An estate agent's '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 the British real estate company Rightmove The share price plunged as much as 28% on Friday after it warned of slower profit growth due to accelerated investment in artificial intelligence.
Rightmove forecast operating profit growth of 3% to 5% in 2026, below its forecast of 9% growth for this year. The company attributed the decline to its AI investments as it upgrades internal systems as well as its consumer-facing apps and search tools. Newer applications of AI are also being investigated, such as agents.
The stock move marks a new 52-week low for the company, but pared some losses and was last trading down 13%.
UBS analysts said the “strategic turnaround raises important questions to which the market will not yet have answers” and have moved their price target and rating on Rightmove to “Under Review”.
“However, we expect a negative market reaction to the release with forecasts implying a 5-19% downgrade in FY28 U/L operating profit compared to Visible Alpha consensus,” UBS analysts said in a research note, referring to FY28 and financial data platform Visible Alpha.
This comes amid rising fears of an AI bubble, as US tech stocks extended recent losses on Thursday. Asian and European markets followed suit before recovering some ground.
“Given the level of investments that have been made, the uncertainty about future cash flows and some of these valuation concerns, we've had a remarkably smooth rally,” Kiran Ganesh, multi-asset strategist at UBS, told CNBC's “Europe Early Edition” on Friday.
Rightmove expects its operating profits to recover after 2028 and AI investments to pay off. The aim is to achieve an annual increase of 12% by 2030.
“AI now plays a central role in how we run our business and plan for the future. We are already working on a wide range of exciting AI-powered innovations that will benefit our partners and consumers and see enormous potential as we leverage our leading reach and connected data,” CEO Johan Svanstrom said in the update.
“We are investing to strengthen our capabilities and we are confident that we will create an even stronger platform and higher-growth business over time. Our aim is to further expand our leading digital position in the UK real estate ecosystem,” he added.
—CNBC's Hugh Leask contributed to this report.