Alphabet (GOOGL) stock surged by 90.8% over five years, significantly outperforming Zillow (ZG), which saw a 69.8% decline. This divergence stemmed primarily from Alphabet’s robust profit growth, driven by expanded operating margins and increased sales from its diverse services like Search, YouTube, and Google Cloud, contrasting sharply with Zillow’s contracting margins despite some recent sales recovery. While Zillow is implementing restructuring to improve profitability, the performance gap highlights the importance of sustained earnings expansion in long-term stock returns.
Over the past five years, the stock market witnessed a stark divergence between two prominent companies, Alphabet (GOOGL) and Zillow (ZG). While Alphabet soared with a remarkable 90.8% increase, Zillow plunged by 69.8% to October 2026. This dramatic contrast begs the question: what factors contributed to Alphabet's significant edge?
November 1st, 2026 · by Trefis Team
Amidst a volatile market where Zillow saw a YTD decline of 53.3% and the broader S&P 500 (SPY) gained 11.4%, the performance of these two tech-driven entities, both operating within the interactive media and services space, offers a compelling study. Investors holding Zillow shares are left to ponder whether the gap stemmed from superior sales growth, robust profit expansion, or a more favorable investor valuation.
Zillow's Industry Performance: A Modest Outlier
Despite its steep decline, Zillow surprisingly outperformed a majority of its industry peers, beating 19 out of 31 companies over the same five-year period. The typical stock in Zillow’s industry actually fell by an even more substantial 71.6%. However, when compared to companies with similar three-year sales growth, Alphabet emerged as a clear leader, finishing a remarkable 160.7 points ahead.
| Company | Sales growth, 3-year average | P/E | 1-year | 3-year | 5-year |
|---|---|---|---|---|---|
| Zillow (ZG) | 14.1% | 132.1x | -55.4% | -10.9% | -69.8% |
| Alphabet (GOOGL) | 16.7% | 14.6x | -0.2% | 123.4% | 90.8% |
Total return to 2026-10-31, including dividends. Companies in Interactive Media & Services whose sales grew within 4 points of ZG’s. P/E: latest close over the last four quarters’ earnings per share.
Sales Growth: A Contributing Factor
Alphabet demonstrated superior sales growth, albeit slightly, over the three-year period, averaging 16.7% annually compared to Zillow's 14.1%. Alphabet's diversified revenue streams, including Search, YouTube advertising, and Google Cloud services, fueled a remarkable 96.9% revenue increase between 2021 and 2026. In contrast, Zillow's revenue declined by 29.3% over the same five years, despite recent three-year gains, indicating earlier struggles within that window. This stronger top-line expansion for Alphabet certainly contributed to its outperformance.
Profitability: The Decisive Advantage
The most significant divergence between the two companies stemmed from profit per share. Alphabet's earnings per share (EPS) surged by an astounding 269.2% between 2021 and 2026. This was driven by a robust 96.9% sales increase and a 3.0-point expansion in operating margin, leading to more than double its operating profit. Additionally, a reduction in diluted share count by 8.6% further amplified its net income, which climbed by 233.8%.
Conversely, Zillow’s EPS plummeted by 62.1% during the same period, primarily due to a 6.3-point contraction in its operating margin. While investor multiples for both companies generally fell over this period (Alphabet from 25.2x to 14.6x, Zillow from 206x to 132.1x), the core difference in performance was undeniably tied to profit per share, rather than a widening valuation gap.
Zillow's Path to Recovery
Zillow is actively addressing its margin challenges. The company, which generates revenue from rentals, its for-sale business, and Zillow Home Loans, announced a restructuring in August 2026, including a 7% workforce reduction aimed at improving operational efficiency. This effort has already shown early signs of success, with an operating margin of 3.4% reported in fiscal Q2 2026, a significant improvement from an operating loss of 1.7% of sales in fiscal Q2 2025.
Looking Ahead: Zillow's Fiscal Q3 2026 Report
Management anticipates further expansion in its adjusted EBITDA margin, guiding to approximately 25% for fiscal Q3 2026, though additional restructuring costs are expected, which are excluded from this adjusted measure. Investors should closely monitor Zillow’s reported operating margin in its upcoming fiscal Q3 2026 report for a clearer picture of its progress toward sustained profitability.
Investing for Long-Term Wealth: A Broader Perspective
The contrasting fortunes of Alphabet and Zillow underscore a crucial investment lesson: long-term wealth is built by identifying and owning industry leaders. Alphabet's sustained outperformance demonstrates the power of consistent growth and expanding profitability. For investors seeking such quality companies across diverse industries, portfolios like the Trefis High Quality (HQ) Portfolio offer a strategy focused on identifying top performers. Since its inception in September 2020, the HQ Portfolio has returned over 105%, significantly outpacing a benchmark combining the S&P 500, S&P Mid-cap, and Russell 2000, by investing in 30 equally weighted quality companies.
