traffic over the past few years with about 35 million average monthly unique visitors in Q3.

As we execute on our twofold strategy in Rentals, we expect continued acceleration in year-over-year revenue growth in Q4, supported by growing inventory and partner adoption. The path to our $1 billion-plus annual rental revenues opportunity is clear, and we're confident in our ability to keep delivering value for consumers and partners. Our strong results in both For Sale and Rentals show how Zillow is successfully innovating on behalf of consumers and real estate professionals across the housing journey.

As we continue delivering excellent results, we're also aware of the external noise that has gotten louder in recent months, and we're confident in our ability to execute through it just as we have the past few years whenever the volume has turned up. We're all eyes forward on building a marketplace that expands visibility and choice, promotes fairness and broad access and empowers consumers and the real estate professionals who serve them. Solving their problems is what ultimately matters. That's what enables success in the modern era and the AI-driven future. That's what drives results, and that's exactly what Zillow is doing with this quarter as the most recent example.

We'll keep executing with discipline, delivering value for consumers and partners and leading the industry toward a more transparent consumer-first future. We have a strong brand, a lightning fast innovation cycle and consistently excellent execution. Thanks to that steady focus and execution, we are on track toward our full year 2025 goals of mid-teens revenue growth, expanding EBITDA margins and GAAP profitability with year-over-year revenue growth expected to accelerate in Q4. 2024 and 2025 have proven our strategy works, and we are proud of our ability to grow our revenue while also expanding margins.

What's most encouraging is that our execution is setting us up for what we believe will be sustainable, profitable growth well into the future. We're excited about our opportunity to unlock $1 billion of anticipated incremental revenue in For Sale just by rolling out our integrated transaction playbook to more people in more places, even in a flat macro housing environment. The momentum we're seeing in enhanced markets indicates we're on the right track towards capturing that opportunity. And Zillow Pro is well positioned to meaningfully expand our potential for growth in For Sale. We also see a clear path toward our $1 billion-plus annual Rentals revenue target and a much larger business beyond that as we build our comprehensive 2-sided marketplace. Behind our strong financial performance is a clear mission, helping millions of people get home and supporting the professionals who make that possible. As a beloved consumer brand and a trusted partner platform, we're proud of the work we're doing to make the housing journey simpler, more transparent and more integrated.

With that, I'll turn the call over to our CFO, Jeremy Hofman.

Thanks, Jeremy, and good afternoon, everyone. We delivered strong results in Q3 that exceeded our expectations and are well positioned to continue delivering strong performance as we execute on our strategy in 2025 and beyond. Q3 revenue was up 16% year-over-year to $676 million, which was above the high end of our outlook range. Our better-than-expected revenue performance, combined with effective cost management, delivered EBITDA of $165 million. also above the high end of our outlook range. Q3 EBITDA margin was 24%, more than 200 basis points higher than a year ago. Our trailing 12-month EBITDA as of the end of Q3 grew 29% year-over-year as we continue to scale revenue and control costs. We reported GAAP net income of $10 million in Q3 as a result of these efforts.

For Sale revenue grew 10% year-over-year in Q3 to $488 million, roughly 500 basis points above the mid-single-digit residential real estate industry growth as reported by the NAR and tracked by Zillow. This was also well above the purchase mortgage origination volume growth for the industry, which we estimate was roughly flat. Purchase mortgage origination volume is noteworthy because the majority of Zillow buyers purchase their home with a mortgage.

Within the For Sale category, residential revenue grew 7% to $435 million. Of note, residential revenue year-over-year growth accelerated 100 basis points from Q2 to Q3 despite a 400 basis point tougher comparable quarter-over-quarter. We saw contributions to this growth broadly across our agent and software offerings and within our new construction marketplace. Agent offerings include Zillow Preferred, formerly Flex, market-based pricing and Zillow Showcase. Software offerings primarily include Follow Up Boss, dotloop and ShowingTime+.

Within the For Sale revenue category, mortgages revenue was up 36% year-over-year in Q3 to $53 million. Our mortgages strategy is making it easier for more buyers to choose financing through Zillow Home Loans, which is the main growth driver of our overall mortgages revenue. Purchase loan origination volume grew 57% year-over-year to $1.3 billion.

Turning to Rentals. Q3 revenue was $174 million, with growth accelerating to 41% year-over-year. Rentals revenue comprised 26% of our total company revenue in Q3, up from 21% a year ago. This increase was driven primarily by our multifamily revenue, which grew 62% year-over-year, up from 56% year-over-year growth in Q2. Our value proposition to multifamily property managers and execution by our sales force to both win new properties and upgrade to more comprehensive packages is evident in our Q3 results.

We increased the number of multifamily properties on our apps and sites by 47% year-over-year, reaching an all-time high of 69,000 multifamily properties as of the end of Q3, up from 64,000 properties at the end of Q2. As a reminder, we measure our multifamily property count as 25-plus unit buildings and do not include our industry-leading long-tail properties, which is a significantly larger count. When you include these long-tail properties, Zillow Rentals had 2.5 million average monthly active rental listings in Q3, the most in the category.

Our Rentals offering is clearly resonating in the market today. By expanding our listings across more sites and apps through trusted platforms, including Redfin and Realtor.com, we are helping provide more visibility into available properties, a simpler search experience and the option to shop on the platform of renters' choice. For multifamily operators, we offer a compelling value proposition by providing efficient and cost-effective alternatives to reach more potential renters through the largest rental audience.

The quantity and quality of high-intent renters on our platform has allowed us to expand our wallet share with property managers. We expect this formula to continue to drive growth in Rentals towards our $1 billion-plus annual revenue target. Q3 EBITDA expenses of $511 million were slightly favorable compared to our outlook. We drove leverage on our total fixed costs, which grew 5% year-over-year compared to total revenue growth of 16%. This includes share-based compensation expense, which was down 8% year-over-year in Q3.

The results of our cost discipline continue to be evident as we expanded our EBITDA margins by more than 200 basis points year-over-year. The combination of revenue growth and cost discipline is also yielding robust cash flows. During the first 9 months of 2025, we generated $295 million of free cash flow, a 28% increase compared to the same period a year ago. We began reporting free cash flow as a new metric this quarter.

We plan to do so going forward to help you all better understand the effectiveness of our strategy and execution and our ability to consistently generate cash from our core operations. We ended Q3 with $1.4 billion of cash and investments, up from $1.2 billion at the end of Q2. Program to date share repurchases have been $2.4 billion at a weighted average price of $48. We are very pleased with the program and expect to be opportunistic in share repurchases going forward.

Turning to our Q4 outlook. We expect total revenue to be between $645 million and $655 million, implying a year-over-year increase of 16% to 18%. We expect For Sale year-over-year revenue growth in Q4 to be in the high single digits. We expect residential revenue growth similar to Q3 and mortgages revenue growth of approximately 20% with continued purchase origination volume growth of over 40%. We saw an accelerated number of loans that closed in late September, resulting in outperformance in Q3 mortgages revenue versus our expectations. In aggregate, we expect mortgages revenue to grow roughly 30% for the second half of 2025.

Our guidance reflects our expectation that challenging housing market conditions and macro uncertainty will continue. We expect our Rentals revenue growth to accelerate in Q4, increasing more than 45% year-over-year, driven by further multifamily revenue growth acceleration. We continue to expect the Redfin partnership to be accretive to EBITDA dollars in the second half of 2025. For the full year, we continue to expect Rentals revenue growth to be approximately 40% for Q4, we expect EBITDA to be between $145 million and $155 million, representing a 23% margin at the midpoint of our outlook range.

EBITDA expenses will decrease from $511 million in Q3 to an estimated $500 million in Q4 due to normal seasonality. For full year 2025, we continue to expect to deliver mid-teens revenue growth. We expect fixed cost investments to grow modestly with inflation while investing in variable costs ahead of revenue to drive future growth, primarily in Rentals and additional loan officers and Zillow Home Loans. We are on track to deliver expanded EBITDA margins and positive net income for the full year 2025. As an early read, we expect 2026 to have similar growth and EBITDA margin expansion as we have had the last 2 years. We are planning for the macro housing environment to continue to bounce along the bottom in 2026 as well.

As we look even further out, we are confident in our mid-cycle targets for $5 billion in revenue and 45% EBITDA margins in a normalized housing market. We have continued to execute on the integrated transaction experience for both consumers and agents. As of Q3, this includes continued expansion of our enhanced markets with 34% of connections now going through the experience and increasing showcase adoption to 3.2% of all new listings. This also includes rapid growth in Rentals with 69,000 multifamily properties advertising with us as of the end of Q3.

As Jeremy mentioned earlier, we recently announced the upcoming launch of our Zillow Pro offering. Through Zillow Pro, the expansion of our serviceable addressable market sets us on a path to engage more customers and more agents. We plan to beta test Zillow Pro in the first half of 2026 and to expand nationwide over the second half of next year. We expect a very modest incremental contribution to revenue from Zillow Pro in 2026. In the near term, we will focus on demonstrating value for the product and incorporating learnings to support continued innovation.

To close, we are successfully executing on our strategy, are on track to meet our full year goals and are very excited about the opportunity ahead of us. We believe we have the right investments in place to support our strategy and are delivering strong growth while maintaining a disciplined cost structure. That formula is driving expanding margins and positive GAAP net income.

And with that, operator, we'll open the line for questions.

[Operator Instructions] Our first question will come from Ron Josey with Citi.

Maybe, Jeremy Wacksman, I wanted to ask a bigger picture question for you just on all the news around AI and commentary around Zillow apps on ChatGPT. You talked about ChatGPT and app just being a new doorway to Zillow. And what I wanted to hear a little bit more is just the integration here, the risk, the opportunities of being that first mover on newer platforms. And then as newer doorways open, Zillow does have 250 million uniques, obviously, right? And so how do you balance your current traffic with these newer doorways with potentially having to spend more on brand awareness?

Yes. Thanks for the question, Ron. I mean we think about this as really pure opportunity. we're excited about the partnership integration we did with OpenAI to be the first real estate app and one of the first apps in this new paradigm. I think you should expect other providers to build out similar ecosystems. And this is really similar to other platform shifts that create expansion into leading brands. Think about as search exploded, think about as mobile exploded, and we were early on to the mobile platform as well. And just look at how brands like ours developed in those shifts, right? Mobile wasn't a replacement. It was additive. It was more time spent. It was incremental use cases. It was easier for us to start to build a more digital transaction than you had in desktop search and the browser only. So we think of it the same way. That's why we kind of call it another new doorway directly in.

And then to your question on brand, I mean, I think that's why we feel so fortunate we have a great strong brand that consumers want whenever you get these new opportunities, it's an opportunity to be additive to that. And when our core base, 80% of our traffic comes to us brand direct. And the data and the platform and the software that we offer, those differentiators to create this really unique experience, I think, get strengthened by these platform shifts. So I know there's a lot that is written about, well, what does this mean for acquisition? It will, for sure, be an opportunity for all of us to tap into more customer demand in more new ways.

But we're also equally excited about the ability to build AI into Zillow. As you know, we've been doing that for the last 20 years and really accelerate that effort the last 3 or 4 as these capabilities have come online. And so building more native capabilities into the software for our consumers and for our agents to make the transaction experience better, to make it more seamless to create more of that one-stop shop for buyers and sellers and for their agents, that's really the opportunity. So you're always going to see us lean in and be early. We're really fortunate that we can do that, and it's a tremendous testament to the technology teams we have at Zillow that we were able to do that here. And we think this is a really, really great platform shift for us to take advantage of.

Our next question will come from Dan Kurnos with Benchmark.

A couple. We've obviously done a lot of work on the Marriott court cases. clients are particularly focused on the recent FTC suit. So maybe it would just be great to get your perspective on any impacts and how you think it plays out? And then separately, the other hot topic with investors is somewhat related, Compass proposed acquisition of Anywhere. So antitrust concerns aside, maybe your views on any potential disruption if agents choose or are forced to take their 3-phase marketing program or if anyone else bandwagons on their efforts to grow the private marketplace listings.

Yes. Maybe I'll try and hit both of those, and Jeremy hop on with anything I missed. With respect to the FTC case, we've been syndicating multifamily property listings to Redfin for about 6 months now. we're seeing the benefits to both consumers and property managers. You see more consumers can see more listings on all of our sites. An interesting stat is renters on Redfin now have access to 3x the number of rental properties they had when Redfin was trying to acquire those on their own. So it's very pro consumer. And then it's also very pro property manager. As a result of the syndication agreement, property managers are seeing increased ROI.

As we said earlier, we're #1 in partner satisfaction for return on investment. And while we are excited about that ROI we deliver today, there's a ton of room for growth. We hear regularly from our large property managers that we are the strongest advertising channel, as they're thinking about their very complicated advertising mix, yes, they advertise on Zillow, other apartment sites, but they also advertise on Google, on Facebook, on Instagram, on TikTok, they market their own property websites. And so being a growing source of high ROI advertising for them, we feel great about that. So to us, it's obviously pro consumer and Pro property manager, which makes it pro competitive, and we look forward to making that case as the process plays out.

And then on the proposed merger, we don't really see any concerns to our business. We do see maybe more noise around hidden listings and the potential to push more hidden listings on to sellers and to buyers and to harm consumers. And so for us, our listing standards which help ensure that agents do right by their sellers. And if they're going to market a listing, they make that listing broadly available to all buyers. We continue to see the vast majority of the industry align with those standards. And we've always advocated for open, fair and transparent access. That's why we always have the most listings. Most folks want their listings on the Internet. They don't want to put the Internet back in the box. And we expect that behavior to continue because agents are trying to do right by their sellers and help their sellers sell their home.

Our next question will come from Brad Erickson with RBC.

I have 2. First, I guess, the residential business looks like it outgrew the market by a couple of points in Q3. Can you just lay out maybe any market forces that leaned one way or the other on the resi business during the quarter that netted out to that number? And then second, can you just talk about what's embedded from a market growth perspective in the Q4 guide? And then I have a follow-up.

Yes, Brad, it's Jeremy Hofman. I'll take that one. Yes, we were definitely pleased with the outperformance in Q3. For Sale grew 10%, which outperformed the housing market by about 5%. And then obviously, the mortgage market was flat. So pleased to be able to keep taking share. When we zoom out, our For Sale line has outperformed the industry by 20% over the last 2 years on a 2-year stack. So that's great as well because that's what we tend to focus on more than quarterly fluctuations.

On the residential front within For Sale, I'd note that the revenue accelerated from Q2 to Q3. So we went from 6% growth in Q2 to 7% growth in Q3 despite a 400 basis point more difficult comp. So I think that's an interesting thing for you all to just keep eyes on and part of the market dynamics. And obviously, Q4 is probably an easier comp for the housing market comparatively. So when we look at what we're doing, we're pretty consistently outperforming the market. We're doing it over multiple periods and feel like the way in which we're doing so is pretty consistent.

The enhanced markets are performing well. Zillow Home Loans continues to grow share alongside that enhanced market expansion. Showcase is expanding really nicely. Follow-up Boss is getting in the hands of more people across our agent base. new construction is doing well as well. So it's a really nice formula, and it's one that we're looking forward to continuing to roll out in Q4 and then into 2026.

Great. And then just a follow-up on Zillow Pro. You mentioned in the prepared remarks just several points of kind of value add. Can you maybe just expand a bit on kind of where the biggest sort of value unlocks come from with Pro? And then also just how does that get monetized? Or how do you envision that getting monetized over time?

Yes, I can take that. I mean I think, first, just to outline what Zillow Pro is because it is new, and we just did announce it. it's effectively an evolution of our software platform for agents. So it's a membership, it's a bundle, so they can get access to all of our software. And that includes follow-up boss, right, the software that almost every preferred agent is using now. That includes premium branding on Zillow, so premium profiles and consistent branding. That includes expansion of a feature called My Agent, which allows them to connect with all of their clients. And so previously, agents could use My Agent for Zillow clients that they had on Zillow, but now they can invite their clients from their database or their sphere of influence to connect with them and become their My Agent on Zillow and get access to great real-time client insights from us about those customers.

So it really bundles all this together, and you want to think about that as a way we are trying to help them just run their business better, right? We're always going to try and help them deliver for our customers, right? But we want to help them deliver for all their customers. And then the last piece on Pro is it ends up being the pathway to Zillow Preferred, right? Zillow Preferred is the subset of agents and teams that we're trusting to handle our customers. We're going to continue to grow that audience of agents and teams as we go from 34% of our customers getting that experience to 75% plus. And this is the great way in. Many folks who are on Zillow Pro and using this stack of software will become eligible to be part of Zillow Preferred as well.

So we see these things working really well together. And we're really excited, as Jeremy said, to test and learn with our initial beta customers early in the year and then roll it out throughout '26.

Our next question will come from Nikhil Devnani with Bernstein.

When you step back and you think about the longer-term opportunity with the Zillow Preferred program, how do you think about the impact on your share spread over time? Would you expect to see a widening gap as these markets scale and the cohorts mature there? And specifically, I'm thinking about the delta between residential and...

Yes, I'll take that. Thanks, Nikhil. I would think about it as the expansion of Zillow Preferred is really a testament to what we're doing in the enhanced markets and how well we feel like those are going. So as we expand the enhanced markets, we will expand Zillow Preferred in tandem. And then with respect to outperformance, I think the outperformance has been strong. We expect it to continue to be strong. I would expect it from both the residential perspective and from the For Sale category as well. So much of the enhanced market experience really comes from that integration of our preferred agent base and Zillow Home Loans.

And when we think about the customer experience we're building, the ability to drive conversion, the ability to drive adoption and ultimately take share, that's where we have so much confidence in not only 2025, but really towards that mid-cycle target of $1 billion of incremental revenue regardless of what the housing market does.

And maybe if I could follow up on Rentals. You've talked about wallet share gains on the back of the increased distribution with Redfin and Realtor. It makes for a compelling sales pitch as well for your customer base. So do you think about needing to run that business any differently from a sales strategy perspective next year if this arrangement is being kind of questioned by the case? Or is it business as usual? Just wondering how we should think about how you guys run the business in Rentals in 2026.

Yes. I'll take that one as well. It's business as usual. Jeremy laid out how we feel about the defenses we have, and we're looking forward to sharing those perspectives. But in the meantime, business as usual, I think we're really proud of what we've done in Rentals over the past couple of years, and we're confident in our ability to grow strongly in 2026. One of the questions would be why do we feel good? I think 2025 just set us up really well, right? Property growth has been strong. We grew properties in Q1 and Q3 by 5,000 a quarter. We had that spike of about 9,000 added in Q2, and we expect to grow properties nicely in Q4 even with typical seasonal patterns.

And we're actually translating all that supply growth into accelerated revenue growth throughout the year. So we grew revenue 33% in Q1, 36% in Q2, 41% in Q3, expect 45% plus growth in Q4. Supply is in a great spot. And then you're right, we've added a lot of value to property managers on the demand side because of our organic traffic and those syndication agreements, right? Each of the 69,000 properties is getting more exposure across Zillow Rentals, Trulia Hotpads, StreetEasy, Realtor.com, Redfin, Apartment Guide and rent. So that just puts us in this really nice position to continue to grow properties, continue to see advertisers upgrade to higher packages and continue to drive really, really good ROI.

And. yes maybe just to add to that as like to zoom out and Jeremy touched on multifamily. If you think about the Rentals marketplace overall, obviously, multifamily is a big part of the revenue growth driver right now. But the strategy of building this 2-sided marketplace with all available listings or as much as we can and building the transaction experience for the renter -- there's a ton of opportunity beyond that $1 billion-plus revenue target we've talked to you all about as you think about attracting even more renters and having them consume more content from, yes, multifamily, but also long tail.

So I think if you zoom out and look over the last couple of years, that strategy has been working incredibly well. We were growing building count and growing audience all along the way, and it's obviously accelerated this year. But we feel great about that strategy. And yes, we feel great about multifamily revenue growth and its contributor to the midterm target, but we're not done there. We see a fantastic business beyond that as we layer on more value for the renter and for the property manager and the long-tail landlord.

Our next question from Tom Champion with Piper Sandler.

One question we get a lot is on the various components of residential revenue. And I'm wondering if you could just talk about the segment, the broad categories around agent software, new construction marketplace, what kind of rolls up into that number? And Jeremy, your point on the revenue acceleration was very interesting. So just curious if there was any 1 or 2 components that might have driven that. And then just really super quick, Jeremy Hofman, if you could talk about headcount and investment into next year. I understand it's probably still in planning process, but I think you provided some early comments on '26. Just any preliminary thoughts there.

Yes. Thanks, Tom. I'll take both of those. So I'll take the For Sale relative outperformance first. Yes, it was a really good quarter. I think we've had a really good year so far. I'm really quite pleased with the team's ability to accelerate revenue into a tougher comp. So all of that does feel quite good. With respect to drivers, I would think of them as the enhanced markets are performing well. So we went to 34% of all connections at Zillow are now in these enhanced markets, and that's well on our way to the 75% target that we are marching towards in those mid-cycle targets.

Zillow Home Loans is growing really nicely, grew nearly 60% in Q3, and we're seeing double-digit adoption of Zillow Home Loans across the enhanced markets. So that feels quite good. And then you couple it with Showcase expanding nicely. Showcase is 3.2% of all new listings today. That's more than double a year ago. And obviously, it's still early. We're learning a ton. We've only been selling the product for about 18, 20 months at this point, but plenty more to come there.

And then Follow Up Boss, just getting in the hands of more people, and we just keep building better and better features to make the software more and more interesting to agents. In our preferred base, it's in nearly everybody's hands, and the business has just done really well since we acquired it. So we're really pleased there. that's all doing quite well on the existing homes front. And then new construction team has just executed nicely. They've been able to show up for partners quite well in a challenging time and really nicely complement the rest of the For Sale business. So that's really a good formula.

And then with respect to costs in 2026, the way we're thinking about it is actually pretty similar to '24 and '25. I think revenue growth formula is pretty similar. We grew 15% in '24. We're on pace for mid-teens in 2025. We think that's a good way to think about '26. And we think the expansion of margins in '24 of 200 basis points, '25, we're on track for solid margin expansion, and we think that's a good way to think about '26 as well. With respect to the cost base, you're going to hear more of the same from us. We are planning to keep fixed as flat as possible and fight inflation, but there will obviously be some inflation and headcount is going to stay pretty flat on the fixed side.

And then on variable, where we see opportunities, we will invest. We've done that in Rentals, I think, quite nicely. I think we've done it well in Zillow Home Loans. And where we see these really outsized growth opportunities, we will go run at those. But the fixed cost discipline allows us to really get leverage and grow profits faster than revenue. And when you think about that together with marketing, which we dial up and down based on what we see in the market, it all nets out pretty nicely to solid revenue growth, ability to expand margins and then GAAP net income comes in there as well because as we hold our fixed costs flat with inflation, we get a lot of leverage on stock-based comp.

So stock-based comp was down 8% year-over-year this quarter. We expect it to be down 10% year-over-year for 2025. And that's just a function of the fact that 90% of our stock-based comp charge really sits in that fixed bucket. So you'll hear much of the same for us, I think, in 2026, and it's a testament to the strategy and execution that the team has been able to deliver.

Our next question will come from Lloyd Wamsley with Mizuho.

I just wanted to ask about sort of the back and forth of the funnel between the agent and Zillow Home Loan side. I think it's clear how in enhanced markets, agents can be helpful in making consumers aware of Zillow Home Loans. Where -- in terms of the other direction, people coming in, whether that's the viability calculator or otherwise, are you seeing a good flow from people who come in through the mortgage funnel and attaching them to an agent? And is that an opportunity you guys are focused on at this point?

Lloyd, I'll take this, and welcome back to the call. We think about them as more similar than different, to be honest. I mean you hit it right. If a consumer is interested in touring homes, whether that's virtual or booking a real-time tour and they start with an agent, making sure a Zillow Home Loans loan officer is ready for that agent and can be a choice for that customer, that's a big part of the growth. We can do that in enhanced markets, and that's how we're rolling out this formula is giving access to more and more agent teams, a Zillow Home Loans team for them to work with for us to earn their trust as one of their choices for Zillow Home Loans. But that works in reverse, right?

So the set of customers that might be shopping financing or asking affordability questions, they're using viability, and that's a good proxy, right? So viability is up to now 2.9 million people have enrolled and used it and found their viability number. That's up from 2 million last quarter. Some of those folks are ready right away to go get preapproved. And we now have a digital preapproval they can do and a loan officer can help them, and that's the path they want to go down.

But many of those folks end up doing that and then shopping. And so it really is not that separate funnel, right? So many of those viability customers just go tour. They're just a more high-intent customer, and they're more interested in Zillow Home Loans because they've started the process with us. And so it makes that conversation more natural for that agent to recommend Zillow Home Loans. So we see both those things kind of growing together over time.

And if you just put the loan officer hat on, that's how a loan officer would think about it. These are just customers coming to Zillow. They're learning the financing answer, they're finding the home they want to buy and the loan officer is there to help nurture them along in partnership with the agent whenever they're ready and whenever they find the house. So for us, we will work on both products from a consumer experience standpoint, but they really are kind of 2 sides of the same coin more and more.

Our next question will come from Dae Kyu Lee with JPMorgan.

First one for Jeremy Wacksman. Following up on your comments on the ChatGPT integration, I understand that mobile transition was an incremental for you guys. But with ChatGPT, there is kind of like an intermediary sitting between you and the consumers. kind of helping you make that connection. So like when you view the consumer journey for users who start their home search in ChatGPT versus those who start directly on Zillow, are you seeing or are you expecting any differences in engagement or monetization potential? And do you expect these users to eventually come back directly to Zillow or continue engaging through ChatGPT? And I have a follow-up.

I mean I think it's really early to try and prognosticate how this all plays out. But I will say, if you think about like what framework could you use to think about that question, the actions you want to take in this category typically lend themselves to a very bespoke category experience. It's a very long-duration shopping cycle for a very large emotional asset where you have to make very almost regulated decisions and need regulated help to make that decision, right? If you're going to buy, you have to get in touch with an agent, you have to work with a loan officer or most people will do those things to make a very complicated financial decision. And the complications of the industry itself require a ton of local specific data and a ton of software to work through all those steps.

So all of that to us says building Gen AI into that platform is how we're going to make it easier, faster, better. Consumers are going to start and ask questions everywhere the way they always have. That's kind of, I think, where the -- does this feel like an app store or does this feel like a search engine question plays out. But once you start browsing and shopping, you ultimately raise your hand to want to transact and having a bespoke native kind of vertical experience is how most people are going to want to transact. They want this one-stop shop, and it's more about how can Gen AI help enable that one-stop shop for them when they're ready.

So we think about it as increased exposure. And we also think about it as like new ways to build that vertical experience because you now can interact with an intelligent piece of software that listens to you and remembers you and his patient. And so we're very excited to wire that up inside of Zillow. But that's why we're so excited about this. It's yet another way for us to start to build this more integrated transaction, which is what this category has desperately needed.

Got it. And then as a follow-up to Jeremy Hofman. When you look at Zillow Pro and Zillow Preferred, like how should we think about like how that could change the monetization potential of your platform and profitability potential of your platform? And when you gave us an early view on 2026, does that early view include meaningful contribution from these products?

Yes, I'll take that. Thanks for the question. I would think about the $1 billion mid-cycle target in For Sale coming from preferred. Pro is really on top of that. So I don't expect any meaningful changes to the way we monetize in preferred. I think it's working quite well, and we expect to continue to roll it out steadily over the next couple of years as we march toward those targets.

And then with respect to Pro, we don't expect it to be much of a contributor from a revenue perspective in 2026. We think 2026 is a year where we do a bunch of beta testing first half of the year, start to roll it out nationally second half of the year, but we're going to really focus on adoption and learning. And then ultimately, we have, I think, a really interesting opportunity to sell Pro over time and really expand our SAM. But 2026, I wouldn't be expecting huge revenue contribution.

Our last question will come from Ryan McKeveny with Zelman.

One on Showcase. So good growth and expansion of listing share. You also called out the AI-powered virtual staging rollout in 3Q. I guess any initial uplift you would say to the overall listing share based on the virtual staging? And I know that's early days, so maybe not. But maybe you could speak more broadly about virtual staging. And should we think of that offering as somewhat unique to the Showcase offering? Or could that be something of broader application over time?

Yes, Ryan, I'll take that. So on Showcase broadly, 32% of new listings, we feel great about. We're constantly testing ways to drive more adoption and how to help build it into the workflow of teams and agents that are working through listings. You're asking them to capture media differently in many ways. And so that's part of why so much of our tech focus is on how to make that easier. And then you're right to call out, we're also improving the product while we're growing adoption, right? So we added AI-powered virtual staging this quarter. We added SkyTour last quarter, which is this fantastic generative AI ability to fly around with all the drone media we capture. We've added listing dashboards. So we continue to add capabilities. With

AI-powered virtual staging specifically, yes, we definitely could see that coming to more types of listings over time. I think we wanted to start with the listing experience where we have the native software built and learn and build from there. But over time, just like we want to see Showcase technology on more to -- more than 5% to 10% of listings over time, we've given you all that as intermediate-term targets. But the goal is really to create a more interactive listing experience on all listings. Photos and text are just not going to cut it.

And that's what Showcase shows everybody, and that's why you're seeing the rapid growth of Showcase even in these early innings because this is just a better way for buyers to consume content. That's why buyers spend more time with it. That's why sellers and listing agents want it because ultimately, they're trying to get the homes sold faster and they're trying to win the next listing, and they can use Showcase to do both of those things.

That's great. And then just one final one. A couple of questions ago, you were asked about the different mortgage funnels. You called out in the shareholder letter, the loan pre-approvals within Follow Up Boss. That sounds interesting. Should we think of that as kind of additive or new to the potential funnel on the mortgage side? Or is that more just a more efficient way of doing things that had historically been done seemingly in a different way? Any thoughts there would be great.

Yes. Thanks, Ryan. I'll take it. I would think of it as really just making the experience better for the shopper, the agent and the loan officer. It's a really nice integration. And if you think about what a shopper is looking to do, that shopper wants a really tightly coordinated team between its loan officer and real estate agent. And we think building functionality that helps that integration work in follow-up ops, which is where these agents tend to run their businesses is beneficial for all parties in the transaction. So that's the way I would be thinking about it.

This completes the allotted time for questions. I will now turn the call back over to Jeremy Wacksman for any closing remarks.

Great. Thank you all for joining us today. We really appreciate your continued support. We are very excited for what's ahead and look forward to speaking with you again next quarter.

Thank you for joining Zillow Group's Third Quarter Financial Results Call. This concludes today's conference call. You may now disconnect.