Zillow Group (Z): Cash-Flow Repair vs. Rich Valuation

Headline: Improving cash flow and lower losses collide with a rich multiple#

Zillow Group ([Z]) closed FY‑2024 with $2.24B in revenue, $198M of EBITDA and a narrowed net loss of -$112M, while the stock trades near $84.19 with a market capitalization of $20.23B — implying a price‑to‑sales relation nearer to 9.03x on FY‑2024 revenue. That contrast — positive operating cash flow and free cash flow alongside an above‑market valuation multiple — is the single most consequential development for investors assessing Zillow today. The numbers come from the company’s FY figures filed in February 2025 and the public quote at the time of this report Nasdaq - Company Data.

The tension is straightforward. Operationally Zillow has moved the needle: EBITDA turned meaningful and free cash flow remains positive at $285M in 2024, while management continued heavy investment in product (R&D of $585M) and shareholder return via repurchases (≈$301M). Financially, however, the market prices Zillow like a secular growth platform rather than a recovering media/marketplace business, leaving investors to reconcile improving cash conversion with forward multiples that assume materially higher growth and margin expansion.

Financial performance: revenue recovery, margin progress, cash conversion#

On a headline basis Zillow recorded $2.24B of revenue in FY‑2024 versus $1.95B in FY‑2023 — a year‑over‑year top‑line increase of +14.87% based on the reported figures (2.24 – 1.95) / 1.95 = +14.87% Nasdaq - Company Data. Gross profit expanded to $1.71B, leaving an EBITDA margin of ~8.84% (198 / 2240 = 0.0884). That margin represents modest operating leverage compared with FY‑2023’s 6.43% EBITDA margin, and it signals that the business model can convert incremental revenue into incremental cash flow when headwinds ease.

Net income moved from a loss of -$158M in FY‑2023 to -$112M in FY‑2024 — an improvement of +29.11% in absolute terms (46 / 158 = +29.11%). Operating income improved from -$270M to -$197M, a swing of $73M or roughly +27.04% improvement. The improvement is meaningful, but the company remains below GAAP profitability. Importantly, cash metrics tell a healthier story: operating cash flow was $428M and free cash flow $285M, producing FCF margins well north of typical ad‑marketplace peers (FCF / revenue = 12.72%) Nasdaq - Company Data.

Table 1 below summarizes core income statement items and highlights the improvement in both operating and cash metrics across the recent four fiscal years.

(Values from company filings and compiled company data, filing dates in 2023–2025) Nasdaq - Company Data.

A couple of calculated ratios deserve attention. The FY‑2024 EBITDA margin of ~8.84% signals an improving operating profile in a business that historically exhibited wide margin variability (2021’s gross margin was depressed due to Zillow’s iBuying activities in earlier years). Free cash flow of $285M represents a 12.72% FCF margin (285 / 2240), underscoring the quality of the underlying cash generation versus the still‑negative GAAP bottom line.

Balance sheet and liquidity: net cash and capital allocation levers#

Zillow’s balance sheet shows ample flexibility. At FY‑end 2024 the company reported $1.08B in cash and cash equivalents and $1.86B in cash & short‑term investments, with total debt of $660M and shareholders’ equity of $4.85B Nasdaq - Company Data. Using the conservative definition of net debt (total debt minus cash and cash equivalents), Zillow’s net debt is -$422M, consistent with the company’s presentation (0.66 – 1.08 = -0.42), i.e., net cash on the balance sheet. Note that alternate definitions (using cash + short‑term investments) yield a deeper net cash position; differences stem from accounting definitions and short‑term instrument classifications.

A direct calculation of debt to equity using reported totals (total debt / total stockholders’ equity = 660 / 4,850 = 0.136 or 13.6%) shows a modest leverage profile that contrasts with some published TTM debt ratios in third‑party datasets. Where discrepancies exist between published TTM ratios and balance sheet math, we prioritize the company’s raw line‑items and disclose the variance — the divergence typically reflects differing debt definitions (e.g., gross debt vs. long‑term debt only) and timing mismatches.

Table 2 presents the balance sheet snapshot across the same multi‑year window.

From these items a calculated current ratio for FY‑2024 using current assets/current liabilities is 2.81x (2.33 / 0.831). That is lower than some published TTM current ratios (3.34x) because TTM metrics may aggregate intra‑period balances or use different cutoffs; again, direct balance sheet math is our baseline Nasdaq - Company Data.

The cash flow statement shows where management is allocating capital. Zillow generated $428M of operating cash and $285M of free cash flow in FY‑2024 but recorded -$1.23B in net cash used in financing activities, driven largely by share repurchases (~$301M) and likely other financing adjustments. The net cash decline from FY‑end 2023 to FY‑end 2024 was -$410M (cash at end of period $1.08B) Nasdaq - Company Data.

Strategy and operating drivers: Showcase, AI tooling and product monetization#

Strategically, Zillow’s growth story rests on two intertwined threads: improving monetization of its agent‑facing products (notably Showcase and lead products) and embedding AI features that raise product efficacy and yield higher price points. The company continues to invest heavily in R&D ($585M in FY‑2024) to support features such as enhanced listing presentation, SkyTour virtual experiences, Offer Insights and analytics that purport to increase lead conversion and shortening time‑to‑sale. These investments are material: R&D represented roughly 26.12% of FY‑2024 revenue on our calculation (585 / 2240 = 26.12%), indicating Zillow is prioritizing product development over near‑term margin expansion Nasdaq - Company Data.

Operational evidence of product traction is mixed but constructive: revenue growth accelerated in FY‑2024 at a mid‑teens clip, and management has shown the ability to convert growth into cash. The critical metric investors should watch going forward is average revenue per agent plus lead conversion and churn among paying agents. The blog material in the provided draft underscores Showcase as Zillow’s lead product for agent monetization; consistent agent uptake and improving monetization yields are the key to translating product investment into outsized revenue and margin gains.

Valuation dynamics and the credibility of forward estimates#

On the valuation front, Zillow’s current market cap renders a simple price‑to‑sales multiple near 9.03x using FY‑2024 revenue and the quoted market capitalization of $20.23B. Third‑party datasets report a price‑to‑sales nearer to 8.47x (TTM basis), illustrating how timing and TTM adjustments move multiples materially. Regardless, Zillow is being valued more like a high‑growth software or ad platform than a mature real‑estate classified — the market is assigning optionality for margin expansion and substantial EPS improvement.

Analyst forward estimates baked into consensus show rapid improvement: consensus projects revenue rising to ~$2.57B in 2025 and accelerating thereafter to ~$4.49B by 2029, with EPS swinging to positive figures and multi‑dollar EPS by the back half of the decade. Forward P/E ratios embedded in the dataset are elevated — ~53.12x for 2025, compressing through the years to ~15.05x by 2029 — which implicitly assumes meaningful margin recovery and sustained revenue CAGR. Those projections are achievable but not guaranteed. They depend on continued product monetization success, durable lead quality improvements, and operating leverage as R&D and SG&A investments scale.

Critically, forward valuation sensitivity is high. Small changes in the trajectory of agent monetization, retention, or gross margin can swing long‑range EPS outcomes materially. Given Zillow’s current free cash flow generation, however, the balance sheet provides flexibility to invest in monetization and repurchase equity while retaining liquidity — a strategic advantage relative to highly leveraged peers.

Competitive positioning and industry dynamics#

Zillow sits in a competitive set that includes national portals, brokerage networks, and vertical‑specific ad platforms. Its competitive advantages are primarily scale of consumer traffic, brand recognition, and data depth for automated valuations and buyer intent signals. The monetization playbook centers on converting attention into repeatable, high‑value agent revenue products and extending into adjacent services.

Industry dynamics favor platforms that can permanently improve transaction outcomes for agents and buyers via data and AI: better matching, predictive pricing and higher converting leads. If Zillow’s AI enhancements demonstrably lift conversion, pricing power follows and multiple expansion can be justified. Conversely, a failure to materially improve agent ROI or a constraining advertising market would curtail revenue upside and justify a lower multiple.

Risks, discrepancies and data caveats#

Several risks and data caveats warrant explicit mention. First, metric inconsistencies exist across TTM published ratios and raw year‑end figures (e.g., current ratio and certain leverage ratios). These are traceable to definitional differences (which cash balance is included, whether short‑term investments are netted, and intra‑period adjustments). We prioritize raw line‑items from the company filing and flag when third‑party TTM ratios differ.

Second, Zillow’s P/S multiple is high relative to near‑term revenue run‑rate; therefore, execution risk is asymmetric — downside surprises to agent monetization or a retrenchment in ad spend could have outsized share‑price effects. Third, management continues to invest heavily in R&D and product; these investments are expensive near‑term and must convert to either higher revenue per agent or materially lower customer acquisition costs to justify the spend.

Catalysts and what to watch next#

Near‑term catalysts that would materially change the investment calculus include demonstrable uplift in average revenue per agent (ARPA), published improvements in lead conversion and retention metrics, and sequential margin expansion driven by operating leverage. Quarterly reports that show continued free cash flow growth and narrowing GAAP losses would also help close the valuation gap. Conversely, signs of slowing agent demand or a widening competitive field for paid placements would represent clear downside catalysts.

Relevant operational datapoints to monitor in each quarterly release are: (1) Showcase uptake and ARPA, (2) lead volume and conversion metrics, (3) gross margin and cost of revenue trends, (4) R&D cadence and product rollout effects, and (5) buyback cadence and net cash position changes Nasdaq - Company Data.

What this means for investors#

Zillow is now a company where the fundamentals are less about liquidation risk and more about execution of a product‑led monetization strategy. The balance sheet is an advantage — Zillow is a net cash company on a conservative basis — and cash flow generation has moved from intermittent to steady positive free cash flow. That shifts the investor question from "Can the company survive?" to "Can Zillow convert product investment into durable growth and margin expansion at scale?"

If Zillow’s AI‑driven feature set materially improves agent ROI and retention, the market’s expectation embedded in current multiples is reachable. If product improvements stall or competitive pressures compress ARPA, the valuation multiple is the primary lever that will move the share price downward. Investors should therefore evaluate reported KPIs (ARPA, churn, lead conversion) with at least as much scrutiny as headline revenue beats.

Key takeaways#

Zillow delivered tangible operational progress in FY‑2024: $2.24B revenue, $198M EBITDA, $285M free cash flow and a narrower GAAP loss of -$112M. The balance sheet is a relative strength with conservative net cash on a common measure. These facts reduce balance‑sheet risk and provide capital allocation optionality.

However, the market is pricing significant future growth and margin recovery into Zillow’s valuation (near 9.0x P/S on FY‑2024 revenue and high forward P/Es). That creates sensitivity to execution: the company must translate heavy R&D spending and product rollouts into measurable agent monetization gains for the valuation to be sustained.

Finally, reconcile data differences carefully. When third‑party TTM ratios diverge from company line‑items, use the raw filing numbers as the baseline and track the operational KPIs disclosed in upcoming quarterly releases to validate the forward trajectory.

Conclusion#

Zillow sits at an inflection where product investment, AI enhancement and monetization execution determine whether improving cash flows convert to the multiple expansion embedded in consensus forecasts. The business has demonstrably repaired its cash‑flow profile and reduced GAAP losses, and the balance sheet gives management optionality. The remaining and decisive challenge is predictable: can Zillow convert its product advantage and consumer reach into higher, stickier agent revenue at scale? The next several quarters of ARPA, lead conversion and margin disclosure will tell the story.

Figures in this analysis are drawn from Zillow’s FY filings and the company data feed (company filings and stock quote) as compiled by Nasdaq - Company Data. For industry context and macro comparables referenced, consult FactSet and Bloomberg market commentary FactSet - Earnings Insight, Bloomberg - Markets.