Zillow Group, Inc. Class A (ZG) Income Statement

The sequential acceleration from 13.0% in 2024Q1 to 17.9% in 2026Q2 suggests strengthening demand for Zillow's real estate services. This growth appears organic, driven by higher transaction volumes and possibly increased adoption of its integrated offerings. The consistent double-digit growth across all quarters indicates a durable trend, though investors should monitor whether this pace can be maintained as the housing market cycles.

The steady erosion in gross margin from 77.3% to 72.8% over eight quarters indicates that Zillow is either facing higher direct costs or experiencing a mix shift toward less profitable segments. This could reflect increased investment in new initiatives or competitive pricing pressures. While still high, the trend warrants monitoring as it may compress future profitability if not offset by operating leverage.

The inability to convert revenue growth into operating profit suggests that SG&A costs are growing faster than revenue, undermining operating leverage. In 2026Q2, SG&A increased by 14.1% year-over-year while revenue grew 17.9%, but the absolute dollar increase in SG&A ($47 million) exceeded the gross profit increase ($73 million), leading to an operating loss. This indicates that Zillow is investing heavily in sales and marketing, which may be necessary for growth but currently dilutes profitability.

R&D expenses have been consistent, indicating a stable investment in product development. In contrast, SG&A has grown from $298 million in 2024Q1 to $380 million in 2026Q2, a 27.5% increase, outpacing revenue growth. This suggests that Zillow is aggressively spending on sales and marketing to drive growth, but the efficiency of this spending is questionable given the operating losses. The volatility in SG&A may reflect variable marketing costs tied to market conditions.