10-Q · May 6, 2026
LegalZoom reported a strong Q1 2026 performance with revenue reaching $206.8 million, a 13% increase from $183.1 million year-over-year. Despite an EPS of $0.12, exceeding estimates, and robust growth in subscription…
Earnings analysis · 10-Q
LZ earnings analysis
Filed November 4, 2026 · Our reading of the company's report
The latest report
LegalZoom delivered Q3 revenue of $195.146 million, up 3% year over year, with subscription growth of 11% more than offsetting a 14% decline in transaction revenue. Gross margin expanded to approximately 70.7% and…
Read full summary
LegalZoom delivered Q3 revenue of $195.146 million, up 3% year over year, with subscription growth of 11% more than offsetting a 14% decline in transaction revenue. Gross margin expanded to approximately 70.7% and operating margin to approximately 6.9%, but business formations fell 13%, subscription units fell 5% to 1.854 million, and retention was approximately 57%. Liquidity remains solid with $181.7 million of cash and no revolver borrowings, although nine-month free cash flow declined 9% to $108.783 million and the filing provides no new quantitative guidance.
Gross and operating margin
How much of each revenue dollar the business keeps.
One point per quarterly or annual filing. Both margins are shares of that report's revenue.
From revenue to operating profit
Where each $100 of revenue went in this report.
Cost of sales, operating expenses, and what remained. Figures are rounded to whole dollars.
Where revenue came from
The business segments reported by the company.
Shares of the segments disclosed in this filing, largest first.
How we read each report
Our analysis across the last few reports.
Our model's reading of each filing, not the share price or the market's reaction. Annual and quarterly reports each occupy one position.
What stood out
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Revenue and gross margin expanded
Revenue increased 3% year over year to $195.146 million, while gross profit increased 8% to $138.063 million. Gross margin was approximately 70.7%, versus approximately 67.3% in Q3 2025.
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Operating profitability improved
Income from operations rose to $13.544 million from $6.493 million, lifting operating margin to approximately 6.9% from 3.4%. Net income increased to $8.061 million from $4.509 million.
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Subscriptions offset transaction weakness
Subscription revenue grew 11% to $139.673 million, led by a 33% increase in legal advisory subscription revenue and a 14% increase in compliance revenue. Subscription revenue represented 72% of total revenue, up from 66%.
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Year-to-date earnings growth
Nine-month revenue increased 7% to $607.216 million, and nine-month adjusted EBITDA increased to $132.405 million from $122.300 million, with adjusted EBITDA margin rising to 22% from 22% on rounded disclosure.
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Strong liquidity and no debt drawn
The company had $181.7 million of cash and cash equivalents and no borrowings outstanding as of September 30, 2026. The full $100.0 million revolving facility was available.
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Liquidity remains adequate
Management expects available cash and operating cash flow to satisfy operational needs for at least the next twelve months. Nine-month operating cash flow was $126.702 million and free cash flow was $108.783 million.
What to watch
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Formation and search-channel pressure
Business formations declined 13% year over year to 110,000 in Q3, while transaction revenue fell 14% to $55.473 million. Management attributed the formation decline primarily to changing customer-acquisition dynamics, including reduced organic traffic from search and AI-generated summaries.
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Retention and subscription-unit decline
Subscription units declined 5% year over year to 1.854 million, and annual small-business retention was approximately 57%. The filing states that lower retention in formation bundles affected the retention rate, creating risk to recurring revenue growth.
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Lower cash generation and capital use
Nine-month operating cash flow fell to $126.702 million from $144.068 million, and free cash flow declined to $108.783 million from $119.924 million. Financing cash use was $130.060 million, including $103.2 million of share repurchases and $12.5 million of deferred Formation Nation consideration.
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AI compliance and reputational risk
AI integration creates regulatory and reputational exposure: the filing identifies potential inaccurate or biased outputs, unauthorized-practice-of-law concerns, and evolving regulation, including the Colorado AI Act and California AI-related laws.
Management's outlook
The 10-Q does not provide new quantitative revenue or EPS guidance. Prior outlook changes were disclosed in the November 4, 2026 earnings release rather than this filing.
Earlier filings 4
10-K · February 23, 2026
LegalZoom (LZ) is explicitly shifting toward a subscription-first model and higher-value DIFM offerings while integrating AI across its platform. The 10-K notes that for the year ended December 31, 2025 approximately…
10-Q · August 7, 2025
LegalZoom reported Q2 revenue of $192.509 million, up $15.147 million (+8.5%) year-over-year, with gross margin of 65.0% (vs 64.1% prior year). Operating loss widened to $(3.100) million (−1.6% margin) versus operating…
10-Q · May 8, 2025
LegalZoom reported Q1 revenue of $183,110 (in thousands), up $8,896 or 5.1% versus $174,214 in Q1 2024. Gross profit rose to $116,550 (63.7% margin) and operating income increased to $8,966 (4.9% margin); diluted EPS…
This is our reading of a public filing, not the filing itself. Analysis can contain errors; check the source document for full context.