Online legal service provider LegalZoom (NASDAQ: LZ) met Wall Street’s revenue expectations in Q2 CY2026, with sales up 6.6% year on year to $205.3 million. On the other hand, next quarter’s revenue guidance of $194 million was less impressive, coming in 4.6% below analysts’ estimates. Its GAAP profit of $0.03 per share was in line with analysts’ consensus estimates.
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LegalZoom (LZ) Q2 CY2026 Highlights:
- Revenue: $205.3 million vs analyst estimates of $205.5 million (6.6% year-on-year growth, in line)
- EPS (GAAP): $0.03 vs analyst estimates of $0.03 (in line)
- 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
- Free Cash Flow Margin: 16.4%, down from 19.8% in the previous quarter
- Subscription Units: 1.89 million, down 63,000 year on year
- Market Capitalization: $1.44 billion
"Since late 2024, we've deliberately repositioned LegalZoom around subscription relationships that pair AI with trusted human expertise," said Jeff Stibel, Chairman and Chief Executive Officer of LegalZoom.
Company Overview
Founded by famous lawyer Robert Shapiro, LegalZoom (NASDAQ: LZ) offers online legal services and documentation assistance for individuals and businesses.
Revenue Growth
A company’s long-term sales performance can indicate its overall quality. Any business can have short-term success, but a top-tier one grows for years. Over the last three years, LegalZoom grew its sales at a tepid 7.6% compounded annual growth rate. This wasn’t a great result compared to the rest of the consumer internet sector, but there are still things to like about LegalZoom.
This quarter, LegalZoom grew its revenue by 6.6% year on year, and its $205.3 million of revenue was in line with Wall Street’s estimates. Company management is currently guiding for a 2% year-on-year increase in sales next quarter.
Looking further ahead, sell-side analysts expect revenue to grow 6.8% over the next 12 months, similar to its three-year rate. This projection is underwhelming and implies its newer products and services will not catalyze better top-line performance yet. At least the company is tracking well in other measures of financial health.
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Subscription Units
User Growth
As an online marketplace, LegalZoom generates revenue growth by increasing both the number of users on its platform and the average order size in dollars.
Over the last two years, LegalZoom’s subscription units, a key performance metric for the company, increased by 10.7% annually to 1.89 million in the latest quarter. This growth rate is strong for a consumer internet business and indicates people love using its offerings. 
Unfortunately, LegalZoom’s subscription units decreased by 63,000 in Q2, a 3.2% drop since last year. The quarterly print was lower than its two-year result, suggesting its new initiatives aren’t moving the needle for users yet.
Revenue Per User
Average revenue per user (ARPU) is a critical metric to track because it measures how much the company earns in transaction fees from each user. ARPU also gives us unique insights into a user’s average order size and LegalZoom’s take rate, or “cut”, on each order.
LegalZoom’s ARPU growth has been exceptional over the last two years, averaging 17.2%. Its ability to increase monetization while growing its subscription units at an impressive rate reflects the strength of its platform, as its users are spending significantly more than last year. 
This quarter, LegalZoom’s ARPU clocked in at $270. It grew by 5.5% year on year, faster than its subscription units.
Key Takeaways from LegalZoom’s Q2 Results
We were impressed by how significantly LegalZoom blew past analysts’ EBITDA expectations this quarter. On the other hand, its full-year revenue guidance missed and its revenue guidance for next quarter fell short of Wall Street’s estimates. Overall, this was a softer quarter. The stock traded down 13.9% to $6.98 immediately following the results.
LegalZoom didn’t show its best hand this quarter, but does that create an opportunity to buy the stock right now? What happened in the latest quarter matters, but not as much as longer-term business quality and valuation, when deciding whether to invest in this stock. We cover that in our actionable full research report which you can read here (it’s free).
