Yelp Inc.

What they do

Yelp operates a consumer platform with over 300 million ratings and reviews, generating substantially all revenue from performance-based advertising sold through cost-per-click auctions. It also offers subscription services, data licensing, and AI tools like Yelp Assistant, Yelp Host, and Yelp Receptionist for businesses.

Revenue drivers

• Services advertising — Advertising from Services categories (e.g., Home, Auto) was $948 million in 2025, up 8% year-over-year, and made up the majority of advertising revenue; in Q2 2026 it was flat at $241 million.
• Restaurants, Retail & Other (RR&O) advertising — Advertising from RR&O businesses declined 6% in 2025 due to a challenging environment for these businesses; this segment continues to face headwinds.
• Other revenue — Includes data licensing (e.g., with OpenAI, Apple Maps) and Hatch (acquired Feb 2026); other revenue grew 98% year-over-year in Q2 2026 and is a key growth driver.

Recent performance

In Q2 2026, Yelp reported net revenue of $375.5 million, up 1% year-over-year, with other revenue up 98% offsetting a 3% decline in advertising revenue. Net income was $31.7 million (8% margin), down from $44 million a year ago, and adjusted EBITDA was $91.4 million, down 9%. For the six months ended June 30, 2026, revenue was $737.0 million (up 1%) and net income was $49.4 million. The company ended Q2 with $94.1 million in cash and repurchased 2.0 million shares for $50 million.

Strategy

Yelp is transforming around AI, with initiatives like conversational search, Yelp Assistant, and AI call answering (Yelp Host). It is expanding data licensing partnerships, including with OpenAI and ChatGPT, and targeting $250 million annual run-rate in other revenue by end of 2028. Management also plans to invest in Hatch’s product roadmap and consumer marketing in H2 2026. The company is focused on product-led growth, holding headcount flat, and reducing stock-based compensation as a percentage of revenue.

Risks

• Macroeconomic pressure on advertisers — Challenging conditions, including inflation and tariff policy changes, continue to reduce advertiser spending, especially in RR&O categories, leading to declining advertising revenue.
• RR&O weakness persists — Advertising revenue from Restaurants, Retail & Other decreased 6% in 2025 and demand remained soft into 2026, with management expecting this to continue.
• Consumer traffic stagnation — Economic uncertainties and inflationary pressures have contributed to a lack of growth in consumer traffic to the platform, which could reduce ad impressions and clicks.
• Execution risk in AI transformation — The success of new AI products like Yelp Assistant, Yelp Host, and Hatch depends on user adoption and technology performance; any failure could impact engagement and revenue growth.

Outlook

Management expects adverse economic conditions to persist into the third quarter of 2026, driving a slight year-over-year decrease in net revenue, with sequential expense increases from AI investments and marketing resulting in a year-over-year decline in adjusted EBITDA. For full-year 2026, they now guide net revenue of $1.460-1.470 billion and adjusted EBITDA of $315-325 million. They continue to target $250 million annual run-rate in other revenue by end of 2028.