Zillow Group (ZG): Marketplace Strengths, Improving Cash Flow, and Hard Questions on Valuation

Opening: Growth and cash flow arrive — but the market still prices a high bar#

Zillow Group [ZG] closed FY2024 with revenue of $2.24 billion (+14.87% year-over-year) and adjusted EBITDA of $198 million, while reporting free cash flow of $285 million, according to the company’s FY2024 filing (filed 2025-02-11) and subsequent quarterly disclosures. Those figures mark a clear operational inflection from the company’s iBuying-era volatility: top-line growth has re-accelerated, cash generation is positive, and management resumed disciplined buybacks. Yet the market value of the equity—$20.48 billion at the reported quote—implies expectations for sustained margin expansion and earnings growth that are materially higher than current run-rate profitability. The core question for investors is whether Zillow’s marketplace and product stack can reliably convert attention into durable, higher-margin revenue streams at scale.

The facts: revenue, margins and cash flow (what the numbers say)#

Zillow’s FY2024 results show a company that is growing revenue and converting more of that growth into cash. Revenue increased to $2.24B in FY2024 from $1.95B in FY2023 (+14.87% YoY) while adjusted EBITDA expanded to $198M, lifting the EBITDA margin to roughly 8.84% (198 / 2,240). Net loss narrowed to - $112M from - $158M a year earlier, an improvement of +29.11% in net income on a trailing-year basis (all figures per FY2024 Form 10-K and corporate releases). The company generated $428M of cash from operations and ended the year with $1.08B of cash and cash equivalents, having produced $285M of free cash flow for the year FY2024 Form 10-K; Zillow investor relations.

These moves are not trivial: after the capital losses of the iBuying episode, positive free cash flow and expanding EBITDA signal improved operational discipline and higher-quality earnings. That said, profitability remains modest relative to the market value implied by Zillow’s public multiples.

Table: Consolidated income statement (FY2021–FY2024)#

All line items above are taken from the company’s annual financial statements (FY2021–FY2024) in the filings and have been calculated to two-decimal precision where ratios are shown. See FY2024 filing for supplemental breakdowns (filed 2025-02-11) FY2024 Form 10-K; Zillow investor relations.

Table: Select balance sheet and cash-flow metrics (year-end)#

Line items and year-ends taken from consolidated balance sheets and cash-flow statements in the company filings FY2024 Form 10-K; Zillow investor relations.

Reconciling messy balance-sheet math: net debt, buybacks and leverage#

There are important reporting and definitional wrinkles in Zillow’s year-end balance sheet that deserve explicit highlighting. Using the year-end line items, an enterprise-level net-debt calculation that subtracts cash & short-term investments ($1,860M) from total debt ($660M) yields a net cash position of approximately - $1.20B (i.e., $1.2B net cash). However, the dataset includes a reported netDebt line of - $422M, and certain TTM metrics (e.g., current ratio) differ between sources. These differences are likely due to timing, classification of short-term investments, or adjustments for lease liabilities and other obligations. When encountering such discrepancies, the conservative approach for creditor/stress analysis is to rely on the raw line items in the same filing period (total debt and cash equivalents reported at the same date) — which supports the view that Zillow closed FY2024 with meaningful net cash on the balance sheet after the company reduced gross debt materially (from $1.83B in 2023 to $660M in 2024).

Capital allocation activity is notable. The company repurchased $301M of common stock in FY2024 (down from $424M in FY2023 and well down from $947M in FY2022), while net cash used in financing totaled - $1.23B for the year — reflecting debt paydowns and other financing activity. The reduction in gross debt together with positive free cash flow materially improves financial flexibility, giving management optionality for investment in product and buybacks without materially increasing leverage FY2024 Form 10-K.

What's changed strategically — and why it matters financially#

After the costly iBuying experiment, Zillow pivoted decisively back to its marketplace strengths: audience, data and lead-generation for agents and lenders. Today the company’s revenue mix is more heavily weighted to advertising, professional services, rental and mortgage-related products and software subscriptions for real-estate professionals. That strategic gravity toward software-like, higher-margin products is visible in the numbers: expanding EBITDA, rising free cash flow, and reduced balance-sheet exposure.

The strategic question is whether the platform can increase average revenue per user (ARPU) from professional customers and lift conversion rates in mortgage and rentals such that revenue growth becomes less cyclical and more recurring. Evidence of progress is mixed but encouraging. Revenue growth of +14.87% in FY2024 and sequential beats on recent quarters’ EPS (small beats in 2025 quarters) show product monetization progress, but operating income remains negative at - $197M, reflecting continued investment in R&D ($585M in FY2024) and SG&A ($1.31B). The company is deliberately trading short-term GAAP profitability for product investment aimed at structurally raising conversion and ARPU. If that strategy succeeds, operating leverage could compound quickly given the content-and-data-driven nature of Zillow’s business.

Competitive dynamics: moat vs. attrition and nimble rivals#

Zillow’s durable advantages are straightforward: brand recognition, consumer mindshare in home search, and proprietary datasets that include listing histories, user behavior and the Zestimate algorithm. These advantages feed a classic two-sided marketplace: consumers drive attention; professionals pay to capture leads. That moat is real, but not impregnable. Competitors range from entrenched portals, brokerages building captive listing channels, to fintech firms targeting the mortgage conversion funnel. The critical battleground is conversion: turning traffic into paid agent leads, mortgage applications, and subscription revenue for pros. If competitors undercut pricing or engineer tighter integration with agent/broker systems, Zillow’s monetization could face margin pressure.

Zillow’s strategic playbook is to make the platform more indispensable to professionals by improving lead quality and conversion through product tools and better data science. That is a high-ROI approach in principle because marginal improvements in conversion can multiply revenue without proportional increases in fixed costs. But execution risk remains: product improvements must be significant enough to shift professional spending patterns, and Zillow must maintain price discipline to prevent commoditization of leads.

Margin trajectory and operating leverage: cautiously optimistic#

Frame the margin story simply: EBITDA margin was ~8.84% in FY2024, improved from ~6.4% in FY2023 and 6.3% in FY2022. That improvement reflects both revenue growth and a slowing of operating expense growth relative to revenue. Over the long run, Zillow’s cost structure contains many fixed or semi-fixed elements (engineering, data platform costs, and brand/marketing) that can produce operating leverage once monetization scales. However, R&D spend remains high (R&D of $585M in FY2024, or ~26.1% of revenue), so the margin opportunity depends on whether product investments accelerate monetization before cost bases reaccumulate.

A realistic scenario is incremental margin expansion over the next several years driven by higher ARPU for agent products, modest improvements in mortgage economics as origination volumes normalize, and steady control of SGA. But the market is clearly pricing a much faster improvement: current TTM price-to-sales of 8.57x and enterprise-value multiples imply elevated expectations for earnings growth and margin expansion [Market data snapshot; company filings].

Valuation context and forward estimates (market expectations)#

At the market quote in the supplied dataset, Zillow’s market capitalization is $20.48B and trailing metrics show price-to-sales ~8.57x and price-to-book ~4.33x. The dataset also records an EV/EBITDA of ~87x (TTM), which reflects a high market-implied growth premium relative to current EBITDA of $198M. Analysts’ forward EPS and revenue estimates in the dataset show steep projected earnings growth over the next five years (for example, consensus estimated EPS of $1.63 for 2025 and $5.74 for 2029), which would materially compress reported forward multiples if achieved. The forward PE range reported (e.g., 52.41x for 2025, down to 15.24x in 2029) illustrates how expectations are concentrated in out-year execution.

There are two core valuation tensions. First, Zillow’s cash generation is real and improving — free cash flow margin was ~12.72% in FY2024 (285 / 2,240) — but current earnings remain negative and diluted by heavy investment. Second, market multiples price in a high-growth, high-margin future; the stock’s valuation therefore requires sustained execution on conversion and product monetization to justify the premium.

Risks and failure modes (measured, data-backed)#

Zillow sits at the intersection of cyclical residential real estate and technology-driven platform economics; risks come from both sides. The first risk is macro sensitivity: housing transaction volumes, mortgage rates and inventory all materially influence advertising and lead demand. A meaningful pullback in transactions would compress agent spending and slow conversion in mortgage funnels, reintroducing headline volatility. The second is competitive erosion: rival portals, broker-affiliated platforms and fintechs could take share or force down prices for leads, pressuring ARPU. The third is execution risk: elevated R&D spends and product bets must generate measurable conversion gains; otherwise, the company risks both slower growth and margin compression. Finally, capital allocation missteps (returning to capital-intensive models or expanding balance-sheet risk) would re-expose shareholders to the losses of prior iBuying experiments.

What to watch — the three practical milestones#

Three measurable milestones will determine whether Zillow’s current trajectory is durable. First, Premier Agent and professional product ARPU expansion and lead-conversion improvements: rising ARPU and improved conversion metrics are the clearest signs that marketplace monetization is deepening. Second, mortgage and rentals: evidence that mortgage origination economics contribute meaningful, repeatable revenue without adding systemic credit risk will diversify seasonality. Third, operating leverage: the company must consistently grow revenue faster than operating expenses so that operating income turns sustainably positive. Each milestone can be tracked in quarterly disclosures and should be weighted alongside macro housing activity.

What this means for investors#

Key Takeaways: Zillow is a marketplace incumbent that has demonstrably repaired its balance sheet and returned to positive cash generation, but the stock’s valuation reflects ambitious assumptions about future margin expansion and earnings growth. Investors should monitor three quantifiable signals: (1) ARPU and conversion metrics for professional products; (2) mortgage/rental revenue mix and unit economics; and (3) pace of expense growth versus revenue to confirm operating leverage.

• Positive: FY2024 delivered $2.24B in revenue, $198M EBITDA, and $285M free cash flow, showing a clear improvement in cash-generative capability and balance-sheet strength after the iBuying exit FY2024 Form 10-K; Zillow investor relations.
• Caveat: Market multiples (TTM price-to-sales ~8.57x, EV/EBITDA ~87x) imply a sustained step-up in both revenue growth and margins — expectations that must be earned through conversion and product monetization, not assumed.
• Operational focus: Watch Premier Agent ARPU, mortgage funnel conversion rates, and sequential improvements in operating income as the primary signals of durable progress.

Historical perspective and management credibility#

Zillow’s pivot away from iBuying is an instructive example of management learning: a large strategic experiment misfired, leading to a durable reset toward the capital-light marketplace model. That history gives extra weight to management’s stated preference for software- and data-driven investments over large inventory exposures. The FY2024 results — showing reduced gross debt and positive free cash flow — provide evidence that the balance-sheet lessons were internalized and acted upon. Still, the long memory of investors about the iBuying losses means that evidence of repeatable, margin-accretive monetization will be required to rebuild higher valuation multiples sustainably.

Conclusion: a data-driven view without a simple verdict#

Zillow today is materially healthier than in the iBuying era: top-line growth re-accelerated (+14.87% YoY in FY2024), EBITDA expanded to $198M, and the company generated $285M of free cash flow while reducing gross debt. Those are meaningful improvements that validate the refocused marketplace strategy. However, the market currently prices a high-growth, high-margin future. Realizing that future requires measurable improvements in ARPU, conversion rates and operating leverage — which remain execution risks rather than delivered outcomes.

For investors and analysts tracking [ZG], the near-term task is empirical: monitor the quarterly cadence of professional-product monetization, mortgage funnel economics, and expense discipline. Those metrics will determine whether the market’s optimistic forward multiples are justified, or whether current pricing reflects an outsized premium for a plausible but unproven pathway to sustained high-margin growth.

(For FY2024 source documents and quarterly disclosures, see Zillow Group investor relations and the company’s filings on the SEC: Zillow investor relations — financials & filings (https://www.zillowgroup.com/investors/financials/) and SEC filings for Zillow Group.)