Zillow is cutting more than 500 jobs even as the real estate technology giant reports some of its strongest revenue growth in years.
The apparent contradiction became clearer in the company’s earnings call on August 5.
Zillow is lowering its fixed costs as it accelerates a major transition.
From selling advertising and customer leads, it now aims to earn more of its revenue when home transactions close.
While the new model has the potential to generate more revenue from each customer, it comes with a caveat.
It will delay when Zillow gets paid, leaving more of its business exposed to mortgage rates, housing affordability, and the number of buyers who complete purchases.
Zillow announced on August 4 that just over 500 employees would leave the company as it reorganizes for what it called “the path ahead.”
The reductions represent approximately 7% of its workforce.
In its original announcement, Zillow said the changes were intended to ensure that it had the right employees in the right roles and could move faster.
CEO Jeremy Wacksman provided a similar explanation during the earnings call.
“To position Zillow for the path ahead, yesterday, we restructured parts of our organization and eliminated some roles,” Wacksman said.
“We made this decision to ensure we can move faster and operate more efficiently, including a more sustainable cost structure.”
The earnings call revealed that the cuts are expected to yield far greater savings than Zillow disclosed in its initial layoff announcement.
Zillow cuts costs to support a new business model
The August cuts follow the departure of roughly 200 Zillow employees during annual performance reviews in January.
At the time, Zillow said the changes were performance-related and were not connected to market conditions or an effort to reduce overall headcount.
But the latest cuts are more clearly a cost reduction.
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Zillow expects approximately $75 million in annualized savings from the restructuring and says the benefit will reach $140 million when reductions to previously planned headcount growth is included.
“Yesterday, we announced a restructuring, which included eliminating approximately 7% of employees as we continue to scale our integrated strategy and drive efficiencies,” Chief Operating and Financial Officer Jeremy Hofmann said at the earnings call.
Zillow’s “integrated strategy” refers to the way it is changing how it makes money from homebuyers and real estate agents.
Zillow traditionally generated much of its agent revenue by charging for advertising and customer connections.
Under its newer Zillow Preferred model, participating agents generally pay Zillow upon transaction close.
Zillow can also earn mortgage revenue when a buyer using one of its agent partners chooses Zillow Home Loans.
The company says this approach generated 23% more revenue per customer connection than its legacy advertising model in 2025.
Zillow expects the advantage to increase to 35% by the end of 2026 as mortgage adoption and transaction conversion improve.
The company is now accelerating the change.
It expects more than 75% of its customer connections to go to Preferred partners by the end of 2026, up from 44% at the end of 2025.
The strategy promises more revenue per customer connection, but there is a trade-off.
Under Zillow’s older advertising model, the company generally recognized revenue earlier.
Under Preferred, more revenue depends on a customer completing a transaction, while mortgage revenue is recognized over the life of a loan connection.
That creates a delay between Zillow connecting a buyer with an agent and collecting all the revenue tied to that buyer.
The workforce reduction gives Zillow a lower cost base while the transition accelerates.
A weaker mortgage market increases the risk
Zillow is making the transition as the housing market supporting it becomes less reliable.
Management previously expected industry purchase-mortgage originations to remain approximately flat in 2026.
Zillow now expects them to decline by a low- to mid-single-digit percentage.
“For the rest of 2026 and the full year, we are assuming the purchase mortgage originations market will be down low to mid-single digits from our prior view of flat,” Hofmann said.
Higher mortgage rates and persistent affordability challenges have had a greater effect on buyers who require financing than on cash purchasers, Zillow said.
This matters because a majority of Zillow’s buyers use a mortgage, making its growing transaction-based business particularly sensitive to borrowing conditions.
Fewer completed home purchases could delay or reduce the revenue Zillow expects to collect from agent transactions and mortgage originations.
Zillow’s third-quarter forecast reflects this pressure.
The company expects revenue of between $745 million and $760 million, representing approximately 11% growth at the midpoint.
This would slow Zillow’s year-over-year revenue growth from 18% in the second quarter.
Zillow expects its residential revenue to remain flat year over year in the third quarter as more revenue shifts from its traditional agent business to mortgages over time.
The company nevertheless expects mortgage revenue to increase more than 50%.
Strong growth did not prevent the cuts
Zillow’s restructuring follows a quarter in which nearly every major revenue category expanded.
Total revenue increased 18% from a year earlier to $772 million, above the high end of the company’s forecast.
The broader residential real estate industry grew an estimated 6% during the same period.
Mortgage revenue surged 75% to $84 million as Zillow’s purchase-loan origination volume increased 95% to $2.2 billion.
Rental revenue rose 31% to $209 million, while residential revenue increased 7% to $465 million.
The results suggest that Zillow did not eliminate jobs because its existing businesses had stopped growing.
Instead, it is reducing expenses before its revenue becomes more dependent on housing transactions that remain difficult to predict.
Zillow recorded $36 million in second-quarter restructuring costs related to the cost-management actions and expects an additional $23 million to $28 million during the third quarter.
The company reported a second-quarter net loss of $4 million, compared with net income of $2 million a year earlier. Adjusted EBITDA increased to $176 million from $155 million.
Analysts question Zillow’s transition
The combination of softer housing assumptions and an accelerated monetization shift has prompted analysts to retreat from bullish ratings.
Bernstein downgraded Zillow to “Market Perform” from “Outperform” and reduced its price target to $38 from $50.
The firm said it had “lost conviction” in its fundamental thesis following the results, citing private-listing disputes, potential competitive pressure from Google, lawsuits, and elevated interest rates.
Evercore ISI analyst Mark Mahaney also downgraded Zillow to “In Line” from “Outperform” and cut the firm’s price target to $40 from $80.
Evercore described Zillow’s second-half outlook as “notably soft” and pointed to the monetization pivot, weakening fundamentals, and the continuing weakness of the housing market, according to analyst notes reviewed by TheStreet.
The downgrades highlight the same tension underlying the layoffs.
Zillow’s new model may eventually generate more revenue and profit per customer, but the company is accelerating the transition at a time when fewer Americans can afford to buy homes.
For the full year, Zillow still expects revenue of between $2.92 billion and $2.96 billion and adjusted EBITDA of between $730 million and $760 million.
The company’s latest results show that it is still growing faster than the housing market.
Its decision to eliminate more than 500 jobs shows that management is unwilling to rely on that growth continuing without a leaner cost structure.
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