YELP Q2 Earnings Beat Estimates as Other Revenues Surge

YELP’s Revenue Mix Shows Mixed Advertising Trends

Advertising revenues declined 3% year over year to $342.5 million. Services advertising revenues were essentially flat at $241 million compared with $240.8 million in the year-ago quarter, as advertiser demand remained stable despite a difficult environment for local businesses.

Restaurants, Retail & Other advertising revenues fell 10% to $101.5 million from $112.9 million. Lower ad clicks and average cost per click hurt the category, while weaker paying advertising locations and average revenue per location also weighed on performance.

Yelp’s Ad Metrics Reflect Softer RR&O Demand

Total paying advertising locations decreased 1% year over year to 510,000. Ad clicks declined 5%, primarily because of weakness in Restaurants, Retail & Other categories, while average cost per click increased 1% as higher-priced Services clicks represented a larger share of total clicks.

Management noted improving trends compared with the first quarter. Restaurants, Retail & Other ad clicks, average cost per click and paying advertising locations improved sequentially, while overall consumer traffic benefited from better app installs and page views.

YELP Expands AI Products and Hatch Scale

Yelp Assistant continued to gain traction as the company reshaped its consumer experience around conversational search. The product generated roughly 10% of Request-a-Quote projects in the second quarter and helped drive overall project growth of about 10% year over year.

Yelp Host reached a 2.4-million annual run rate for calls handled in July, more than tripling from January. Meanwhile, Hatch annual run rate revenues increased 59% year over year to $35 million in June. Yelp is adding product, engineering, sales and marketing resources to expand Hatch’s AI voice and lead-management capabilities.

Yelp’s Costs Rise as AI Investments Pressure Margins

Total costs and expenses increased 4.6% year over year to $331.8 million. The cost of revenues rose 17.9% to $41.8 million, reflecting higher infrastructure expenses tied partly to AI products and Hatch. Sales and marketing expenses jumped 6.2% to $153.6 million.

Product development expenses declined 10.1% to $70.5 million, while general and administrative expenses increased 3.3% to $47.9 million. Adjusted EBITDA fell 9% to $91 million, and the adjusted EBITDA margin contracted to 24% from 27% a year earlier.

YELP’s Cash Flow and Capital Allocation Stay Active

Yelp ended the second quarter with $94.1 million in cash and cash equivalents and $100 million in borrowings under its revolving credit facility. It generated operating cash flow of $75.8 million and free cash flow of $61.1 million in the second quarter.

The company repurchased $50 million of shares during the quarter at an average price of $24.92. It subsequently bought back roughly $25 million of shares in the third quarter, bringing 2026 repurchases to about $200 million, before pausing the program to reduce revolving-credit borrowings.

Yelp Narrows 2026 Guidance Range

For the third quarter, Yelp expects net revenues between $365 million and $370 million. Adjusted EBITDA is projected between $70 million and $75 million as expenses rise sequentially on investments in its AI transformation, Hatch and consumer marketing.

For 2026, management narrowed its net revenue outlook to $1.460-$1.470 billion from $1.455-$1.475 billion previously. The adjusted EBITDA range was narrowed to $315-$325 million from $310-$330 million. Yelp continues to target a $250-million annual run rate for other revenues by the end of 2028 as AI-driven offerings and data licensing scale.

YELP’s Zacks Rank & Stocks to Consider

Yelp currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader Zacks Computer and Technology sector are Lumentum LITE, Applied Materials AMAT and Analog Devices ADI, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Shares of Lumentum have surged 141.5% year to date. The Zacks Consensus Estimate for LITE’s fiscal 2026 earnings is pegged at $8.19 per share, up by 5 cents over the past 30 days, indicating an increase of 297.6% year over year.

Shares of Applied Materials have jumped 109.8% year to date. The Zacks Consensus Estimate for AMAT’s fiscal 2026 earnings is pegged at $12.17 per share, up by 3 cents over the past seven days, suggesting a rise of 29.2% year over year.

Analog Devices shares have rallied 43.8% year to date. The Zacks Consensus Estimate for ADI’s fiscal 2026 earnings is pegged at $12.42 per share, up by 10 cents over the past 30 days, implying an increase of 59.4% year over year.

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