Shares in British real estate portal Rightmove experienced a sharp decline Friday, falling as much as 28% after the company announced a significant increase in spending on artificial intelligence. The investment is expected to temper profit growth in the short term, a prospect that unsettled investors and pushed the stock to a new 52-week low.
The company adjusted its operating profit growth forecast for 2026, projecting a range of 3% to 5%. This figure stands in stark contrast to the 9% growth anticipated for the current year, with the difference attributed directly to the accelerated AI development plan.
Key Takeaways
- Rightmove's stock price dropped by as much as 28% on Friday, marking a new 52-week low.
- The decline followed an announcement of accelerated investment in artificial intelligence technology.
- Operating profit growth for 2026 is now forecast at 3-5%, down from an expected 9% this year.
- The company projects a rebound in growth after 2028, targeting a 12% annual increase by 2030.
Investor Confidence Shaken by Short-Term Outlook
The market's reaction to Rightmove's strategic update was immediate and severe. Trading on Friday saw the company's shares plummet, though they later recovered some of the losses to close down approximately 13%. The core of investor concern appears to stem from the revised financial guidance for the medium term.
The projection of 3% to 5% operating profit growth in 2026 signals a significant slowdown. This planned dip in profitability is a direct result of the company's decision to channel more capital into upgrading its technological infrastructure, including its internal systems, consumer-facing app, and property search tools with advanced AI capabilities.
By The Numbers
- Peak Share Decline: 28%
- 2024 Profit Growth Forecast: 9%
- 2026 Profit Growth Forecast: 3% to 5%
- 2030 Annual Growth Target: 12%
Analysts were quick to weigh in on the announcement. A research note from UBS highlighted the uncertainty created by the move, stating the “strategic pivot poses important questions that the market will not yet have answers to.” The investment bank subsequently moved its price target and rating for Rightmove to under review, signaling a period of reassessment.
A Long-Term Bet on Artificial Intelligence
Despite the market's apprehension, Rightmove's leadership framed the investment as a crucial step toward future-proofing the business. The company is betting that a short-term reduction in profit growth will pave the way for a more dominant and technologically advanced platform in the long run.
CEO Johan Svanstrom emphasized the central role of AI in the company's future strategy. He outlined plans to integrate AI across the business to deliver new innovations for real estate partners and consumers.
“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,” Svanstrom said in the company's update.
The strategy involves not just enhancing existing products but also exploring new applications for the technology, such as developing AI-powered tools for real estate agents. This forward-looking approach is designed to solidify Rightmove's position in the UK property market.
The Broader AI Market Context
Rightmove's announcement comes at a time of heightened sensitivity around AI-related stocks. After a period of rapid gains, technology shares in the U.S. and other global markets have shown signs of volatility. Investors are increasingly scrutinizing the high valuations of tech companies, questioning whether future profits can justify current stock prices. This broader market nervousness likely contributed to the strong negative reaction to Rightmove's spending plans.
The Path to Recovery and Future Growth
Rightmove's leadership has laid out a clear timeline for its financial recovery following this investment phase. The company anticipates that operating profit will begin to rebound significantly after 2028. The ultimate goal is to achieve a 12% annual increase by the year 2030, a rate that would surpass its current growth trajectory.
This long-term target suggests confidence that the AI investments will eventually yield substantial returns, creating a more efficient and powerful platform capable of generating higher growth.
What the Investment Entails
The increased spending will focus on several key areas:
- Upgrading Internal Systems: Modernizing the core infrastructure that powers the platform.
- Consumer-Facing Enhancements: Improving the user experience on the Rightmove website and mobile app through smarter search and personalization.
- New AI-Powered Tools: Developing innovative solutions for real estate agents to help them work more effectively.
Svanstrom added that the investment aims to “create an even stronger platform and higher-growth business over time.” The challenge for Rightmove will be to manage market expectations and demonstrate tangible progress from its AI initiatives over the next few years to win back investor confidence.
For now, the market has sent a clear signal that it prioritizes immediate profitability. Rightmove's task is to prove that its long-term vision of an AI-driven future is a worthwhile, and ultimately more profitable, destination.