An estate agents’ “Sold” sign is pictured outside a house in a row of terraced houses in Guildford, southern England on August 6, 2024.
Justin Tallis | AFP | Getty Images
Share of British real estate listing company Rightmove plummeted as much as 28% on Friday after it warned of lower profit growth on the back of accelerated investments in artificial intelligence.
Rightmove projected a operating profit growth of 3% to 5% in 2026, coming in lower than its forecast of 9% growth this year. The firm put the shrinking down to its AI investments as it upgrades internal systems and its consumer-facing app and search tools. It’s also looking at newer applications of AI, such as agents.
The share move marks a new 52-week low for the firm, though it pared some losses and was last seen trading 13% lower.
UBS analysts said the “strategic pivot poses important questions that the market will not yet have answers to” and moved its price target and rating for Rightmove to under review.
“We do however expect a negative market reaction to the release with guidance implying a 5-19% downgrade to FY28 u/l operating profit vs visible alpha consensus,” UBS analysts said in a research note, referring to the financial year of 2028 and financial data platform Visible Alpha.
It comes amid heightened fears of an AI bubble, with U.S. technology shares extending recent losses on Thursday. Asian and European markets followed suit, before regaining some ground.
“We’ve had a remarkably smooth rally given the scale of investment that’s taken place, given the uncertainty about future cash flows, and given some of those concerns about valuation,” Kiran Ganesh, multi-asset strategist at UBS, told CNBC’s “Europe Early Edition” on Friday.
Rightmove expects its operating profit to rebound after 2028, with AI investment paying off; it is targeting a 12% increase annually by 2030.
“AI is now becoming absolutely central to how we run our business and plan for the future. We are already working on a wide range of exciting AI-enabled innovations benefit of our partners and consumers, and see vast potential utilising our leading reach and connected data,” CEO Johan Svanstrom said in the update.
“We are investing to accelerate our capabilities, which we are confident will create an even stronger platform and higher-growth business over time. We aim to further advance our leading digital position in the UK property ecosystem,” he added.
— CNBC’s Hugh Leask contributed to this report.
