Zillow’s big shift into home sales is showing signs of paying off as its revenue nearly doubled in the third quarter.
The company “Homes” segment, which includes the Zillow Offers program it launched last year, generated $384.6 million in revenue, up 55% from the second quarter, as it sold 1,211 homes and purchased 2,291, ending the quarter with 2,822 on its balance sheet.
In the comparable period a year ago, Zillow reported only $11 million in Homes segment revenue.
Overall revenue rose 117% to $745 million though Zillow’s widened to $64.6 million from about $492,000 a year earlier, reflecting in part its heavy investment in the homes business. The results beat analysts’ estimates of a loss of $90.3 million and $717.5 million in revenue.
“Our third quarter results were strong, demonstrating that Zillow Group’s business model expansion to mechanize real estate transactions is gaining traction as consumer demand reveals people want a better, simpler way to buy, sell, rent and finance homes,” CEO Rich Barton said in a a news release.
On news of the earnings, Zillow shares rose nearly 12% to $13.75 in after-hours trading Thursday.
Zillow has made a big bet on directly buying and selling homes, setting a goal of $20 billion in revenue in three to five years from the Homes segment.
The Offers service, which allows customers to request cash offers directly from Zillow, expanded from 13 to 21 markets in the third quarter and the company plans to launch it in Los Angeles — the second largest housing market in the U.S. — in the fourth quarter.
Homes segment revenue for the full year is projected to reach more than $1.2 billion. “While still very early, we are encouraged by the positive feedback from our Zillow Offers customers and the demand we’re seeing for a more efficient, integrated transaction experience,” Zillow said in a letter to shareholders.
Revenue from Zillow’s legacy Internet, Media & Technology segment increased 7% year over year to $335.3 million in the third quarter. The company also has a mortgage business, which generated $25.3 million in sales, up 37%.