LegalZoom.com, Inc.

What they do

LegalZoom combines technology with access to attorneys through its independent attorney network and its own law firm, serving small businesses and individuals on legal matters from formation to ongoing compliance. It operates a mix of transaction and subscription offerings, including do-it-yourself tools and do-it-for-me concierge and attorney-led services. As of December 31, 2025, it had formed over 5.0 million businesses since inception, and approximately 65% of 2025 revenue came from subscriptions.

Revenue drivers

• Subscription revenue — Recurring legal, compliance, and business management subscriptions generated $133.4 million in Q2 2026, up 11% year-over-year, representing about 65% of total revenue and the company's fifth consecutive quarter of double-digit subscription growth.
• Transaction revenue — One-time offerings led by business formation services generated $71.9 million in Q2 2026, down 1% year-over-year, and remain the largest share of total transaction orders per the 10-K.
• Business management and DIFM offerings — Virtual mail, legal forms, bookkeeping, estate planning, compliance concierge, and business manager (formerly concierge) suites support higher-value, full-service subscriptions and customer lifetime value.

Recent performance

Q2 2026 revenue was $205.3 million, up 7% year-over-year, with subscription revenue rising 11% to $133.4 million and transaction revenue declining 1% to $71.9 million. Net income was $5.2 million, or 3% of revenue, versus a net loss of $0.3 million in the prior-year quarter, and Adjusted EBITDA was $45.9 million, or 22% of revenue. Cash flow from operations was $39.5 million and free cash flow was $33.7 million, with $167.2 million in cash and no debt outstanding as of June 30, 2026. The company repurchased $45.5 million of shares in the quarter, leaving approximately $80.4 million under its existing authorization.

Strategy

LegalZoom has repositioned around subscription relationships that pair AI with human expertise, and is investing in AI-native operations and new customer acquisition channels as discovery shifts away from traditional search. In August 2026 it committed to a restructuring plan reducing its workforce by approximately 13%, expecting about $6.0 million in charges mostly in Q3 2026, to become more agile and AI-native. The company is diversifying marketing across media channels, increasing brand marketing, and expanding partnerships with AI platforms and other emerging channels. It is testing pricing and commercialization strategies and introducing higher-value do-it-for-me offerings, including its business manager suite.

Risks

• Dependence on business formations — Most transaction revenue comes from business formation services, and the 10-K states the number of formations on its platform is subject to unpredictable declines from factors largely out of its control.
• Search and discovery shift — The 10-Q states Google search algorithm changes and prioritization of AI-generated summaries have reduced organic traffic and increased emphasis on paid search, reshaping customer acquisition.
• History of net losses — The 10-K risk factors note a history of net losses and that the company may not be able to maintain profitability, with net income declining to $15.4 million in 2025 from $30.0 million in 2024.
• Customer renewal and conversion — The 10-K states the business depends substantially on transactional customers converting to subscribers and on subscribers renewing, which affects recurring revenue and customer lifetime value.

Outlook

Management updated full-year 2026 revenue guidance to $795.0-$805.0 million and Adjusted EBITDA to $190.0-$195.0 million. The outlook reflects an industry-wide shift in customer discovery away from traditional search and assumes no recovery in traditional search. Management says profitability reflects operating discipline and margin expansion, while it continues investing in long-term growth initiatives including AI and partnership channels.