Online legal service provider LegalZoom (NASDAQ: LZ) reported Q2 CY2025 results topping the market’s revenue expectations, with sales up 8.5% year on year to $192.5 million. On top of that, next quarter’s revenue guidance ($183 million at the midpoint) was surprisingly good and 3.3% above what analysts were expecting. Its GAAP loss of $0 per share was in line with analysts’ consensus estimates.

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“Our second quarter results clearly demonstrate the advances we have made against our strategic priorities,” 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

Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Regrettably, LegalZoom’s sales grew at a sluggish 5.1% compounded annual growth rate over the last three years. 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 8.5%, and its $192.5 million of revenue exceeded Wall Street’s estimates by 5.4%. Company management is currently guiding for a 8.5% year-on-year increase in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to grow 5% over the next 12 months, similar to its three-year rate. This projection doesn't excite us and indicates its newer products and services will not accelerate its 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 11.7% annually to 1.96 million in the latest quarter. This growth rate is strong for a consumer internet business and indicates people love using its offerings.

In Q2, LegalZoom added 346,000 subscription units, leading to 21.5% year-on-year growth. The quarterly print was higher than its two-year result, suggesting its new initiatives are accelerating user growth.

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 has been roughly flat over the last two years. This isn’t great, but the increase in subscription units is more relevant for assessing long-term business potential. We’ll monitor the situation closely; if LegalZoom tries boosting ARPU by taking a more aggressive approach to monetization, it’s unclear whether users can continue growing at the current pace.

This quarter, LegalZoom’s ARPU clocked in at $256. It declined 5.5% year on year, worse than the change in its subscription units.

Key Takeaways from LegalZoom’s Q2 Results

We enjoyed seeing LegalZoom beat analysts’ revenue expectations this quarter. We were also glad its revenue guidance for next quarter exceeded Wall Street’s estimates. On the other hand, its EBITDA slightly missed. Overall, this print had some key positives. The stock traded up 7% to $8.97 immediately following the results.

LegalZoom had an encouraging quarter, but one earnings result doesn’t necessarily make the stock a buy. Let’s see if this is a good investment. If you’re making that decision, you should consider the bigger picture of valuation, business qualities, as well as the latest earnings. We cover that in our actionable full research report which you can read here, it’s free.