Property listing giant Rightmove experienced a significant drop in its share value after announcing a substantial increase in investment towards artificial intelligence (AI). The company's pivot to prioritize AI development led to a downward revision of profit growth forecasts, causing investor confidence to waver despite assurances of long-term benefits.
Key Takeaways
Rightmove's shares fell sharply, by as much as 28% at one point, following the announcement.
The company plans to invest £60 million over the next three years, with a significant portion allocated to AI.
Profit growth forecasts for 2026 have been lowered to 3-5%, down from a previous estimate of 9% for the current year.
Despite short-term profit concerns, Rightmove aims for annual revenue growth exceeding 10% by 2030 and expects operating profit to rebound after 2028.
Strategic Shift Towards AI
Rightmove's Chief Executive, Johan Svanstrom, emphasized that AI is becoming "absolutely central" to the company's operations and future strategy. The increased investment is intended to accelerate the development of AI-enabled innovations for both property partners and consumers, aiming to enhance efficiency, leverage data more effectively, and improve user experience on the platform. The company projects that this strategic shift will ultimately create a stronger business with higher growth potential over time.
Investor Reaction and Market Concerns
The market's response was notably negative, with shares plummeting as investors expressed skepticism about the scale of the AI investment and its immediate impact on profitability. Analysts noted that while investing in future growth is positive, the magnitude of the market's reaction suggests concerns that Rightmove might be adopting AI trends without a fully convincing long-term financial outlook. This sentiment was echoed in broader market trends, with technology stocks experiencing a general sell-off due to fears of an AI bubble.
Financial Outlook and Future Projections
While Rightmove anticipates its operating profit to rebound after 2028, with AI investments expected to yield returns, the immediate financial outlook has been tempered. The company forecasts operating profit growth of 3% to 5% in 2026, a significant reduction from the 9% growth projected for the current year. However, Rightmove remains optimistic about long-term revenue growth, targeting over 10% annually by 2030, and expects underlying operating profit growth to rise to over 12% by the same year.
Sources
UK Stocks Shed Amid Tech Selloff; Rightmove Plunges Over AI Spend, Yahoo Finance UK.