Online legal service provider LegalZoom (NASDAQ:LZ) announced better-than-expected revenue in Q4 CY2025, with sales up 17.7% year on year to $190.3 million. Guidance for next quarter’s revenue was better than expected at $201.5 million at the midpoint, 0.8% above analysts’ estimates. Its GAAP profit of $0.03 per share was in line with analysts’ consensus estimates.

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Revenue: $190.3 million vs analyst estimates of $184.6 million (17.7% year-on-year growth, 3.1% beat)

EPS (GAAP): $0.03 vs analyst estimates of $0.03 (in line)

Adjusted EBITDA: $49.89 million vs analyst estimates of $47.31 million (26.2% margin, 5.5% beat)

Revenue Guidance for Q1 CY2026 is $201.5 million at the midpoint, roughly in line with what analysts were expecting

EBITDA guidance for the upcoming financial year 2026 is $195 million at the midpoint, above analyst estimates of $189.4 million

Operating Margin: 6.6%, down from 8.1% in the same quarter last year

Free Cash Flow Margin: 14.7%, down from 24.7% in the previous quarter

Subscription Units: 1.94 million, up 173,000 year on year

Market Capitalization: $1.24 billion

“LegalZoom is built for where the market is going. AI is transforming how legal work starts, which is opening up new markets. We are winning by delivering customers to the finish line with trust, judgment, and execution,” said Jeff Stibel, Chairman and Chief Executive Officer of LegalZoom.

Founded by famous lawyer Robert Shapiro, LegalZoom (NASDAQ:LZ) offers online legal services and documentation assistance for individuals and businesses.

Examining a company’s long-term performance can provide clues about its quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Over the last three years, LegalZoom grew its sales at a tepid 6.8% 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 reported year-on-year revenue growth of 17.7%, and its $190.3 million of revenue exceeded Wall Street’s estimates by 3.1%. Company management is currently guiding for a 10% year-on-year increase in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to grow 6% over the next 12 months, similar to its three-year rate. This projection is underwhelming and suggests 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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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 12.5% annually to 1.94 million in the latest quarter. This growth rate is strong for a consumer internet business and indicates people love using its offerings.

In Q4, LegalZoom added 173,000 subscription units, leading to 9.8% year-on-year growth. The quarterly print was lower than its two-year result, suggesting its new initiatives aren’t accelerating user growth just yet.

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 52.9%. 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 $266. It grew by 1.1% year on year, slower than its user growth.

It was great to see LegalZoom’s full-year EBITDA guidance top analysts’ expectations. We were also glad its EBITDA outperformed Wall Street’s estimates. On the other hand, its EBITDA guidance for next quarter missed. Overall, this print had some key positives. The market seemed to be hoping for more, and the stock traded down 2.5% to $7.07 immediately after reporting.

So should you invest in LegalZoom right now? We think that the latest quarter is just one piece of the longer-term business quality puzzle. Quality, when combined with valuation, can help determine if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free.