Yelp’s Earnings Call: Record Revenue Amid Challenges

Yelp Inc ((YELP)) has held its Q3 earnings call. Read on for the main highlights of the call.

Yelp Inc. recently held its earnings call, revealing a strong quarter characterized by record revenue and profitability. The company experienced significant growth in services revenue and made strides in strategic AI and partnership initiatives. However, challenges in the Restaurants, Retail & Other (RR&O) segment, a decline in ad clicks, and macroeconomic uncertainties have led to a cautious outlook.

Record Net Revenue and Profitability

Yelp reported a record net revenue of $376 million, achieving a net income margin of 10% and an adjusted EBITDA margin of 26%. These figures underscore Yelp’s robust financial performance during the quarter, highlighting its ability to generate substantial profitability.

Services Revenue Growth

The company saw a 7% year-over-year increase in services revenue, reaching a quarterly record of $244 million. This growth was driven by improvements in AI initiatives, particularly the introduction of Yelp Assistant, which has enhanced user engagement and service offerings.

AI Transformation and Product Expansion

Yelp’s commitment to AI transformation was evident with the rollout of over 35 new AI features, including Yelp Assistant and Menu Vision. These innovations contributed to a remarkable 400% year-over-year increase in project submissions through Yelp Assistant, showcasing the company’s focus on enhancing its technological capabilities.

Strategic Partnerships

Yelp expanded its food ordering network by partnering with DoorDash, significantly increasing restaurant coverage by approximately 200,000 new restaurants. This strategic move is expected to enhance Yelp’s market presence and customer reach.

Disciplined Expense Management

The company achieved strong results through disciplined expense management, reducing stock-based compensation expense to 9% of revenue. Yelp plans to continue this trend, aiming to further lower expenses and improve financial efficiency.

Decline in RR&O Revenue

Despite overall growth, Yelp faced challenges in the RR&O segment, with revenue declining by 2% year-over-year. This decline highlights the ongoing struggles within this category, impacting Yelp’s overall revenue performance.

Ad Clicks Decline

Yelp experienced an 11% year-over-year decline in ad clicks, influenced by macroeconomic and competitive pressures within the RR&O categories. This decline poses challenges for Yelp’s advertising revenue stream.

Macroeconomic Uncertainties

Heightened macroeconomic uncertainties persisted, affecting typical seasonal revenue increases and leading to a lowered full-year revenue outlook. These uncertainties continue to pose risks to Yelp’s financial projections.

Reduced Overall Paying Advertising Locations

A decrease in RR&O locations led to an overall 2% year-over-year decline in paying advertising locations, totaling 512,000. This reduction reflects the challenges faced in maintaining advertising growth.

Forward-Looking Guidance

During the Q3 2025 earnings call, Yelp provided guidance reflecting both strong performance and caution amidst macroeconomic uncertainties. The company reported record net revenue and highlighted its AI-driven transformation, including the rollout of Yelp Assistant. Despite these achievements, Yelp adjusted its full-year revenue outlook downwards, citing persistent macroeconomic challenges. The company plans to maintain disciplined expense management and continue share repurchases.

In summary, Yelp’s earnings call painted a picture of a company achieving record revenue and profitability, driven by strategic initiatives in AI and partnerships. However, challenges in the RR&O segment, declining ad clicks, and macroeconomic uncertainties have led to a cautious outlook. Yelp’s forward-looking guidance reflects a balance between optimism in its strategic initiatives and caution due to external economic factors.