LegalZoom’s second quarter results reflected the impact of rapid changes in online search dynamics. Management attributed the quarter’s performance to a mix of solid subscription growth and the accelerating adoption of AI-powered services, but also acknowledged significant headwinds from declining Google-driven customer acquisition. CEO Jeffrey Stibel cited a “material change and a step down” in Google search, which pressured traditional traffic and business formation volumes. The company’s shift toward higher-value, human-in-the-loop offerings helped offset some pressure, but the abrupt onset of new search realities was a key theme.
Is now the time to buy LZ? Find out in our full research report (it’s free for active Edge members).
LegalZoom (LZ) Q2 CY2026 Highlights:
- Revenue: $205.3 million vs analyst estimates of $205.5 million (6.6% year-on-year growth, in line)
- Adjusted EPS: $0.16 vs analyst estimates of $0.15 (7% beat)
- Adjusted EBITDA: $45.9 million vs analyst estimates of $40.92 million (22.4% margin, 12.2% beat)
- The company dropped its revenue guidance for the full year to $800 million at the midpoint from $820 million, a 2.4% decrease
- EBITDA guidance for the full year is $192.5 million at the midpoint, below analyst estimates of $195 million
- Operating Margin: 5.2%, up from -1.6% in the same quarter last year
- Subscription Units: 1.89 million, down 63,000 year on year
- Billings: $203.2 million at quarter end, up 4% year on year
- Market Capitalization: $931.7 million
While we enjoy listening to the management’s commentary, our favorite part of earnings calls is the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From LegalZoom’s Q2 Earnings Call
- Eleanor Smith (JPMorgan) asked about the pace and impact of higher-value product adoption. CEO Jeffrey Stibel said, “We are actually seeing real strength” in human-in-the-loop offerings, though packaging and renewal cycles are under review.
- Smith (JPMorgan) followed up on AI partnerships. Stibel explained that LegalZoom’s early moves with AI platforms are producing incremental traffic, now about 3% of LLC formations, and could offset Google’s decline over time.
- Sang-Jin Byun (Jefferies) questioned the timing and potential duration of the Google traffic shift. Stibel and CFO Noel Watson clarified the change was abrupt and structural, with guidance assuming no near-term recovery or further deterioration.
- Matthew Condon (Citizens Bank) asked about the rationale for increased brand investment. Stibel argued that brand authority is crucial for AI-driven discovery and partnerships, while Watson noted it enhances customer trust and pricing power.
- Patrick McIlwee (William Blair) probed how LegalZoom is managing marketing spend amid search volatility. Watson responded that spend is shifting from Google to new channels, with brand and partnerships prioritized despite slower returns.
Catalysts in Upcoming Quarters
In the coming quarters, the StockStory team will be monitoring (1) LegalZoom’s progress in scaling AI-driven and partnership channels for customer acquisition, (2) the effectiveness of workforce reductions and automation in supporting margin expansion, and (3) the adoption rate of higher-value subscription services. The pace at which AI integrations convert to meaningful traffic and transaction volumes will be a crucial signpost for sustainable growth.
LegalZoom currently trades at $5.46, down from $8.10 just before the earnings. Is the company at an inflection point that warrants a buy or sell? See for yourself in our full research report (it’s free).
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