Yelp Earnings: AI Innovation Powers Growth Amid Restaurant Weakness
- Hardik Shah
- 8 minutes ago
- 3 min read
TL;DR
• Revenue Strength: Net revenue rose 4% YoY to $376M, led by a 7% increase in Services advertising.
• Margin Trends: Adjusted EBITDA fell 3% to $98M (26% margin), while net income grew 2% to $39M (10% margin).
• Forward Outlook: 2025 revenue guidance trimmed slightly; adjusted EBITDA outlook raised to $360–$365M.
Business Overview
Yelp Inc. operates a community-driven platform connecting consumers with local businesses through reviews, photos, and service bookings. The company generates most of its revenue from advertising, split into two major segments: Services (home, auto, and local professionals) and Restaurants, Retail & Other (RR&O) categories. Yelp’s global footprint is anchored in North America, with growing monetization through data licensing, AI-powered tools, and subscription services such as Yelp Guest Manager, Host, and Receptionist.
Yelp Earnings
Yelp reported record quarterly net revenue of $376 million, up 4% year over year and $6 million above the top end of guidance.
Services advertising rose 7% YoY to $244 million, driven by strong Home and Auto Services demand and the integration of RepairPal’s booking system.
RR&O revenue declined 2% YoY to $114 million, reflecting softness among restaurant and retail advertisers.
Ad clicks declined 11%, offset by a 14% increase in average cost-per-click (CPC) as advertiser quality improved.
Adjusted EBITDA decreased 3% to $98 million, with a 26% margin, while net income rose 2% to $39 million.
Operating cash flow reached $132 million, with $334 million in cash and no debt.
CFO David Schwarzbach noted, “Our third-quarter results demonstrate the margin potential of our business, with a net income margin of 10% and an adjusted EBITDA margin of 26%”.
Forward Guidance (FY'25)
Management expects continued macroeconomic uncertainty to pressure Q4, particularly in RR&O.
Net revenue: $1.46–$1.465 billion (slightly reduced)
Adjusted EBITDA: $360–$365 million (raised from prior midpoint)
Stock-based compensation: ~9% of revenue, trending toward <8% by year-end and <6% by 2027.
Operational Performance
The Services segment remains Yelp’s growth engine, led by Home Services and the integration of AI-driven product experiences such as Yelp Assistant, which enables conversational project matching. Request-a-Quote projects rose roughly 10% YoY (excluding paid search), while submissions via Yelp Assistant surged 400% YoY.
The RR&O segment, meanwhile, continues to face headwinds from labor and input inflation in restaurants and cautious advertiser spending. CEO Jeremy Stoppelman highlighted that Yelp’s partnership with DoorDash, now expanding food ordering access to over 500,000 restaurants, will help stabilize the category and generate incremental revenue.
Market Insights
Yelp’s advertising landscape shows diverging dynamics:
Services remains resilient, buoyed by home improvement and repair demand.
Restaurants and retail reflect macro strain and higher consumer sensitivity to price.Average CPC growth suggests improved ad efficiency and prioritization of higher-quality leads.
In the broader digital advertising space, Yelp’s data licensing to AI search platforms is emerging as a new growth driver, now surpassing $10 million in annual recurring revenue (ARR).
Consumer Behavior & Sentiment
Consumers increasingly engage with AI-enhanced experiences. Yelp’s MenuVision feature lets diners point their phone at a menu to view photos and reviews of dishes, while Yelp Assistant now answers business-specific questions across categories. These innovations make discovery more conversational and immersive, signaling Yelp’s pivot toward agentic search and AI-mediated commerce.
Strategic Initiatives
Yelp is executing on three AI-led pillars:
Lead in Services: Expanding category coverage and integrating RepairPal’s scheduling.
Drive Advertiser Value: Launching Yelp Host for restaurants and Yelp Receptionist for service professionals—AI voice agents priced from $99/month that handle customer calls and bookings autonomously.
Transform the Consumer Experience: Deploying cross-category Yelp Assistant, MenuVision, and enhanced voice and video search tools.
Stoppelman emphasized, “AI can deliver a lot of value if you apply it in the right way… Yelp Assistant is a reinvention of the consumer experience”.
Capital Allocation
Yelp’s capital strategy balances investment and shareholder returns:
Repurchased $75 million in shares during Q3 2025 at an average price of $32.59.
$127 million remains under its $2 billion cumulative authorization.
Headcount is expected to remain flat through 2025, aided by AI efficiencies.
The Bottom Line
Yelp’s quarter underscores steady growth, disciplined execution, and accelerating AI monetization. Investors should watch three key themes:
AI Product Scaling: Yelp Assistant and call-answering products could create new SaaS-style revenue streams.
Services Momentum vs. Restaurant Drag: Continued divergence across segments may shape 2026 trajectory.
Data Licensing Leverage: Emerging as a strategic moat amid the rise of AI search ecosystems.
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