Zillow (ZG, Financial) is trading nearly flat after releasing its Q1 results. The company reported a solid earnings per share (EPS) beat with revenue increasing by 13% year-over-year (YoY) to $598 million, exceeding prior guidance of $575-590 million. Adjusted EBITDA rose by 22% YoY to $153 million, surpassing the $125-140 million guidance. However, the midpoint of Q2 revenue guidance fell below consensus, affecting shares today.

Zillow has restructured its reporting segments into two main categories: For Sale and Rentals. In the For Sale segment, revenue increased by 8% YoY to $458 million. Residential revenue grew by 6% YoY to $417 million, driven by Premier Agent growth, Zillow Showcase expansion, and contributions from its new construction marketplace and Follow Up Boss. Within this category, mortgages revenue rose by 32% YoY to $41 million, outperforming expectations as more buyers opt for Zillow Home Loans.

Zillow acknowledges ongoing challenges in the housing market, which has been stagnant since 2022. The company anticipates this trend to persist into 2025 but remains pleased with its consistent double-digit revenue growth despite the tough market conditions.

On the Rentals side, revenue growth accelerated in Q1, increasing by 33% YoY to $129 million, compared to 25% growth in Q4. This growth was mainly driven by multifamily revenue, which grew by 47% in Q1, up from 41% in Q4. Zillow increased the number of multifamily properties on its platforms by 38%, reaching an all-time high of 55,000 properties at the end of Q1.

Zillow recently partnered with Redfin (RDFN, Financial), becoming the exclusive provider of multifamily rental listings on Redfin's sites. This partnership, which went live at the end of April, has exceeded expectations. Zillow will start paying Redfin for rental leads in Q2 and expects the partnership to boost EBITDA in the second half of 2025.

While Zillow has seen impressive quarters recently, the last few have been more modest. Factors such as election uncertainty in Q4 and macroeconomic issues in Q1 have dampened home buying interest. However, Zillow's strategic move into Rentals has proven wise, helping to balance the cyclical nature of the housing market.