By Shaina Mishkin

Legal battles targeting Zillow Group stacked up in 2025. The company on Tuesday put a price tag on it when it reported 2025 financial results.

Zillow class C shares closed 16.5% lower Wednesday, the day following its earnings report, according to Dow Jones Market Data. Its close, at $45.66, was the lowest since Aug. 7, 2024. The drop was the steepest percentage decline since Nov. 3, 2021 -- the day after Zillow's announcement that it would exit the business buying and selling homes.

There's no such strategy shift at play this time. Investors are reacting to the company's 2026 earnings expectations, which it said would be dampened by legal costs. The company expects "ongoing elevated legal expenses" will represent a roughly 200 basis point headwind to its adjusted earnings before interest, taxes, depreciation, and amortization, or Ebitda, margin in the first quarter.

Zillow said it expects its first-quarter Ebitda in a range of $160 million to $175 million, lower than the more than $183 million analysts polled by FactSet had expected.

For the full year, the company expects a 100 basis point headwind on its Ebitda margin from legal expenses, executives said on a call with investors. "Legal will be a drag," Zillow CFO Jeremy Hofmann said. "But overall, we still expect to expand margins similar to what we've done in 2024 and 2025."

Zillow's guidance was among the factors likely to move the stock lower, William Blair analyst Stephen Sheldon wrote in a Tuesday note. "With limited visibility into a housing recovery, choppiness in the profit trajectory, and ongoing legal uncertainty, we believe shares of Zillow are likely to remain relatively range-bound," he wrote.

Over the past several years, Zillow, which is perhaps best known for its home for-sale listings website, has grown its offerings across agent services, mortgages, and rentals. That expansion in revenue streams hasn't come without challenges. The company is facing a number of lawsuits from competitors, consumers, and the Federal Trade Commission targeting different parts of its business.

Zillow says its integration of multiple housing services is better for everyone, including consumers. Its product offerings, scale, and scope "puts Zillow in a unique position to improve outcomes for consumers and partners," CEO Jeremy Wacksman said on a Tuesday call with analysts.

( News Corp, which owns Barron's, also operates Realtor.com, which similarly runs a home listings website.)

Most of the lawsuits haven't yet reached the courtroom, with the exception of the brokerage Compass's antitrust complaint. Zillow notched an early legal win in a New York court earlier this month when a judge declined Compass's request for a preliminary injunction against Zillow's home listing rules.

Among the other litigation naming Zillow as a defendant is a lawsuit by CoStar, a real estate technology company and parent of rival housing marketplace Homes.com, alleging copyright infringement; a complaint by the Federal Trade Commission against Zillow and Redfin's rentals partnership; and a recently consolidated class action lawsuit alleging that Zillow's lead generation business and integration with its mortgage product results in buyers paying higher fees than they would otherwise.

"We are confident in our positions and approach, and we don't expect these matters to have a material impact on our financial position or long-term strategy," Zillow's Wacksman and Hofmann wrote in a letter to shareholders.

Zillow still expects Ebitda margin expansion this year, Canaccord Genuity internet analyst Maria Ripps noted in a Tuesday report. That expectation is, "even with incremental legal expenses, broadly in line with expectations," she said.

Zillow's cost structure leverage on its business model is improving, Hofmann said on the call. "We're expecting strong revenue growth. We expect Ebitda will grow faster than revenue. And we're expecting net income will grow even faster than both revenue and Ebitda."

Ripps reduced her price target to $72 from $84 and maintained her Hold rating. "Housing trends remain challenging so far in Q1, which, coupled with near-term legal uncertainty, keep us on the sidelines for now," she wrote.

"Still, we are encouraged by Zillow's steady strategic momentum and margin expansion, which position it well as the housing backdrop eventually improves."

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

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

February 11, 2026 16:36 ET (21:36 GMT)

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