Every headline this week wants you to buy Zillow Group (NASDAQ:Z | Z Price Prediction) on the back of an earnings beat and a fresh AI-platform pitch from CEO Jeremy Wacksman. But here is what you should actually be watching.
Zillow is a leveraged bet on a housing market that the company itself, in its own forward guidance, describes as “planning for the macro housing environment to continue to bounce along the bottom of the cycle”. That setup reads as a value trap dressed in an AI costume, not a retirement-portfolio anchor.
The Z Beat Is Hiding Real Damage
Yes, Q1 EPS of $0.53 topped the $0.46 estimate, and revenue of $708 million grew 18.39%. Look under the hood. Traffic to Zillow apps and sites declined 3% year over year to 220 million average monthly users. Gross margin compressed 350 basis points. Incremental legal spend on the FTC trial expected in the first half of 2026 is dragging Adjusted EBITDA margins by 160 basis points. Industry purchase mortgage origination volume is down approximately 1% year over year.
The market has already cast a vote. Shares trade at $35, down 48.7% year to date and 47.34% over the last year, with a trailing P/E of 140. Paying that multiple for a transaction-dependent platform staring at elevated mortgage rates, historically low existing-home inventory, and a housing market that remains thoroughly locked up qualifies as wishful thinking.
The Quiet Beneficiary: Caterpillar
A more durable alternative sits with Caterpillar (NYSE:CAT), the unsexy infrastructure giant that just printed $17.415 billion in Q1 revenue, up 22.2%, with EPS of $5.54 against a $4.6439 estimate. Three reasons stand out.
1. Caterpillar is an AI data center play. The Power Generation product line, large reciprocating engines and turbines feeding hyperscaler buildouts, hit $2.817 billion in Q1, up 41% year over year. Jim Cramer put it bluntly in April: “CAT represents infrastructure money, construction money and data center money.” Picks and shovels for the AI capex cycle, without the 60x semiconductor multiples.
2. A record backlog the housing cycle cannot touch. Construction Industries revenue rose 38% to $7.161 billion with segment margin expanding 1.6 points to 21.4%. North America revenue jumped 32%. CEO Joe Creed said “A record backlog provides a strong foundation for continued positive momentum.” That backlog is fed by long-term legislative funding bills like the Infrastructure Investment and Jobs Act and global reshoring trends, sources insulated from 30-year mortgage rates.
3. A cash machine returning real money. In Q1 alone, Caterpillar deployed $5.028 billion on share repurchases and roughly $0.7 billion on dividends. Operating cash flow rose 45.1% to $1.870 billion. The stock is up 53.55% year to date and 151.68% over the past year, yet the forward earnings multiple sits at 38x with an analyst target of $920.14.
The tariff line is real. Q1 Resource Industries segment profit fell 39% on 7 points of margin compression from tariff-driven manufacturing costs. Caterpillar beat through it anyway. Zillow has no such cushion.
The retirement-focused investor does not need another lottery ticket on a housing rebound that management is openly disavowing. For investors weighing the two, the yellow machines powering data centers, highways, and reshored factories look better positioned than the headline-chasing Zillow narrative.
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