Yelp Q3 Earnings Call Highlights

Key Points

• Advertising weakness pressured results: Q3 revenue fell 1% year over year to $371 million and net income declined 12% to $35 million. Yelp cited weaker consumer demand and expects the local advertising market to remain soft in Q4.
• AI-related businesses offered a growth offset: Other revenue surged 82% to a record $34 million, supported by Hatch, data licensing and food ordering. Yelp Assistant contributed to Request-a-Quote growth, while Yelp Host’s call volume reached a 2.5 million annual run rate.
• Yelp expects a weaker fourth quarter and has paused buybacks: The company forecast Q4 revenue of $347 million to $352 million and adjusted EBITDA of $57 million to $62 million. After repurchasing $200 million of shares year to date, it paused buybacks to pay down its credit facility and expects to resume in 2027.

Yelp NYSE: YELP reported lower third-quarter revenue and profit as advertising weakened, while growth in artificial intelligence-related businesses helped offset some of the decline.

Net revenue fell 1% from a year earlier to $371 million in the third quarter of 2026, Chief Financial Officer David Schwarzbach said on the company’s earnings call. Net income declined 12% to $35 million, or $0.63 per diluted share. Adjusted EBITDA fell 6% to $92 million, representing a 25% margin.

Revenue was $1 million above the high end of Yelp’s outlook, while adjusted EBITDA exceeded the top of its forecast by $17 million. Executives said consumers and local businesses remain under economic pressure and forecast further advertising weakness in the fourth quarter.

Advertising Weakness Persists

Services advertising revenue declined 2% year over year to $238 million, while RR&O advertising revenue fell 13% to $99 million. Total paying advertising locations decreased 1% to 509,000, as a decline in services locations was partly offset by a 3% increase in RR&O locations.

Ad clicks fell 8%, while average cost per click rose 2%, with softer consumer demand the primary factor in both changes, Schwarzbach said.

Chief Operating Officer Jed Nachman said consumers are choosing to repair rather than replace items and postponing some larger services projects. Local businesses are also dealing with high labor and other input costs, he said. “We do not expect the local advertising market to turn anytime soon,” Nachman told analysts.

Nachman said the increase in RR&O paying locations was largely driven by multi-location customers that added locations without necessarily increasing average revenue per location.

AI Products Drive Other Revenue Growth

Other revenue rose 82% year over year to a record $34 million, helped by revenue from acquired business Hatch and growth in data licensing and food ordering, Schwarzbach said. Yelp is targeting a $250 million annual run rate for other revenue by the end of 2028; its third-quarter run rate was $136 million.

Chief Executive Officer Jeremy Stoppelman said the company saw demand for its data licensing products, including through partnerships with OpenAI and Meta. He said Yelp’s reviews, photos and business information could be useful to personal AI agents that help consumers find local businesses.

Stoppelman said Yelp Assistant generated approximately 10% of Request-a-Quote projects during the quarter. Overall project submissions grew approximately 10% year over year. Yelp’s Request-a-Quote feature is also available within ChatGPT, which Stoppelman said contributed to that growth.

Yelp Host, an AI-powered restaurant call-answering service, reached an annual run rate of 2.5 million calls handled in October, up 15-fold from October 2025. In a test with a major restaurant client, food order conversion increased 13% after the implementation of a new voice model in September, Stoppelman said.

Hatch’s annual run rate revenue reached approximately $37 million in the third quarter, up 55% year over year and 6% from the preceding quarter. Nachman said Yelp has expanded Hatch’s sales capacity and is moving into additional service categories, including moving, pest control and lawn care.

Stoppelman also said Google’s increased use of AI Overviews had some effect on Yelp’s search traffic during the quarter, but the impact was muted in the context of overall results. Yelp also receives traffic through other channels, including its Apple partnership and its own app, he said.

Outlook and Capital Allocation

For the fourth quarter, Yelp forecast net revenue of $347 million to $352 million and adjusted EBITDA of $57 million to $62 million. For the full year, it expects revenue of $1.455 billion to $1.46 billion and adjusted EBITDA of $320 million to $325 million.

Schwarzbach said fourth-quarter expenses should be modestly higher than in the third quarter as Yelp invests in areas including Hatch and Yelp Host. The company also expects a roughly $30 million fourth-quarter tax benefit that will increase net income but not affect adjusted EBITDA.

Yelp repurchased $25 million of shares in the third quarter, bringing its year-to-date buybacks to $200 million. It subsequently paused repurchases to pay down its revolving credit facility and expects to resume them in 2027, subject to market conditions and business requirements, Schwarzbach said.

About Yelp (NYSE:YELP)

Yelp Inc operates an online platform that helps consumers discover and evaluate local businesses. Through its website and mobile applications, Yelp provides business listings, user-generated reviews, ratings, photos and other information across categories such as restaurants, home services, beauty and fitness, automotive, health and professional services.

The company generates revenue primarily by providing businesses with advertising and marketing solutions designed to increase their visibility and connect them with potential customers.

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