LegalZoom.com (NASDAQ:LZ) executives used the company’s fourth-quarter 2025 earnings call to highlight a strategy they say is designed to benefit from the rapid adoption of artificial intelligence while emphasizing areas where human judgment remains essential. Chairman and CEO Jeff Stibel described 2025 as “early validation” of a “human-in-the-loop” approach that combines automation with expert review and service execution, while COO and CFO Noel Watson pointed to accelerating subscription growth and improving margins as evidence of progress.
Management frames AI as a tailwind, with “last-mile” execution as the differentiator
Stibel said LegalZoom is refocusing to “capture the AI opportunity,” arguing that AI tools can help customers “start” but that LegalZoom is positioned to help them “finish,” particularly where nuance, accountability, confidentiality, and regulatory requirements matter. He said customers are increasingly beginning research and document review through AI platforms, naming tools such as ChatGPT, Gemini, Claude, and Perplexity, but still need help completing complex legal tasks.
Full-year 2025 results: revenue up 11% to $756 million, Adjusted EBITDA margin expands
Watson reported that full-year 2025 revenue grew 11% to $756 million, which he said was “more than double” the company’s initial outlook and included the Formation Nation acquisition. He said the results reflected “successful integration and incremental growth” from Formation Nation and organic revenue growth of 3%.
Subscription revenue increased 13% for the year, which Watson attributed to a focus on higher-value customers and “differentiated premium human-in-the-loop service offerings.” Adjusted EBITDA was $172 million, representing a 23% margin, up about 100 basis points year over year, as the company invested in AI and product innovation while expanding margins.
Q4: subscription growth accelerates again; concierge and compliance cited as drivers
In the fourth quarter, total revenue was $190 million, up 18%. Subscription revenue increased 20% to $131 million, which Watson said marked the fourth consecutive quarter of accelerating subscription growth. He cited strength in registered agent and compliance offerings, as well as contributions from Virtual Mail, a 1-800Accountant partnership, and Formation Nation. He also said pricing actions and improved retention in registered agent and compliance contributed to performance.
LegalZoom ended the quarter with approximately 1.94 million subscription units, up 10% year over year. Watson said unit growth was driven by increased Virtual Mail adoption, the inclusion of Formation Nation subscriptions, and bundled offerings that combined bookkeeping and legal advisory services with certain formation products. The company expects “modest” unit growth in 2026 as it fully laps bundling initiatives.
ARPU was $266 in Q4, up 1% year over year. Watson said ARPU reflected “early benefit” from a focus on higher-touch human-led services, partially offset by bundled subscriptions with lower-priced offerings. Looking ahead, he said ARPU is expected to become a key driver of subscription revenue growth in 2026 as the customer mix shifts toward higher-value subscriptions such as legal plans, compliance, and concierge offerings.
Executives discussed “concierge” as an emerging pillar of the strategy. Watson described concierge as white-glove, “do-it-for-me” offerings that provide one-on-one guidance and full-service filing and fulfillment. He said these concierge subscription offerings are sold online and through the sales force and have an average price of over $1,100 per year. In Q&A, Stibel said early proof points were “green shoots,” and that the company factored them into 2026 expectations “in a conservative way.” Watson later added that compliance-oriented concierge offerings were seeing the strongest uptake, and he described efforts to activate customers by communicating compliance status and helping with reinstatement and ongoing management.
Transactions, formations, and the Formation Nation contribution
Transaction revenue increased 12% to $59 million in the quarter, driven largely by Formation Nation and growth in annual report filings, partially offset by an expected decline in BOIR revenue. Transaction units declined 1% to 239,000, which Watson attributed to the elimination of BOIR activity, partly offset by Formation Nation transactions and higher annual report volumes. Excluding BOIR and Formation Nation, transaction units increased 5%.
LegalZoom processed 112,000 business formations in Q4, up 17% year over year. Watson said the increase was driven by Formation Nation and continued growth in formations acquired through the partner channel. Average order value rose 13% to $248, driven by increased adoption of higher-priced concierge services and the elimination of lower-value BOIR transactions.
On Formation Nation specifically, Watson said the acquisition contributed about $9.8 million in transaction revenue and $5.7 million in subscription revenue in Q4. He said the business has performed “really nicely” since the acquisition, aided by integration and resource sharing, and that the company expects it to continue to grow in 2026.
Margins, cash flow, buybacks, and 2026 outlook
On a non-GAAP basis, Q4 gross margin was 71%, flat year over year. Adjusted EBITDA was $50 million, representing a 26% margin. Free cash flow was $28 million, down from $36 million in the prior-year quarter due largely to working capital timing, but full-year free cash flow was a record $148 million, up 48% year over year. The company ended the quarter with $203 million in cash and cash equivalents.
LegalZoom repurchased about 4.3 million shares for approximately $42 million in Q4, and about $80 million for the full year, repurchasing 8.3 million shares at an average price of $9.71 per share. Watson said the company has reduced share count by roughly 10% since the IPO and had about $70 million remaining under its authorization as of Dec. 31, 2025. He added that the board approved a $100 million increase to the buyback authorization and that the company’s $100 million revolving credit facility remains undrawn.
For 2026, management guided to revenue of $805 million to $825 million, about 8% year-over-year growth at the midpoint, and Adjusted EBITDA of $100 million to $200 million. Watson said the outlook reflects improved gross margins and disciplined cost management, partially offset by higher product and marketing investments focused on higher-value and established-business customer acquisition. He also disclosed a “gross reduction in headcount of 5%” completed earlier in the month, which he said was enabled by AI-driven efficiency gains.
For the first quarter of 2026, LegalZoom guided to revenue of $200 million to $203 million and Adjusted EBITDA of $34 million to $36 million, with the year-over-year decline in quarterly EBITDA tied to the timing of customer acquisition marketing investments. Watson said Q1 spending is weighted toward brand and partner channel initiatives aligned with peak formation seasonality, and that performance marketing can adjust up or down with demand.
In Q&A, executives also discussed partner strategy and AI-driven changes in traffic. Stibel said LegalZoom is in active conversations with AI platforms and is “platform-agnostic,” adding that both sides are still determining the right “handoff” mechanics, but that LegalZoom intends to be the solution for the “now what” moment when AI helps customers identify issues but not complete legal work. Management also said it is seeing less traffic coming from traditional search engines and more from AI queries, with Watson adding that inbound traffic that does arrive tends to be “more highly qualified and convert better.”
About LegalZoom.com (NASDAQ:LZ)
LegalZoom.com, Inc (NASDAQ: LZ) operates as a leading online legal technology company that provides a broad range of legal and business services to individuals, families and small businesses. Through its digital platform, the company offers customized legal documents and filing services, including business formation (LLCs, corporations and nonprofits), estate planning (wills and trusts), intellectual property protection (trademarks and copyrights), and ongoing compliance support. LegalZoom also connects customers with independent attorneys for consultations on matters such as family law, immigration and real estate.
Founded in 2001 by entrepreneurs Brian Lee, Brian P.
