LegalZoom Cuts 2026 Adjusted EBITDA Outlook

The Tip Desk · November 11, 2026 · 3 min read

Third-quarter revenue was $195.1 million as the company narrowed full-year revenue to $797.0 million–$803.0 million and lowered Adjusted EBITDA to $180.0 million–$185.0 million.

LegalZoom (LZ), the online legal-services company, reported third-quarter revenue of $195.1 million, up 3% from a year earlier, above the midpoint of its prior guidance range, as year-over-year growth slowed from 7% in the second quarter and 13% in the first.

The slowdown was concentrated in transaction work. Transaction revenue fell 14% to $55.5 million, a steeper drop than the 1% year-over-year decline in the second quarter after a 15% increase in the first. Transaction units declined 4% to 249,000, business formations fell 13% to 110,000, and average order value dropped 12% to $222.

Subscription revenue of $139.7 million grew 11%, matching the second-quarter rate and marking a sixth consecutive quarter of double-digit subscription growth. Chairman and Chief Executive Officer Jeff Stibel said human-in-the-loop subscription services grew 17% and now represent 49% of total revenue. Subscription units at period end declined 5% to 1,854,000, while average revenue per subscription unit rose 9% to $280.

Gross margin expanded to 71% from 67% a year earlier. Net income rose 79% to $8.1 million, or 4% of revenue, from $4.5 million, or 2% of revenue, a year earlier. Adjusted EBITDA was $50.0 million, or a 26% margin, at the midpoint of the company’s guidance range. Non-GAAP net income was $31.4 million, or $0.19 a share. Restructuring costs related to a global headcount reduction were $5.8 million, versus $88 thousand a year earlier.

Cash from operating activities fell 26% to $39.9 million and free cash flow fell 27% to $34.1 million. Cash and cash equivalents were $181.7 million as of September 30, 2026, with no debt outstanding. The company completed $14.6 million of share repurchases in the quarter, leaving about $65.8 million under its existing authorization.

LegalZoom reiterated the midpoint of its full-year 2026 revenue outlook at approximately $800.0 million, or 6% year-over-year growth, and narrowed the range to $797.0 million–$803.0 million from $795.0 million–$805.0 million. It updated Adjusted EBITDA to $180.0 million–$185.0 million, or about a 23% margin at the midpoint, from a prior range of $190.0 million–$195.0 million, or a 24% margin at the midpoint. The company said more than half of the change reflects continued investment in channel diversification, including partnerships, affiliates and AI channels, about one-quarter reflects higher costs in paid customer-acquisition channels, and the remainder reflects investment in higher-value expert services and seasonal sales capabilities ahead of the first-quarter peak in business formations.

Chief Operating Officer and Chief Financial Officer Noel Watson said subscription growth continues to offset customer-acquisition pressure, supporting the unchanged $800 million midpoint. The company said the outlook continues to reflect scaling of higher-value growth initiatives and partner-channel momentum, partially offset by continued pressure in customer acquisition for the remainder of the year.

For the fourth quarter ending December 31, 2026, LegalZoom expects revenue of $190 million to $196 million, or 1% year-over-year growth at the midpoint, and Adjusted EBITDA of $48 million to $53 million, or 1% year-over-year growth at the midpoint and a 26% margin. Stibel said the results give the company confidence to accelerate investment in bringing expert support into the customer relationship from the first purchase.