Yelp Inc.

Second-quarter net revenue increased 1% year over year to $376 million, $8 million above the high end of the outlook range. Net income decreased 28% year over year to $32 million, or an 8% margin, and adjusted EBITDA decreased 9% year over year to $91 million, or a 24% margin. Services ad revenue was flat year over year at $241 million, RR&O ad revenue declined 10% to $102 million, paying advertising locations fell 1% to 510,000, ad clicks declined 5%, and average CPC increased 1%. Other revenue increased 98% year over year to a record $33 million. For the third quarter, Yelp expects net revenue of $365 million-$370 million and adjusted EBITDA of $70 million-$75 million. For the full year, it narrowed guidance to $1.460 billion-$1.470 billion of net revenue and $315 million-$325 million of adjusted EBITDA.

Jeremy Stoppelman framed the quarter as progress in Yelp’s AI transformation, emphasizing a more conversational discovery experience, Yelp Assistant, and expanding the reach of Yelp content through partnerships. He highlighted early engagement signs from Yelp Assistant, roughly 10% year-over-year project growth in Services, and strong momentum in Yelp Host, including new languages, OpenTable integration, and food ordering. His tone was constructive and confident, while acknowledging that consumers and local businesses are still dealing with a challenging economic backdrop.

David Schwarzbach focused on the financial tradeoffs of investing in new growth areas while preserving profitability. He noted Other revenue reached a record $33 million, and reiterated the long-term target of a $250 million annual run rate in Other revenue by the end of 2028. He also said stock-based compensation fell to 7% of revenue, expects it to be less than 6% by the end of 2027, and detailed capital allocation plans to invest in growth, pursue acquisitions, and return more than 50% of free cash flow to shareholders annually through repurchases; Yelp bought back $15 million in Q2 and has paused repurchases while paying down its revolver, with $339 million remaining under authorization.

Analysts pressed on how Yelp plans to scale Hatch and what margins could look like versus advertising; management said it is investing in product, engineering, and go-to-market, and expects Hatch’s long-term margin profile could resemble other subscription businesses, though near-term investment will continue. Questions also focused on data licensing and the ChatGPT Request-a-Quote integration, with management saying the opportunity is still early but could become a meaningful distribution channel that both drives traffic back to Yelp and monetizes content through licensing. On paid-search lead buying for multi-location Services advertisers, management said the new approach is more targeted than past efforts and is designed to source high-quality leads with strong ROAS, supporting larger customer budgets.