Zillow grows revenue 7% to $724 million as home sales revenue falls 4%: shares drop 16% after hours

Zillow Group reported third-quarter results after the close on Wednesday, and the shape of the quarter says as much about the housing market as the headline numbers. Revenue rose 7% to $724 million, but the part of the business tied to people actually buying and selling homes went backward: Residential revenue fell 4% to $419 million, which the company blamed on mortgage rates higher than it expected. Everything that grew was somewhere else, in mortgages and rentals.

Zillow's Class C shares (Z) closed the regular session at $33.90, up 9.43% on the day. In after-hours trading at 4:50 PM ET, Nasdaq quoted them at $28.50, down $5.40 or 15.93%. We have not confirmed what drove the after-hours move. The release does not include the fourth-quarter outlook, which sits in the shareholder letter, and we did not read it for this story, so we do not attribute the drop to guidance or to anything else.

The numbers, from Zillow's own release

The percentage on adjusted free cash flow is our arithmetic from the two figures in the release.

Why a profit became a $158 million loss

The GAAP loss is mostly one item. Zillow said its results include a $165 million settlement of the securities class action tied to its Zillow Offers home-flipping business, net of expected insurance recoveries. Strip it out and adjusted net income was $124 million, or $0.55 a share, against $113 million, or $0.44, a year earlier. The GAAP loss was $0.70 a share, compared with income of $0.04 a year ago. So the loss is a bill for an old decision, and the adjusted figures show the current business still earns money. The adjusted free cash flow drop is a separate point: far less cash came through the door after adjustments than last year.

The part that matters for the housing market

Zillow measured the industry too. It said total residential real estate dollar volume (existing homes sold times average price, using National Association of Realtors data) grew just 1% in the quarter, and that it estimates industry purchase mortgage origination volume fell 4%. Against that, Zillow's revenue grew 7%, helped by the mortgage line, where purchase loan originations rose 55% to $2.0 billion. That is a small base growing fast inside a market that is shrinking, not a sign that home buying is recovering.

The user numbers cut the other way. Average monthly unique users were 215 million, down 3%, and visits fell 5% to 2.3 billion. Zillow says it still draws 77% of average monthly unique visitors in the real estate category, according to Comscore, so it is a bigger share of a quieter room.

Who feels this

• Real estate agents and small brokerages are the likely readers of the Residential line, Zillow's revenue from the home buying and selling side of its business (the release does not break it down further). It fell while industry dollar volume grew only 1%. If you pay for leads, track cost per closed deal rather than cost per lead.
• Buyers watching the monthly payment. Freddie Mac's 30-year average was 7.24% on Oct. 29, down from 7.40% on Oct. 8 and 15. On a $400,000 loan, principal and interest only, that is about $2,726 a month, our calculation. The relief is real but small, and Zillow's own result shows it has not moved transaction volume yet.
• Landlords and property managers. Rentals revenue rose 26%, with multifamily revenue up 35%, per Zillow. It was the fastest-growing part of the company this quarter.

For more on how mortgage rates are feeding through to buyers, see our report on this week's mortgage applications and the real estate section.

Sources: Zillow Group Q3 2026 results release; Zillow investor relations; SEC EDGAR filings; Nasdaq.com; Freddie Mac. Some data may be delayed. This is market information, not investment advice.