LegalZoom.com Inc. Common Stock Q2 2026 Earnings Recap

LegalZoom's shares plunged 32.6% following a disappointing outlook update driven by significant deceleration in core organic search traffic and margin pressure from higher paid search costs due to Google's shift to AI-powered search, overshadowing solid revenue growth and EBITDA expansion.

Key Takeaways

• Q2 revenue grew 7% year-over-year to $205 million, in line with management’s guidance.
• Adjusted EBITDA rose approximately 18% year-over-year to $46 million, exceeding the high end of guidance.
• Organic and paid search traffic from Google, the company’s main customer acquisition channel, declined sharply as AI-generated answers replaced traditional clicks.
• Paid search costs increased, compressing margins and forcing a cautious outlook revision.
• Human-in-the-loop subscription services grew about 20% year-over-year, now comprising ~65% of subscription revenue and over 40% of total revenue, reflecting customer willingness to pay for expert-guided offerings despite traffic headwinds.