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Hello, welcome to Zillow Group's first quarter 2026 financial results call. We ask that you please hold all questions until the completion of the formal remarks, at which time you will be given instructions for the question and answer session. 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 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 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. 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 one integrated experience, supporting both consumers and the professionals who serve them. In 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. 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. We have more than 2x 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 costs than planned. 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 in residential real estate for 20 years, from the Zestimate 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 three 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 SkyTour. 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 two to three hours a week over five months. They are not just browsing.

They're saving homes, they're 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. 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. 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 BuyAbility, see available times and book a tour through ShowingTime, receive a pre-approved loan scenario from Zillow Home Loans, and connect with a 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 three advantages are built on something that matters just as much as the technology itself. Two 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 happen 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 in 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 lifecycle, 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 agent 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, 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 transactions at higher quality without more hours, all enabled by Zillow. Just as AI is making our two-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-fueled 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. 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 two decades building the content, the context, and the integration that differentiates Zillow from others in our category. Now we are powered by AI across every layer of our company, in our products, in 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. BuyAbility, 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 loan 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, 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 pre-approval in hand now get a clearer view of the monthly cost of ownership and whether a listing is within their pre-approval 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 Pre-approval 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 agent, and shop alongside them, making the 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 loan officer communicate in one 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 pre-market listings broad public exposure on the most visited real estate platform in America. Unlike pre-marketing in a private listing network, Preview puts listings in front of the buying public from day one. With Preview, sellers can build interest and get real-time signals, views, saves, tour scheduling requests from Zillow's massive audience of deeply engaged users, which is pricing intelligence they can actually use. Preview listings surface 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 two 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. 85% of soon-to-be sellers said they'd be more likely to hire an agent who can pre-market their home to the broadest online audience. It is no wonder agent adoption of Zillow Preview has moved so quickly. We announced Preview just seven weeks ago with five initial brokerage partners. We have since added more than 60 brokerages. We are currently onboarding agents to use Preview. 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. 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 lifecycle. 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 it's seen more than 70% growth in monthly active users since Zillow acquired it at the end of 2023. ShowingTime enables tours on 90% of all homes for sale in the country. 40 million tours were booked through the platform last year. 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 two-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.

Because of our relentless focus on the consumer experience, renters rate Zillow as their number one 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. In April, we launched two 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 two are designed to work together, identify which units need more traffic in the dashboard, then 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. 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 multi-year 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 months 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 is 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.

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 six 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 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. 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 legal 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 one 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. 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-$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-$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-$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-$185 million in Q2, 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. 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 2026, 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, EBITDA 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. In 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. 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 four key drivers to margin expansion in the second half of the year. First, we expect to continue to leverage fixed costs, 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.

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

Thank you. At this time, if you would like to ask a question, please click on the Raise Hand button, which can be found on the black bar at the bottom of your screen. When it is your turn, you will receive a message on your screen from the host allowing you to talk, and then you will hear your name called. Please then accept, unmute your audio and ask your question. We will wait one moment to assemble the queue. Our first question today comes from Ryan McKeveny from Zelman & Associates. Ryan, you may now unmute your line and ask your question. Thank you.

Great. Thank you for taking the questions. First, I wanted to dig in on Zillow Preview. Obviously it's early days, but you've quickly ramped up broker partners. 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. 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? Thank you.

Thanks, Ryan. This is Jeremy Wacksman and I'll take that. On Preview early learnings, I mean, the response really has been more than we expected. We announced it just two months ago with five partners and as I said, now more than 60 have been announced. We are really heads down on onboarding agents and onboarding franchisees and getting it into the hands of those folks. We've been really pleased with the results, and I think that dovetails into your second question, you know, the collaboration with realtor.com. I mean, it's really just a win-win for both Zillow and our agent partners as well, obviously, as realtor.com. It extends the visibility of this pre-market inventory to now two of the most visited real estate platforms in the country.

We think that further increases the value and the demand for Preview listings, which was already very strong. I mean, as a reminder, Zillow Preview brings pre-market listings in front of the public from day one, 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. Still very early days. Hard to believe we've made this much progress in just the first two months. We're excited to continue.

Great. Thanks for that. 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? You know, I'm curious both from a fixed cost and variable cost perspective, just, you know, visibility you guys have into the business to have confidence in the margin ramp in the back half. Thank you.

Yep. Thanks, Ryan. It's Jeremy Hofmann. I'll take that one. Q2, two things are going on from a cost perspective. One is legal costs are up $20 million year-over-year. If you adjust for that, you'd see an EBITDA guide of $170 million-$185 million, which is, you know, more in line with margins from last year. The other is we're increasing advertising dollars by about $16 million in Q2. Those are the two 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 why. The first half of the year in aggregate were right on plan, so that's a good start.

As we move into the second half of the year, the structural revenue drivers we have are well intact across for sale and rentals, that growth algorithm is durable regardless of macro environment, just because the business is scaling and diversifying so much. With respect to costs, you know, a lot is in our control. 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's 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. In our control primarily as well.

Legal costs were a headwind in the first half of the year. We expect they'll be less of a headwind in the second half, really as we move past the FTC trial. That is on an accelerated timeline, and as a result, the costs are on an accelerated timeline as well, but we're eager to get through that. 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. In the back half of the year, we expect advertising to follow a more typical seasonal pattern. EBITDA is on track for margins to expand this year, and we feel good about it.

Great. Thank you.

Thank you. Our next question comes from Ron Josey at Citi. Ron, you may now unmute your line and ask your question. Thank you.

Great. Great. Thanks for taking the question. Jeremy, I wanna 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 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. As a separate question, just Zillow AI mode. Gotta 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 Zillow 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. Thank you.

Yep. Thanks, Ron. I'll take the first one, then hand it to Jeremy on the AI mode. On rentals, we expect continued strong growth and execution in the second half of the year. 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. 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 39%, and we expect to grow another 30% this year.

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 billion-dollar-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, you know, as much of the supply as possible, both for single family homes for rent and apartments for rent is really differentiated. The value proposition we're bringing to consumers and advertisers is so compelling. You see that in the growth that we've had the last few years, and we expect it to continue from here.

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, you know. 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 audience 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.

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. You know, we see green lights ahead for rentals growth. On AI Mode, you're gonna hear us say it's early a lot 'cause it is early. I mean, 5% of audience, we're getting a huge signal from millions of users. 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. 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, those folks find more of their needs from our platform. Then when they reach out to talk to a loan officer or an agent, they're ultimately gonna be a higher converting customer. You know, 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, the fact that we span the full gamut of the platform.

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 tour homes, virtually tour homes, meet with your agent, message with your agent, make an offer, and ultimately close. That's what we're helping you do. 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.

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

Hi, guys. Can you hear me?

Yeah, we got you.

All right. Great. Thanks for taking the question. I guess resi, you know, 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. We'd 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 for sale and resi in particular. Secondarily, as we think about mortgage, really performing well here, picking up the slack, you know, the critique there is obviously around the lower margin profile and that sort of thing. Can you speak to that?

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? Thanks.

Yeah. Thanks, Brad. I'll take those. 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. 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. The enhanced markets playbook is clearly working regardless of housing market conditions. That gives us confidence on the for sale category overall, regardless of what housing does.

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. 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. With respect to the mortgages, margin question, you know, 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. You know, even last year, we improved loan officer productivity by 11% despite growing loan officer count by about 40%. 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. We're a top 25 lender in the country today. We're proud of that and the progress we've made. Our goal is to be one of the biggest purchase mortgage originators in the country. 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 costs. We think mortgage origination is purpose-built for AI applications over time too. 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 estate.

Understood. Thank you.

Thank you. Our next question comes from Nick Jones at BNP Paribas. Nick, you may now unmute your line and ask your question. Thank you.

Great. Thank you. I guess a follow-up on rentals. I'm just curious, as that business continues to kind of grow nicely here, is there kind of a threshold where kind of the product velocity on the rental side may start looking 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. You know, as you kind of approach this $1 billion revenue threshold, might your posture on the segment start to change? That's kind of the first question. The second question more broadly is 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 guess you're ostensibly getting more views into their psychology, whether they're looking at pre-approvals. I think you gave a stat at the AI Summit that 65% of renters also look at maybe buying a home. I guess ostensibly, you're getting better and better data as to, maybe how the macro environment is starting to look. Just curious if that's, if that's the right way to think about it. Thank you.

Maybe I'll take the first and you can weigh in on the 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. 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, you know, mid 70,000 buildings out of the, you know, 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.

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. Remember, our strategy is twofold. It's multifamily plus single family and long tail, which is, you know, combined 2.7 million rental listings becoming a one-stop shop for all renters. 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. We see tremendous growth coming from there as well. 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. 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 pre-approved, book tours, virtually tour, hire your agent, message with your agent, bring your co-shopper into the messaging platform, start to write offers, then close on the transaction. You're using Zillow tools. On the agent side, the context you're asking about isn't just on the consumer side, it's on the professional side, right?

Follow Up Boss, it's 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 Preview and Showcase. 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. 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 one to be the one that understands you the best, that helps supercharge the professionals the best, and that helps provide the most friction-free and delightful experience.

Yeah. Maybe just to layer on top of that, Nick. Jeremy said it well, but, you know, 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. Having that inventory all in one 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. Yes, we're building relationships with these consumers over multiple transactions. 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.

Thanks.

Thank you. Our next question comes from John Colantuoni at Jefferies. John, you may now unmute your line and ask your question. Thank you.

Can you hear me?

Yep, we got you.

Okay, great. Thanks for taking my questions. First one, 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. Just curious if there's anything transitory there and maybe you're expecting a pickup in the second half. 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 approach relative to some alternatives that have been launched. Thanks.

Jeremy, I can take the first one, and then maybe you take the second one.

Yeah.

Yeah, I think on John, for Q2, the market started out slower than we, you know, folks anticipated. Weather and rates throughout the first quarter was worse than folks were anticipating. 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. As a result, I'd say the agent sentiment heading into the spring selling season impacts MBP. As a result, you know, we've seen this now a number of years in a row, but MBP lags a bit because of that agent sentiment.

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. You're not seeing that come through in Zillow Preferred either. 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. That's what we're most focused on versus the quarterly fluctuations. That structural driver feels well intact.

The on the margin move is really around MBP sentiment.

Your second question on Preview. I mean, Preview, the response to Preview, I think, kind of proves that it's, you know, something that's broadly desired by most of the market, and that's just because public is better than private. You know, the vast majority of sellers want to sell their home for the most money and sell it fastest, using the public market and making it available to a broad pool of buyers is how you do that. It's why, you know, we gave out some consumer sentiment stats. You know, most sellers are gonna use agents who can help them maximize price. The only benefit of private is it benefits the brokerage that hides listings for their own gain.

It's not surprising you're seeing such strong support from brokers and agents, even in just the first two months. You know, we're excited to continue to grow and expand it.

Thank you. Our final question today comes from Nikhil Devnani at Bernstein. You may now unmute your line and ask your question. Thank you.

Hey, thanks for squeezing me in. Appreciate it. I wanted to just follow up on John's question there around the revenue guidance. 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?

Yeah, I can take that one. I'll say this, Nikhil. Housing market's been effectively flat. We're not planning for that to get better. It may, we're not planning for it. Against that backdrop, what informs the mid-teen guide is we expect mid-single digit growth in residential. We expect for sale to grow faster than residential because of the enhanced markets working so well and mortgage growing so nicely. Total revenue continues to be on track for mid-teen growth because you include rentals as well. They all layer on top of each other. We're not planning for any macro changes versus what we saw in the first quarter. Despite that, well intact for mid-teens revenue growth for the year.

This completes the allotted 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.

Hello and welcome to Zillow Group, Inc. Class C's fourth quarter and fiscal year 2025 financial results call. We ask that you hold all questions until the completion of the formal remarks, at which time you'll be given instructions for the question and answer session. Also, as a reminder, this conference is being recorded today. If you have any objections, please disconnect at this time. Brad, you may begin.

Thank you. Good afternoon, and welcome to Zillow Group, Inc. Class C's quarterly earnings call. Joining me today to discuss our results are Zillow Group, Inc. Class C's CEO, Jeremy Wacksman, and CFO, Jeremy Hofmann. During today's call, we will make forward-looking statements about our future performance and operating 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 Group, Inc. Class C, 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 twenty 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 Group, Inc. Class C's evolution reflects two 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 and 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 Group, Inc. Class C 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 Group, Inc. Class C 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 puts Zillow Group, Inc. Class C in a unique position to improve outcomes for consumers and partners. Professionals make repeated decisions as they engage with clients 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 US, 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 Group, Inc. Class C has been applying advanced technology in this category for twenty 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 Group, Inc. Class C. 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 Group, Inc. Class C'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 Group, Inc. Class C, 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 Group, Inc. Class C. 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 three 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. Viability, 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 viability with Zillow Home Loans and with Follow-up Boss. In that same vein, we recently rolled out custom preapproval 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 Group, Inc. Class C'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 Group, Inc. Class C at the center of so many real estate workflows. We're also continuing to expand Zillow Showcase, our immersive listing experience that helps agents win listings and give sellers a more compelling way to market their homes. Showcase enhancements like Sky Tour 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. Showcase was on 3.7% of new listings in Q4, 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 Group, Inc. Class C, in a single connected system. Over time, we expect it to reinforce Zillow Group, Inc. Class C'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 Group, Inc. Class C's housing funnel and create durable growth across the business. In Q4, Zillow Group, Inc. Class C 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. And because of our relentless focus on the consumer experience, Zillow Group, Inc. Class C rentals attracted 31 million average monthly unique visitors in Q4. Renters rate Zillow Group, Inc. Class C as their number one preferred platform. High-quality audience engagement translates into strong outcomes for our partners. Property managers tell us Zillow Group, Inc. Class C 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 Group, Inc. Class C. As a result, and 39% for the full year 2025, rentals revenue grew 45% year over year in Q4. 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 Group, Inc. Class C. As we continue to scale in rentals, we're coupling revenue growth with thoughtful investment, and we see a clear path to a billion-dollar-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 Group, Inc. Class C rentals reflect the same core strengths that show up across Zillow Group, Inc. Class C: 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 Group, Inc. Class C 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 Group, Inc. Class C 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 Group, Inc. Class C's twenty years of building in this category, we continue to shape what's next. We've spent two 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 was roughly flat year over year in Q4, which is noteworthy given a majority of buyers transacting with Zillow Group, Inc. Class C 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 Salesforce 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 app 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 Group, Inc. Class C 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 Group, Inc. Class C delivers the highest return on marketing investment in our category. We expect to continue to drive growth in rentals towards our billion-dollar-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 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 continued 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 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 continued 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 compared to 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 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 a 24% margin at the midpoint of our outlook range. This is being driven primarily by a seasonal increase in payroll-related expenses 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, 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 improvements 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 2026 and then trend towards in line with revenue growth in 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.

Thank you. At this time, if you would like to ask a question, please click on the raise hand button which can be found on the black bar at the bottom of your screen. When it is your turn, you will receive a message on your screen from the host allowing you to talk. And then you will hear your name called. Please accept, unmute your audio, and ask your question. We'll wait a moment to allow the queue to form. Our first question will come from Nick Jones with BNP Paribas Security Corp. Please unmute your line and ask your question.

Great. Thanks for taking the questions. I have two, one on rentals and one on AI. Can you elaborate a little bit on rental trends? You're gaining share on 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 white space do you see there kind of maybe this year and beyond? That's the first question. And the second question is a great slide on your positioning for vertically integrated AI. Partnered with OpenAI today. Can you talk about how you see kind of a vertical AI future in Zillow Group, Inc. Class C's place in it to the extent you can kind of share what you're excited about? Thanks.

Yeah. 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, you know, more than or two and a half 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 comm score 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, able to sign custom leases, be able to make rent payments, report credit, report rents, 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, you know, as Jeremy talked about, the ROI is really the signal there. You know, we consistently hear we're the highest ROI advertising spend of all their sources of advertising spend, and they spend at 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 the revenue growth to continue as Jeremy talked about. We feel very confident in our ability to get to that billion-dollar-plus revenue target that we've put out for you all in rentals. And 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 billion-dollar-plus mile marker. But for now, we're really excited to just make progress towards it.

And then

you know, on the AI question, I mean, I think I talked about it in my prepared remarks. You know, 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 fourteen years at this point. So, you know, 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, 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 work so they can convert more transactions, they can be more efficient. And delight in our shared customers. That's what we think the end of this rainbow looks like, and we're excited to go deliver it.

Great. Thank you.

Our next question will come from Brad with RBC Capital Markets. Your line is open. Please unmute and ask your question.

Hi, guys. Thanks. I have two. First, I think we all know kind of Zillow Group, Inc. Class C's stance on listing distribution requirements, but, you know, just curious how you think about maybe any effect 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 I have a follow-up.

Thanks, Brad. I mean, short answer is no. 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, you know, 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 Group, Inc. Class C's broad audience. Right? What consumers want is more transparency, want to sell their homes fast. They want to sell their homes for the most money. 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 probably can't comment too much on the case itself. I'm just curious if that's creating any sort of adverse effects or on the ground for you as you go to market with ZHL or even just the enhanced market strategy overall? Thanks.

Sure. Yeah. 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, you know, helping buyers understand what they can afford when they're on Zillow Group, Inc. Class C, 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 loan 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. 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.

Got it. Thanks.

Our next question will come from Ronald Josey with Citi. Your line is open. Please go ahead.

Great. Thanks for taking the question. 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 Group, Inc. Class C's business strategy that has to happen because of these challenges? Or anything that you feel needs to change just because of, you know, 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 mortgages 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 were using as we build out revenue throughout '26. Obviously, we have Q1 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. Thank you.

Yeah. Maybe I'll take the first one. 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 meaningful change to our business or 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.

Yeah. 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, 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 continuing to nicely alongside, the enhanced markets expansion, 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.

Alright. Our next question will come from John Colantuoni with Jefferies. Your line is open. Please go ahead.

Okay. Great. Thanks for taking my questions. 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 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 guide closer to the high end rather than beat the high end? Thanks.

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 Group, Inc. Class C customers, run their whole business. And help them convert all of their customers, not just Zillow Group, Inc. Class C customers. And that includes, you mentioned our CRM, Follow-up Boss. That includes premium agent profiles with curated media. It includes branding. It 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 Group, Inc. Class C about what those clients are doing and 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, you know, 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 across 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. We're going to be bringing more AI and more insights to the part of their business that is not Zillow Group, Inc. Class C customers. And so many of them have great databases, great clients, great lead sources that are off Zillow Group, Inc. Class C, 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. 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.

Yep. 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 these last few quarters than maybe the magnitudes 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 a 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.

Very helpful. Thank you.

Our next question will come from Mark Mahaney with Evercore. Your line is open. Please go ahead.

Okay. Thanks. Maybe two questions. You talked about getting to 75% of connections coming through enhanced markets. What are the biggest obstacles to going from 44% to 75%? And you talked about that as a medium-term goal, medium, like, two to three 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? Thank you.

Yeah. 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 existing geographies. We did that this year, and maybe think about pacing to be a similar clip of growth to last few years. So, you know, 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, you know, 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 and 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 loan officers. You have to build all those things to go grow. We're really proud of the work we did in 2025. You know, 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 billion-dollar-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.

Yep. 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, you know, 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 at a monthly subscription that's priced for adoption.

Thank you very much.

Our next question comes from Nikhil Devnani with Bernstein. Your line is open. Please go ahead.

Hi, there. Thanks for taking my question. 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? Thank you.

Yeah. Sure. It's a really good question. First, I'd say consensus feels right for the year on EBITDA. And that implies, you know, 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 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, you know, 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. I'd be remiss if I didn't say stock-based comp will be down, 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. Expect EBITDA will grow faster than revenue. And we're expecting net income will grow even faster than both revenue and EBITDA.

Great. Thank you so much.

Our next question will come from Trevor Young with Barclays. Line is open. Please ask your question.

Great. Thanks. On mortgages years ago when you had disclosed segment EBITDA, I think it was approaching EBITDA breakeven when the business was around $250 million in revenue. So a bit bigger than where we're at today. Is mortgages EBITDA profitable today and how we think about margin here in a recovery scenario as we bridge to that mid-cycle 45% EBITDA margin bogey? And then second question, just to clarify, you know, the cadence of EBITDA this upcoming year. It sounds like legal expenses were kind of outsized here in April. Embedding a bit more for the full year, you know, two points hit in January, one point hit for the full year. Should we lap that by April such that, you know, we'll see that uptick in margin really hitting in April?

Yeah. 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. You know, 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 great brand and we have great distribution as well. So we love the opportunity and we're seeing it play out in the results. Mortgages grew 39% in Q4, home loans purchase originations grew 67%. And we're expecting the category to grow 40% in Q1 as well. So feel quite good about all that. Hopefully, that helps give some context on, you know, where we're headed on the mortgage front.

Our next question will come from Dae Lee with JP Morgan. Your line is open. Please ask your question.

Great. Thanks for taking my questions. 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, 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?

Yep. I'll take that. So on the macro front, we planned the cost structure. We planned 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 fast 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 a 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 meaningfully sensitive to the housing market growth. Or if your expenses framework should be less correlated to that.

I would think about the 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.

Got it. Thank you.

Our next question will come from Lloyd Walmsley with Mizuho. Your line is open. Please go ahead.

Great. Thanks for the questions. Two, if I may. First, just can you give us a sense of if you're planning to step up enforcement of Zillow Group, Inc. Class C 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.

Yeah. Maybe I'll take the first one and then Jeremy can take the second. Thanks, Lloyd. 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's a violation that would result in a listing not being broadly marketed and not being on Zillow Group, Inc. Class C, 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 Group, Inc. Class C. 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 the broadest possible exposure for those things to sell their home fastest and for more money.

Yep. 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. I wouldn't think about it as one to one as we increase the amount of connections in enhanced markets, it will go one to one with the overall for sale business.

Okay. Thank you, guys.

Our last question will come from Daniel Kurnos with Benchmark Company. Your line is open. Please go ahead.

Yeah. Great. Thanks. 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 advertised 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. Thank you.

Yep. 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 on 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. Not 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.

Great. Super helpful. Thank you.

Yep.

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, Inc. Class C's fourth quarter and full year results call. This concludes today's conference call, and you may now disconnect.