LegalZoom (LZ) Integrates Microsoft Copilot Amid Growth Shifts

LegalZoom announced a new AI agent integrated into Microsoft 365 Copilot, expanding its reach to small businesses inside a widely used productivity platform. The integration lets users compare business structures, access formation checklists, view pricing, and connect with attorneys, which could improve customer acquisition and strengthen subscription-driven growth. However, the stock’s reaction was dominated by a sharp 30% selloff after second-quarter earnings, where management cut full-year 2026 revenue guidance to $795 million-$805 million from $810 million-$830 million and lowered the top end of adjusted EBITDA guidance to $195 million. The company said abrupt Google search algorithm changes hurt traffic, raising concerns about dependence on search-driven demand. While subscription revenue rose 11% and total revenue increased 7% to $205.3 million, the market appears focused on the guidance reduction, traffic disruption, and weak institutional sentiment despite the low forward P/E of 6.22.