Zillow Group (Z): Revenue Momentum, Rentals & Mortgages Power Growth, But Margins and Metrics Warrant Scrutiny

Q2 / FY2024 — The Single Most Important Development#

Zillow’s most consequential development is a clear shift in revenue composition: newer businesses — notably Rentals and Mortgages — are now meaningfully driving top-line momentum even as legacy listings remain large. At the company level Zillow reported FY2024 revenue of $2.24B and EBITDA of $198M while GAAP net loss narrowed to -$112M. Those figures signal improving operating leverage, but they also conceal important balance-sheet and ratio discrepancies that change how investors should read the company’s financial flexibility and valuation multiples.

The juxtaposition is striking: revenue and EBITDA are moving in the right direction, yet standard leverage and enterprise‑value multiples implied by public data look expensive once you recalculate them from raw balance-sheet and cash‑flow lines. That tension — growth and operational progress on one hand, and stretched multiples plus noisy metric definitions on the other — defines Zillow’s investment story today.

Financial performance: what the numbers actually say (recalculated)#

A first principle for assessing Zillow is to re-run the arithmetic from the company’s reported line items rather than rely on headline TTM aggregates. Using the FY2024 statutory lines provided, I calculate the following core metrics: gross profit margin = 76.34%, operating margin = -8.80%, net margin = -5.00%, and EBITDA margin = 8.84%. Free cash flow for FY2024 was $285M, producing a free-cash-flow margin of 12.72% (FCF / revenue).

Those margins reflect a business where product mix and scale are improving economics: gross margins are extraordinarily high because Zillow’s revenue base is largely distribution/advertising and services, while contribution margins after cost of revenues remain healthy. At the same time, operational spending keeps operating income in modest negative territory because management continues to invest heavily across growth initiatives.

Importantly, recalculating standard balance-sheet ratios from the reported year-end lines yields different conclusions than some published TTM aggregates. Using the FY2024 balance sheet, Zillow’s simple current ratio is 2.80x (total current assets $2.33B / total current liabilities $0.831B). Using the same balance-sheet items gives total debt = $660M and cash + short-term investments = $1.86B, which produces a net cash position of -$1.20B (netDebt = -$1.20B) — i.e., Zillow had roughly $1.2B more cash and near-cash investments than debt at year end if you net those two line items directly. These recalculations matter because they alter leverage and EV multiples materially versus some third‑party TTM summaries.

Accordingly, when I compute enterprise value using the provided market capitalization of $19.55B, total debt and cash-and-short-term investments reported for FY2024, I arrive at an EV of ~$18.35B and an EV / FY2024 EBITDA of ~92.7x, materially higher than some headline EV/EBITDA figures reported elsewhere. That divergence stems from differences in definitions (TTM vs FY, use of cash vs cash-and-short-term investments, and adjustments for leases/other liabilities). Where outside data conflicts with the company line items above, I prioritize the actual balance-sheet figures provided in the fundamentals and highlight the gap below.

Financial summary tables (reconciled to company lines)#

Income statement snapshot (FY 2021–2024)#

Sources: company income-statement line items as provided in the fundamentals data.

Balance-sheet & cash-flow highlights (FY 2022–2024)#

Notes: Net Debt is calculated here as Total Debt minus Cash + Short-term Investments; if positive it indicates net indebtedness, if negative it indicates net cash. All figures are taken from the provided balance-sheet and cash-flow lines.

Segment & earnings-quality analysis — where growth is coming from#

Q2 2025 commentary and the company’s shareholder presentation (Q2) make the revenue mix shift explicit: Rentals and Mortgages are growing fast and driving margin expansion. According to the company’s Q2 release and presentation, Q2 revenue was $655M (+15% YoY) with Rentals at $159M (+36% YoY) and Mortgages at $48M (+41% YoY), and management called out Adjusted EBITDA of $155M (24% margin) in the quarter — all signs of improved unit economics as higher-margin, capital‑light segments scale Zillow Group Reports Second-Quarter 2025 Financial Results.

The quality of earnings shows up in cash-flow metrics. For FY2024, operating cash flow was $428M and free cash flow was $285M, both positive and growing versus prior years. That is important: GAAP net losses persisted, but the business generated cash from operations and converted a meaningful share into free cash. Put differently, management is running a capital-light monetization engine in rentals and other services while investing to scale mortgages and cross‑sell.

However, the EPS story is mixed: in Q2 non‑GAAP EPS missed consensus by a small amount, reflecting elevated sales-and-marketing and cost-of-revenue pressure while management leaned into growth investments. That trade-off explains why EBITDA and cash flow can be improving while EPS sometimes lags expectations.

Strategic transformation: the 'Housing Super App' — progress and capital requirements#

Zillow’s stated strategy is to knit together listings, rentals, mortgage origination and adjacent services to capture more of each housing consumer’s lifetime value. The early results show tangible traction: rentals now contribute a meaningful portion of revenue and mortgages are ramping originations within Zillow Home Loans, increasing cross‑sell and capture rates. The near-term cost of that transformation is higher operating expenses and elevated capital deployment in selected markets to build end‑to‑end offerings.

Quantitatively, Zillow’s R&D and SG&A remain large line items: R&D was $585M in FY2024 and SG&A $1.31B, together representing roughly 84% of gross profit. That points to a deliberate and resource-intensive build. The ROI question is whether the high R&D and marketing spend generates a durable per‑user revenue uplift. Early signs — accelerating rentals revenue and growing mortgage origination volumes — are encouraging, but conversion to sustainable operating income depends on continued scale benefits and improving fulfillment economics in mortgage operations.

The capital requirement to fully realize the super-app is modestly favorable because rentals monetization is capital-light (advertising and SaaS for property managers), but mortgages require operational capital, compliance frameworks, and working capital to support origination pipelines. Zillow has used buybacks and a convertible-note settlement in recent periods, indicating active capital allocation choices that tighten liquidity even as they simplify the capital structure.

Capital allocation and balance-sheet dynamics#

Management’s capital-allocation moves have been significant. FY2024 cash at period end declined and the company reported common stock repurchases and a convertible-note settlement that impacted liquidity in the quarters following the FY close. At the same time the company increased operating cash flows and free cash flow, reducing the need to fund growth externally if that improvement continues.

Re-stating the balance-sheet arithmetic matters here: while some third-party TTM summaries show small net indebtedness, the FY2024 lines indicate net cash using cash + short-term investments less total debt of roughly $1.2B. The difference between that simple net-cash calculation and other reported net-debt figures stems from differences in what is included in ‘debt’ (e.g., lease liabilities, convertibles, or other financings) and whether one uses cash or cash + short-term investments. Investors should therefore inspect the company’s filings to determine which liabilities are included when counterparties report net-debt or leverage metrics.

Competitive dynamics — where Zillow stands versus key rivals#

Zillow’s advantage is platform scale: very high traffic and brand awareness give it the ability to monetize multiple housing touchpoints. That advantage is real and measurable in segregated metrics (rental visitors, listings, and cross‑sell rates) and underpins why rentals advertising can scale quickly. However, mortgage origination is a structurally different business with entrenched competitors like Rocket Companies and UWM. Those incumbents have scale in loan distribution, balance-sheet capacity, and specialized origination operations, so Zillow’s pathway is not guaranteed. Zillow’s moat is strongest where the company can use its traffic to match supply and demand (advertising and marketplace services) and is weaker in capital‑intensive or highly regulated activities unless execution is flawless.

Key risks and data inconsistencies investors must weigh#

There are four practical red flags that emerge once you reconcile raw numbers.

First, published TTM ratios (debt/equity, EV/EBITDA, net-debt/EBITDA) in some data services differ materially from calculations derived directly from the FY2024 line items. For example, recalculating EV/EBITDA from market cap, total debt and cash-and-short-term-investments yields ~92.7x using FY2024 EBITDA, higher than some reported figures (~83.5x). These gaps largely reflect timing, definitional differences and whether analysts use rolling TTM EBITDA versus last-fiscal-year EBITDA. I prioritize direct balance-sheet lines and call out any divergence for readers.

Second, mortgage revenue is rate-sensitive. The mortgage segment showed strong YoY growth in recent quarters, but a material rise in mortgage rates or a decline in purchase activity would compress originations and revenue rapidly because origination volumes are cyclical.

Third, advertising pricing and landlord adoption in rentals face the risk of commoditization. As more players enter rentals advertising or as landlords consolidate platforms, ad pricing could come under pressure and yield declines, pressuring margins.

Fourth, regulatory risk in mortgage origination is non-trivial. Scaling Zillow Home Loans means taking on compliance, operational and reputational risks that differ from marketplace advertising, and any misstep could be costly.

What this means for investors (actionable implications without advice)#

Investors should treat Zillow as a growth platform with improving underlying cash generation but also with valuation and metric noise that requires active scrutiny. The most important selectors to watch are repeated and measurable: rentals revenue growth, mortgage origination volumes and per‑origin economics, Adjusted EBITDA margin trajectory, cash-flow conversion and any further capital-allocation moves (buybacks, debt settlements).

If Rentals continues to grow in the +30–40% range and Mortgage origination volumes expand while Adjusted EBITDA margins remain in the double-digits on a quarterly basis, the company is demonstrating that the super‑app model is moving from promise toward durable economics. Conversely, if mortgage origination stalls with rising rates or rentals monetization weakens, the same investment case that looks promising today would face a rapid re-rating because much of the valuation premium domestically attaches to future cross‑sell capture.

Conclusion — progress with caveats#

Zillow is executing a meaningful strategic transformation: FY2024 revenue of $2.24B, EBITDA of $198M, narrowing GAAP losses and positive free cash flow all indicate the company is monetizing a broader slice of the housing lifecycle. Rentals and Mortgages are the growth engines, and early-quarter results show those segments contributing materially to revenue and margin expansion Zillow shareholder presentation, Q2 2025.

At the same time, reconciliation of balance-sheet lines and multiples shows the headline valuation metrics can look stretched depending on definitional choices, and the mortgage business introduces rate sensitivity and regulatory complexity. Investors and analysts must therefore parse underlying definitions when comparing EV / EBITDA or net‑debt ratios and track the quarter-to-quarter conversion of rentals and mortgage growth into sustained EBITDA and free cash flow conversion.

In short, the company is on a credible growth path and showing improving cash generation, but the story is still an execution play: scale rewards are plausible and visible, but so too are macro and regulatory risks. For anyone analyzing [Z] today, the critical next questions are not whether growth exists (it does) but whether margins and cross‑sell economics can continue to improve at scale while the company manages capital allocation and the regulatory demands of mortgage origination.

Sources

Company Q2 2025 press release and presentation: Zillow Group Reports Second-Quarter 2025 Financial Results and Zillow 2Q25 Shareholders Letter (Presentation PDF). Additional context from earnings call transcript and market press coverage listed in the company sources.