Revenue growth decelerated to 6.6% in 2026Q2 with gross margin improving to 68.2%, but operating margin remains thin at 5.2% due to SG&A consuming 53% of revenue.
LegalZoom.com, Inc. (LZ) annual income statement — 9-year revenue, gross profit & net income history
| Metric | TTM | Dec'25 | Dec'24 | Dec'23 | Dec'22 | Dec'21 | Dec'20 | Dec'19 | Dec'11 | Dec'10 |
|---|
| Sales/Revenue | 792.49M | 756.04M | 681.88M | 660.73M | 619.98M | 575.08M | 470.64M | 408.38M | 156.07M | 120.77M |
| Revenue Growth % | 12.26% | 10.88% | 3.2% | 6.57% | 7.81% | 22.19% | 15.24% | 161.67% | 29.22% | - |
| Cost of Goods Sold | 263.89M | 257.96M | 240.09M | 239.26M | 211.09M | 189.36M | 154.56M | 136.91M | 80.44M | 60.64M |
| COGS % of Revenue | - | 34.12% | 35.21% | 36.21% | 34.05% | 32.93% | 32.84% | 33.53% | 51.54% | 50.21% |
| Gross Profit | 528.61M | 498.08M | 441.79M | 421.46M | 408.88M | 385.72M | 316.07M | 271.46M | 75.63M | 60.13M |
| Gross Margin % | 66.7% | 65.88% | 64.79% | 63.79% | 65.95% | 67.07% | 67.16% | 66.47% | 48.46% | 49.79% |
| Gross Profit Growth % | - | 12.74% | 4.82% | 3.08% | 6.01% | 22.03% | 16.43% | 258.94% | 25.78% | - |
| Operating Expenses | 494.75M | 483.72M | 406.21M | 400.4M | 450.62M | 470.79M | 267.14M | 210.88M | 69.35M | 63.85M |
| OpEx % of Revenue | - | 63.98% | 59.57% | 60.6% | 72.68% | 81.87% | 56.76% | 51.64% | 44.44% | 52.87% |
| Selling, General & Admin | 417.36M | 405.5M | 316.62M | 317.22M | 379.94M | 385.87M | 222.41M | 173.68M | 61.23M | 56.35M |
| SG&A % of Revenue | - | 53.63% | 46.43% | 48.01% | 61.28% | 67.1% | 47.26% | 42.53% | 39.24% | 46.66% |
| Research & Development | 58.59M | 81.94M | 89.58M | 83.18M | 70.43M | 84M | 41.86M | 37.2M | 8.12M | 7.51M |
| R&D % of Revenue | - | 10.84% | 13.14% | 12.59% | 11.36% | 14.61% | 8.89% | 9.11% | 5.2% | 6.22% |
| Other Operating Expenses | 88K | -3.72M | 0 | 0 | 248K | 924K | 2.87M | 0 | 0 | 0 |
| Operating Income | 34.49M | 14.36M | 35.58M | 21.06M | -41.74M | -85.08M | 48.93M | 63.16M | 6.28M | -3.73M |
| Operating Margin % | 4.35% | 1.9% | 5.22% | 3.19% | -6.73% | -14.79% | 10.4% | 15.47% | 4.02% | -3.09% |
| Operating Income Growth % | - | -59.64% | 68.96% | 150.45% | 50.94% | -273.86% | -22.53% | 906.1% | 268.45% | - |
| EBITDA | 82.09M | 61.77M | 72.64M | 49.13M | -17.95M | -68.39M | 69.03M | 79.55M | 10.84M | -218K |
| EBITDA Margin % | 10.36% | 8.17% | 10.65% | 7.44% | -2.89% | -11.89% | 14.67% | 19.48% | 6.95% | -0.18% |
| EBITDA Growth % | 5.15% | -14.96% | 47.84% | 373.8% | 73.76% | -199.07% | -13.23% | 633.88% | 5072.48% | - |
| D&A (Non-Cash Add-back) | 47.59M | 47.41M | 37.06M | 28.07M | 23.79M | 16.69M | 20.1M | 16.39M | 4.56M | 3.51M |
| EBIT | 40.08M | 33.73M | 43.53M | 31.99M | -47.41M | -91.57M | 51.8M | 48.84M | 6.28M | -3.73M |
| Net Interest Income | 5.54M | 6.28M | 7.4M | 8.81M | 1.54M | -27.98M | -35.5M | -38.56M | -153K | -15K |
| Interest Income | 7.29M | 7.57M | 7.85M | 9.31M | 1.8M | 61K | 0 | 0 | 0 | 0 |
| Interest Expense | 1.75M | 1.29M | 446K | 493K | 260K | 28.05M | 35.5M | 38.56M | 153K | 15K |
| Other Income/Expense | 3.84M | 18.08M | 7.5M | 10.44M | -5.93M | -34.54M | -36.61M | 0 | -153K | -15K |
| Pretax Income | 38.33M | 32.44M | 43.08M | 31.49M | -47.67M | -119.61M | 12.32M | 10.28M | 6.13M | -3.74M |
| Pretax Margin % | 4.84% | 4.29% | 6.32% | 4.77% | -7.69% | -20.8% | 2.62% | 2.52% | 3.92% | -3.1% |
| Income Tax | 21.48M | 17.01M | 13.12M | 17.54M | 1.06M | -10.95M | 2.43M | 3.16M | -6M | 282K |
| Effective Tax Rate % | 56.03% | 52.44% | 30.45% | 55.7% | -2.22% | 9.16% | 19.71% | 30.74% | -97.93% | -7.54% |
| Net Income | 16.85M | 15.43M | 29.96M | 13.95M | -48.73M | -108.66M | 9.9M | 7.44M | 12.12M | -4.02M |
| Net Margin % | 2.13% | 2.04% | 4.39% | 2.11% | -7.86% | -18.9% | 2.1% | 1.82% | 7.77% | -3.33% |
| Net Income Growth % | -41.41% | -48.51% | 114.74% | 128.63% | 55.15% | -1198.06% | 32.96% | -38.6% | 401.27% | - |
| Net Income (Continuing) | 16.85M | 15.43M | 29.96M | 13.95M | -48.73M | -108.66M | 9.9M | 7.44M | 12.12M | -4.02M |
| Discontinued Operations | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| Minority Interest | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| EPS (Diluted) | 0.10 | 0.08 | 0.16 | 0.07 | -0.25 | -0.55 | 0.04 | 0.06 | 0.10 | -0.03 |
| EPS Growth % | -43.46% | -50% | 122.84% | 128.72% | 54.55% | -1590.51% | -37.77% | -38.74% | 401.56% | - |
| EPS (Basic) | - | 0.09 | 0.17 | 0.07 | -0.25 | -0.55 | 0.04 | 0.06 | 0.10 | -0.03 |
| Diluted Shares Outstanding | 171.64M | 184.69M | 182.87M | 194.41M | 195.83M | 198.08M | 196.66M | 125.42M | 125.25M | 125.25M |
| Basic Shares Outstanding | 170.19M | 178.8M | 180.21M | 190.47M | 195.83M | 198.08M | 196.66M | 125.06M | 125.25M | 125.25M |
| Dividend Payout Ratio | - | - | - | - | - | - | 2.87% | - | - | - |
Quick answers to the most common questions about buying LZ stock.
For fiscal year 2025, LegalZoom.com, Inc. (LZ) reported total revenue of $756.0M. This represents a 526.0% increase compared to $120.8M in 2010.
LegalZoom.com, Inc. (LZ) is profitable, generating $15.4M in net income for the fiscal year ending 2025 with a net profit margin of 2.0%.
LegalZoom.com, Inc. (LZ) reported an operating income of $14.4M, resulting in an operating profit margin of 1.9%. This margin reflects the operational efficiency of the business before interest and taxes.
LegalZoom.com, Inc. (LZ) generated $498.1M in gross profit for the year, representing a gross profit margin of 65.9%. This demonstrates the company's core pricing power and production efficiency.
Key Metrics
Top Statement Risk
Margin compression and demand deceleration
Metrics are mathematically derived from official filings.
Growth Momentum Fades Despite Revenue Gains
Revenue growth decelerated to 6.6% in 2026Q2 from 12.9% in 2026Q1, and management lowered guidance to $192M–$196M, suggesting demand conversion is weakening. According to recent SEC filings, the slowdown appears broad-based.
The 10.9% year-over-year growth in 2026Q2 masks a sequential deceleration from 12.9% in the prior quarter, and the lowered guidance implies further softening. The EPS miss ($0.03 actual vs. $0.19 estimated) on $205.3M revenue suggests that revenue quality may be deteriorating, possibly due to a shift toward lower-priced or freemium offerings. Investors should monitor whether this reflects a one-off disruption or a structural slowdown in new business formations, which are a key driver of transactional revenue.
Gross Margin Resilience Masks Operating Strain
Gross margin improved to 68.2% in 2026Q2, up from 64.0% in 2026Q1, but operating margin remains thin at 5.2%, reflecting high fixed costs. As reported in financial statements, the gap between gross and operating margins highlights structural inefficiencies.
The gross margin expansion to 68.2% suggests pricing power or a favorable mix shift, yet operating margin of 5.2% is only slightly above the 1.6% in the prior quarter, indicating that SG&A and R&D costs are absorbing most of the gross profit gains. The persistent high gross margin (around 66% average) with low operating margin (1.9% average) implies that the company's cost structure is heavily weighted toward sales and marketing, which may be necessary to maintain brand leadership but limits profitability. This dynamic warrants monitoring as the company invests in AI and human-delivered services, which could either improve efficiency or further compress margins.
Operating Leverage Remains Elusive
Despite revenue growth of 6.6% in 2026Q2, operating income rose to $10.7M from $3.4M in 2026Q1, but this is volatile and not scaling consistently. Based on reported figures, SG&A expenses have grown roughly in line with revenue, limiting operating leverage.
The sequential improvement in operating income from $3.4M to $10.7M is encouraging, but it follows a quarter of near-breakeven performance, and the trend is uneven. SG&A expenses have remained around $109M in the last two quarters, while revenue has been flat, suggesting that the company is not yet achieving economies of scale. The high fixed-cost base, particularly in sales and marketing, means that operating leverage will only materialize if revenue growth accelerates without proportional cost increases. Given the lowered guidance, investors should question whether the current cost structure is sustainable.
Earnings Quality Clouded by SBC and Tax Items
Net income of $5.2M in 2026Q2 is heavily impacted by $23.6M in stock-based compensation, which exceeds net income. According to financial disclosures, SBC has averaged over $20M per quarter, significantly diluting reported EPS.
The reported EPS of $0.03 in 2026Q2 is misleading because SBC of $23.6M is more than four times net income, indicating that a large portion of earnings is non-cash and dilutive. The effective tax rate appears volatile, with net income fluctuating from $1.1M in 2026Q1 to $5.2M in 2026Q2, which may be due to one-time items or valuation allowances. Investors should adjust for SBC to assess true profitability, as the company's cash earnings are likely much lower than reported. The high SBC also suggests that management is using equity as a significant part of compensation, which could be a red flag for shareholder dilution.
SG&A Dominates Cost Structure
SG&A expenses of $109.2M in 2026Q2 represent 53% of revenue, while R&D is minimal at $0, indicating a heavy investment in sales and marketing. As reported in financial statements, this cost structure limits profitability despite high gross margins.
The absence of R&D in 2026Q2 is notable, as it was around $20M in prior quarters, suggesting a possible reclassification or a strategic shift. SG&A remains the largest cost line, and its high proportion of revenue (over 50%) indicates that the company is spending heavily to acquire customers, which is typical for a subscription-based model but raises questions about efficiency. The recent CEO commentary about 'discovery moving' may imply that customer acquisition channels are becoming less effective, which could lead to higher SG&A as a percentage of revenue. Investors should monitor whether the company can reduce SG&A intensity as it scales.
2026Q2 Marks a Potential Turning Point
The 2026Q2 quarter stands out as an inflection point, with revenue growth decelerating to 6.6% and management lowering guidance, following a period of mid-teens growth. According to recent earnings reports, this may signal a shift in demand dynamics.
The combination of an EPS miss, lowered guidance, and a sequential slowdown in revenue growth suggests that the company may be entering a period of deceleration. The gross margin improvement to 68.2% is positive, but it may be driven by a mix shift toward higher-margin subscription services, which could be masking underlying volume weakness. The CEO's comment that 'demand remains intact' but 'discovery is moving' indicates that the company is facing challenges in converting interest into revenue, possibly due to increased competition or changes in customer behavior. This inflection warrants close monitoring, as it could be the start of a longer-term trend or a temporary blip.
What Could Invalidate the Growth Narrative
The bull case for LegalZoom relies on the CTA driving compliance demand, but the recent EPS miss and lowered guidance suggest that revenue growth may be slowing. As reported in financial statements, operating margin of 1.9% leaves little room for error.
Short-sellers would likely focus on the fact that despite a 10.9% revenue growth, operating margin is only 5.2% in 2026Q2, and the company has consistently failed to convert its high gross margins into meaningful profitability. The shift toward 'freemium' formation models could pressure attach rates and revenue per customer, as seen in the decelerating growth. Additionally, the high SBC and thin net margins (2.5%) suggest that reported earnings are of low quality. If the CTA-driven tailwind fails to materialize as expected, or if competition intensifies, the company could face margin compression and further guidance cuts. Investors should be cautious about the sustainability of the current growth rate.