LegalZoom Q2 Earnings: Subscription Growth and AI Partnerships Drive Expansion

LegalZoom reported Q2 revenue of $192.5mln, an 8.5% YoY increase, beating analyst expectations. The company's non-GAAP profit of $0.15 per share was in line with estimates. Revenue guidance for Q3 was $183mln, above analyst estimates. Management attributed the strong performance to its subscription strategy and partnerships with AI companies.

LegalZoom Inc. (NASDAQ: LZ) reported robust financial results for the second quarter of 2025, with revenue reaching $192.5 million, an 8.5% year-over-year (YoY) increase, and beating analyst expectations. The company's non-GAAP profit of $0.15 per share was in line with estimates. Revenue guidance for the third quarter was set at $183 million, above analyst estimates. Management attributed the strong performance to its subscription strategy and partnerships with AI companies [1].

Key highlights of the Q2 report include a 10% YoY increase in subscription revenue to $119.9 million, which now represents 62% of total revenue. Transaction revenue also grew 6% to $72.6 million. Despite a minor net loss of $0.3 million compared to net income of $1.3 million in Q2 2024, LegalZoom's adjusted EBITDA improved significantly to $39.0 million, a 35% increase. Free cash flow nearly doubled to $31.6 million, reflecting improved operational efficiency [2].

LegalZoom's balance sheet remains strong, with $217.0 million in cash and cash equivalents at the end of Q2 2025, up from $142.1 million at year-end 2024. The company repurchased 2.2 million shares for $20.4 million during the quarter. Management's decision to raise its 2025 revenue growth outlook from 5% to 8% while maintaining a 23% adjusted EBITDA margin target signals confidence in their ability to execute their strategy through the second half of the year [3].

The subscription business is becoming the growth engine for LegalZoom, with subscription units growing 22% to nearly 2 million units, despite a 6% decline in average revenue per user (ARPU) to $256. This subscription-first approach provides more predictable, recurring revenue streams compared to transaction-based models. The company's strategic execution and focused strategy have driven this growth, with investments in subscription growth bearing fruit while maintaining discipline on costs [2].

LegalZoom's strong Q2 results, combined with accelerating growth and improved profitability, signal a promising future for the company. The company's improved outlook suggests that its investments in subscription growth are paying off, while maintaining a strong balance sheet and operational efficiency [3].

References:
[1] https://www.ainvest.com/news/legalzoom-q2-rev-192-5mln-9-yoy-raises-fy25-growth-expectations-2508/
[2] https://www.ainvest.com/news/legalzoom-beats-q2-revenue-expectations-raises-2025-outlook-2508/
[3] https://www.ainvest.com/news/legalzoom-q3-revenue-expected-reach-182m-184m-adjusted-ebitda-44m-46m-2508/