By Shaina Mishkin

It's a tough housing market out there. That likely won't stop home services company Zillow Group from inching closer to profitability, according to Wall Street estimates.

For the first quarter, the company is expected to report on Wednesday its narrowest loss since it last turned a quarterly profit in 2022, according to FactSet data. Analysts polled by FactSet estimate Zillow will report a net loss of about $9 million on revenue of $589 million, better than its $23 million loss on $529 million in revenue in last year's first quarter.

That would be a sign that Zillow's path to profitability is working even in a slow and uncertain macroeconomic environment. Zillow's chief financial officer said in February that the company expects to have positive generally-accepted accounting practices, or GAAP, net income for the full year.

"The way in which we do that is pretty straightforward," Chief Financial Officer Jeremy Hofmann said on the company's fourth quarter 2024 earnings call in February. "We need to continue to meaningfully outperform the housing market and grow revenue."

Zillow's business model has changed quite a bit since it last logged a net profit in the second quarter of 2022. Notably, it is no longer buying and selling houses through its Zillow Offers iBuying program -- a strategy that resulted in less predictable financial results, with big earnings beats in some quarters, and steeper-than-expected losses in others. The company announced plans to end the iBuying business in late 2021, and reported it as a discontinued operation in late 2022.

Now, Zillow is focused on a strategy it calls the "housing super app." Along with its lead-generation model for real estate agents, which directs house hunters searching Zillow to an agent, who pays the website for placement on its listings, Zillow has expanded services for buyers and agents. That means providing tools like workflow management software to agents, and targeting buyers directly by more closely integrating the company's home financing business with its house search platform.

Revenue from Zillow's mortgage and rental businesses has increased as the company has diversified its services for house hunters. Analysts expect that revenue in the two operations climbed a respective 29% and 30% from one year prior, to $40 million and $126 million, in its first quarter, according to FactSet.

Such an improvement would come even as the housing market remains relatively stagnant. High housing costs have weighed on home sales for the past several years, and a drop in consumer perceptions of job security could add to buyer malaise.

Still, there are a few reasons to think Zillow's earnings could beat estimates, a team of KeyBanc analysts led by Justin Patterson wrote on Monday. Both mortgage applications and housing inventory have increased, hinting at a "modest" real estate recovery this year, they wrote. And home sales might not need to gain for Zillow to beat estimates as it further integrates its services and boosts market share, they added.

But don't expect upside on its guidance, the analysts wrote. Zillow will likely keep it unchanged, calling for low-to-mid-teens revenue growth in 2025 and positive GAAP net income, they added. "Given the recent volatility in mortgage rates, we believe a cautious guide is prudent," they wrote.

Zillow shares closed down 1.4% to $67.19 on Tuesday. The stock is down 9.3% so far this year while the S&P 500 is off 4.7%.

Write to Shaina Mishkin at shaina.mishkin@dowjones.com

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May 07, 2025 04:00 ET (08:00 GMT)

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