Despite operating in “one of the hardest mortgage markets in a generation” that’s “punishing” for American families as described by its CEO, Rocket Companies reported Q3 adjusted earnings above Wall Street expectations, with shares rising about 3% in after-hours trading Oct. 29.
Rocket reported a GAAP (Generally Accepted Accounting Principles) total revenue of $3.28B, up 18% from Q2’s $2.78B in total revenue; and adjusted revenue of $2.57B, down almost 7% from Q2’s adjusted revenue of $2.76B, but a notable 200%-plus increase in net income of $709M this quarter from last quarter’s net income of $229M. Adjusted net income and adjusted EBITDA were both down slightly from last quarter to $419M and $748M, respectively.
But looking at Rocket’s year-over-year earnings shows a total top-line turnaround. Its GAAP total net revenue increased over 94% from $1.69B; adjusted revenue up 37% from $1.87B; adjusted net income up 165% from $158M; adjusted EBITDA up 114% from $349M and most notably, a net income increase from a $124M loss swinging to that $709M profit.
In a release, Rocket Companies CEO and Director Varun Krishna attributed the numbers coming in against a backdrop of mortgage rates at three-year highs, to gains in both purchase and refinance.
“Rocket gained market share in both purchase and refinance, quarter-over-quarter and year-over-year, and delivered our highest profitability margin in nearly five years, even as mortgage rates climbed to a three-year high,” said Krishna. “We didn’t spend the last three years waiting for rates to fall. We acquired distribution, connected real estate and mortgage, and invested heavily in technology. We changed the economics of our business. Rates went up. We took share. Profits grew. That’s not a coincidence.”
In an investor call following the release of the data, Krishna attributed Rocket’s turnaround to a company rebuild three years ago that’s “built for any cycle,” which today is experiencing historic housing market hardships—from the 10-year Treasury rising to its highest point in 24 years to mortgage rates rising to their highest point in three years, to declines in existing-home sales and refinance applications.
“Here’s the truth about tough markets: they don’t lie,” he said. “They strip everything down to what’s real—who has the capital to keep investing, whose model works in any cycle, who can win their clients back, and who can move fast when it counts. This quarter did all of this. This was our highest margin in nearly five years and our fourth straight quarter of expansion since we closed the Mr. Cooper transaction. Adjusted net income of $419 million; $0.15 of adjusted EPS.
“So why does Rocket win?” he continued. “It’s no accident. Three years ago we made a decision: Rebuild this company at every single level. An ecosystem that serves clients from home search through servicing. A technology platform built for scale, speed and efficiency. Distribution that reaches homebuyers and homeowners everywhere. And a fortress balance sheet, now over $11 billion in liquidity, so we can keep investing while others pull back.”
Breaking down the data
On the investor call, Rocket Companies’ Chief Financial Officer Brian Brown walked through the Q3 numbers in more detail.
“We expanded adjusted EBITDA margin to its highest level in nearly five years, and we ended the quarter with record liquidity,” he said, noting that the $2.6B adjusted revenue was near the midpoint of its guidance range (an estimate of the company’s future financial performance). He said the company generated $40.4 billion in net rate lock volume and $43.6 billion in closed loan volume and that based on its estimates, purchase market share approached 6.5% and refinance market share was 15.5%. That’s compared to the 6.2% and 14.3% reported in the second quarter, he added.
Brown also commented that Rocket Local, its team of in-market loan officers who work directly with real estate agents, also grew volume more than 30% year-over-year, and now includes 400 loan officers across several major metro areas. He said the company’s partnership with Redfin and Compass extends that reach, with one in five of its purchase clients represented by a Redfin or Compass agent.
On the wholesale and partner lending side, he said over the last few months, the company has added around 200 new Rocket Pro partners to its platform, representing $12 billion in potential annual volume. Refinance volume set a record, Brown noted, saying cash-out refinance volume remained healthy, supported by another step up in recapture.
“Recapture rates on the combined portfolio reached an all-time high, the fourth consecutive quarter of improvement. Gain on sale margin, excluding correspondent, was 333 basis points, up from 311 basis points last quarter,” he said.
Krishna said that more than 70% of the company’s revenue this year is coming from recurring or less rate-sensitive sources, such as servicing fees, subscriptions, purchase, cash-out refinance and home equity. He said because of the firm’s integration with Redfin, mortgage buyers are brought into their ecosystem early, creating a path to Rocket from the beginning of their home-search journey. He said as of this earnings report, visitors who click through to start a purchase mortgage transaction are up 50% year-over-year.
“Redfin’s contribution to our refinance leads also more than doubled this quarter from a year ago,” Krishna said. “Compass simply extends that same playbook and delivers what buyers want most—homes and the agents who sell them. Cumulative unique listings are now nearly 40,000, up from roughly 25,000 last quarter. Homes you cannot find anywhere else. Rocket Pro net rate lock volume through Compass has passed $3 billion since February, up 50% from last quarter. Then there’s servicing—our ballast. More than $1 billion a quarter in servicing fees. More than $4 billion a year. That’s triple where we were three years ago. That’s recurring cash flow in any rate environment, revenue that shows up whether rates are 4% or 8%. And here’s what makes it compound: Because we know these clients; we’re first in line when they’re ready for their next loan. In Q3, recapture across the combined portfolio hit the highest level in our history.”
Rocket has a three-year agreement with Compass to provide national exposure to its private and coming-soon listings via Redfin.
AI and technology advantages
Krishna said advances in AI in mortgage lending are a game-changer for Rocket, citing four segments of the process: Credit pulls, digital refinance, voice agents and the future of agentic AI.
On nearly 20% of its direct-to-consumer volume, AI completed the credit pull step on digital purchase and refinance leads before the client spoke to a loan officer, he said.
On refinance loans, he said clients can choose to pull their credit, see their loan options and lock their rate without having to speak to a loan officer. In Q3, he said digital was more than 40% of all direct-to-consumer refinance applications, and digital leads converted at four times the rate of every other channel.
Rocket’s AI voice agents now handle 65% of inbound servicing calls and resolve more than half of them on their own, Krishna added. On the future of agentic AI, he said consumers are starting to shop with their own AI agents to compare price, speed and ratings across lenders. Over the past 18 months, Rocket has built the APIs and protocols those agents need to complete the mortgage process with Rocket end to end, he noted.
Q4 predictions
Looking ahead, Brown said he expects the economic headwinds that have hammered the better part of this year to continue in Q4 and beyond, especially in the refinance sector.
“The MBA Purchase Application Index is down nearly 20% year-over-year, and refinance applications are down more than 50%,” he said. “The fourth quarter is seasonally low for our industry, and this year that slowdown comes at a time where mortgage rates are reaching highs we haven’t seen in two decades.”
Brown added that Rocket expects the refinance market to decline by almost half from the third quarter, “which would leave the overall mortgage activity near multi-decade lows.”
With that context, in the fourth quarter, Brown said they expect adjusted revenue to be between $2.1B and $2.3B with their guidance reflecting continued share gains. For expenses, they expect total expenses of $2.05B, including $110M of intangible amortization, $80M of stock-based compensation and $10M of one-time integration costs. Excluding these items, Brown said they expect expenses of $1.85B, a decline of $165M from the third quarter.
“Tough markets drive separation,” Brown said in his closing remarks. “This quarter, rates rose, volumes fell, and the industry felt it. Rocket Companies grew share, expanded margin, delivered synergies ahead of plan and ended the quarter with record liquidity. The fourth quarter will be harder still. We’re ready for it.”
