Zillow Group's stock experienced a sharp decline of 6.29% in the after-hours session, following the release of its first-quarter financial results.

Despite reporting better-than-expected Q1 earnings and revenue, the company's shares fell as management indicated it is planning for the macro housing environment to continue to bounce along the bottom of the housing cycle, signaling a cautious outlook for future growth.

Adding to investor concerns, a separate Zillow market report highlighted that higher mortgage rates stalled a rebound in U.S. home sales in April, shifting buyers to a more cautious stance and potentially impacting the company's core transaction-based business segments.