LegalZoom’s third quarter results were met positively by the market, following robust revenue growth and strong execution in its subscription business. Management credited the acceleration to higher adoption of its compliance-focused offerings and the ongoing shift toward do-it-for-me solutions, which blend technology and human expertise. CEO Jeffrey Stibel highlighted the company’s ability to attract more established small businesses, noting, “We have transitioned beyond stabilizing the business, having now built a strong foundation for accelerated growth.” Efforts to expand bundled services and deepen strategic partnerships—such as with 1-800 Accountant—also contributed to the quarter’s momentum.
Is now the time to buy LZ? Find out in our full research report (it’s free for active Edge members).
LegalZoom (LZ) Q3 CY2025 Highlights:
- Revenue: $190.2 million vs analyst estimates of $183 million (12.8% year-on-year growth, 3.9% beat)
- Adjusted EPS: $0.17 vs analyst expectations of $0.19 (8.9% miss)
- Adjusted EBITDA: $46.32 million vs analyst estimates of $45.29 million (24.4% margin, 2.3% beat)
- Revenue Guidance for Q4 CY2025 is $184 million at the midpoint, above analyst estimates of $176.9 million
- EBITDA guidance for the full year is $169 million at the midpoint, in line with analyst expectations
- Operating Margin: 3.4%, down from 9.6% in the same quarter last year
- Subscription Units: 1.96 million, up 242,000 year on year
- Billings: $190 million at quarter end, up 15% year on year
- Market Capitalization: $1.79 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are 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 Q3 Earnings Call
- Eleanor Smith (JPMorgan Chase) asked about the importance of pricing and bundling for subscription growth. CEO Jeffrey Stibel said it is a key lever, now being emulated by competitors, and contributes to leadership in the space.
- Patrick McIlwee (William Blair) inquired about the new enterprise partnership with OpenAI. Stibel described it as an early-stage but strategic move to embed AI in all LegalZoom operations and product launches.
- Trevor Young (Barclays) requested details on Formation Nation's revenue contribution. CFO Noel Watson reported sequential improvement and highlighted collaborative integration, with both transaction and subscription revenue meeting or exceeding acquisition expectations.
- Michael McGovern (Bank of America) raised concerns about the impact of large language models (LLMs) on legal advice. Stibel responded that AI will expand the addressable market but human validation and oversight remain crucial differentiators for LegalZoom.
- Lucas Cerisola (Morgan Stanley) questioned the sustainability of subscription growth amid tougher comparisons. Stibel acknowledged more challenging comps but emphasized durable growth drivers like compliance offerings, reduced churn, and improved average revenue per user (ARPU).
Catalysts in Upcoming Quarters
In upcoming quarters, the StockStory team will be watching (1) the pace and effectiveness of new AI-enabled product launches and their adoption by existing small businesses, (2) continued growth in channel and strategic partner contributions, particularly the integration of bundled tax and legal services, and (3) execution on margin improvement amid ongoing investment in technology and organizational changes. Progress in cross-selling and customer retention for expanded subscription offerings will also be key indicators.
LegalZoom currently trades at $9.96, down from $10.18 just before the earnings. Is there an opportunity in the stock?Find out in our full research report (it’s free for active Edge members).
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