Zillow eliminated over 500 positions and has not disclosed whether AI was a contributing factor.
On Tuesday, Zillow laid off over 500 employees, which accounts for around 7% of its workforce, marking its most significant reduction this year. This decision came just a day before the company was set to announce its quarterly earnings. Throughout the year, Zillow has indicated to investors that it is transitioning to become an "AI-native" business, though it has not confirmed if AI influenced the layoffs.
CEO Jeremy Wacksman described the layoffs as a form of housekeeping. In a blog post, he emphasized the need for "a disciplined cost structure and greater efficiency, placing the right people in the right roles," without elaborating further. He noted that scaling up requires the company to "operate differently than it does today."
The situation is complicated by the fact that Zillow is performing well. According to GeekWire, its revenue in the first quarter increased by 18% to $708 million, outpacing an industry growth rate of only 2%. Profits surged from $8 million to $46 million compared to the previous year. Wacksman stated that the company continues to do better than a stagnant housing market, making the layoffs appear less like a necessary rescue and more like a cost-cutting measure. Zillow has been investing heavily in areas such as rental listings, loan officers, advertising, and legal expenses, and in May, it informed investors that spending would decrease in the latter half of the year. Reducing payroll is one of the quickest ways to achieve that goal, which may be reflected in the upcoming earnings report.
The lack of clarity regarding the role of AI in the layoffs is notable. In April, Wacksman mentioned to real estate executives that Zillow was retraining its workforce to utilize AI, with marginal but compounding benefits, according to Real Estate News. He elaborated on an earnings call in May, stating, "We are rapidly becoming an AI-native company." However, when specifically asked whether AI influenced the layoffs, Zillow provided no response. Both GeekWire and Real Estate News posed the question but received no answer. This pattern of silence regarding AI is becoming common; companies frequently cite AI as a reason for job cuts while also being cautious about discussing it openly.
Zillow isn't the only company navigating this uncertainty. Patreon laid off 20% of its staff while the CEO maintained that AI was not a factor. Monday.com also reduced its workforce despite growth. This reflects a broader trend in the tech industry, where companies are uncertain about the impact of technology on their staffing decisions.
Beyond efficiency concerns, Zillow's stock has plummeted by over 47% this year, despite its strong performance, which the finance chief attributed to a "dislocation" or temporary mispricing. Law firms are seeking shareholders to participate in a proposed class action lawsuit, and this month, Zillow will face trial in an FTC antitrust case involving a $100 million deal for exclusive rental listings on Redfin's platforms.
The broader property-tech sector is also experiencing contractions. CoStar has reduced its Homes.com sales team, Better's founder resigned as CEO this week, and Rocket cut jobs after acquiring Redfin. Whether or not AI is subtly altering these companies, the industry is reassessing its staffing needs. Zillow's earnings report on Wednesday will provide insights into how deeply the company is implementing these changes.
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Zillow eliminated over 500 positions and has not disclosed whether AI was a contributing factor.
Zillow reduced its workforce by over 500 positions, marking its largest layoff of the year, just one day prior to its earnings report. The company, which describes itself as "AI-native," has not disclosed whether artificial intelligence was a factor in this decision.