Yelp (YELP) Q2 FY26 earnings call: guidance and Q&A

What are the planned investments for Hatch (product, go-to-market) and what is the expected structural margin profile compared to core advertising?

Investments are across go-to-market, product, and engineering to scale Hatch. The long-term margin profile is expected to be similar to other subscription businesses, but the near-term focus is on investment to capture market opportunity.

“In terms of over the longer term, the margin profile for this business we expect can be similar to other subscription businesses. In the near term, though, we definitely want to continue to invest to scale and, again, to capture market opportunity.”

asked by Eric Sheridan (Goldman Sachs) · answered by David Schwarzbach

How does Yelp capture economic value from AI platforms like ChatGPT, by driving users back to Yelp or through data licensing?

Yelp is excited about the OpenAI partnership, with current integrations showing ratings/review snippets linking back to Yelp, and request-to-quote coming. This is seen as a potentially significant distribution channel, similar to existing partnerships that drive meaningful traffic back to Yelp.

“So it's both an opportunity opportunity to merchandise and remind consumers of Yelp, but also can deliver some meaningful traffic back. And so we see the opportunity with these AI players to be quite similar, and we're thinking about it much in the same way.”

asked by Sergio Segura (KeyBank) · answered by Jeremy Stoppelman

Are there any notable differences in the quality or conversion of leads coming from AI platforms compared to other performance channels?

It's too early to have a strong opinion on conversion from AI platforms due to the minimal current integration. However, overall consumer traffic tailwinds are observed from SEO, app downloads, partner networks, and Google's algorithmic changes favoring user-generated content.

“I think it's quite early to really have a strong opinion on that. You know, the way that it's being merchandised is just kind of at the bare minimum, as you can see. And I don't think that's the eventual steady state.”

asked by Sergio Segura (KeyBank) · answered by Jeremy Stoppelman

Has Yelp found success cross-selling the ads product with Yelp Host, and how might Host open doors to new partnerships?

Yelp Host has seen significant growth and new features. A dedicated team sells Host, Guest Manager, and ads to restaurant partners, creating some positive synergies. While it hasn't "changed the game" for restaurant ad sales yet, it provides a compelling product for conversations.

“On the ad side, we do have a group that is a dedicated group to working with restaurant partners. And so they're selling Yelp guest manager, they're selling Yelp ads, they're selling Yelp host. And so we do see some positive synergies there.”

asked by Zachary Witaszek (Baird) · answered by Jeremy Stoppelman

What has changed in the renewed paid search efforts, and what gives confidence in driving incremental advertising budgets?

The key difference is specifically targeting multi-location services businesses, who are able to commit larger budgets for scale. The company is confident in the return on ad spend (ROAS) for these customers.

“I THINK THE DIFFERENCE NOW IS THAT WE'RE SPECIFICALLY TARGETING MULTI LOCATION SERVICES, BUSINESSES. WE'VE TALKED ABOUT THAT OPPORTUNITY FOR A WHILE NOW. AND THEY'RE OBVIOUSLY ABLE TO COMMIT A LOT OF BUDGET IF YOU'RE ABLE TO DRIVE LEADS.”

asked by Nitin Bansal (Bank of America) · answered by Unknown Speaker

What contributed to the acceleration in paying advertising locations, and how should future growth and monetization be viewed given the narrowed revenue guide?

Encouraging trends were seen in paying advertising locations (PALs), particularly on the services side (flat YoY, best performance in years), leading to an overall -1% YoY PALs (an improvement from Q1). Macro pressures persist, but these are early signs of encouragement, with long-term potential for both PALs and ARPL.

“Overall, PALs were down 1% year over year, which is a big improvement over Q1. And so, we see that as early signs of ENCOURAGEMENT THERE.”

asked by Nitin Bansal (Bank of America) · answered by Unknown Speaker

Can you elaborate on Google traffic tailwinds post May/June core updates, contrasting with AI overview headwinds for some internet peers, and delineate between paid vs. organic tailwinds?

Yelp has "bucked the trend" regarding AI overviews, as its highly monetizable categories are not typically at the top of AI overviews, suggesting Google's revenue preservation. Yelp is largely organically driven, with paid traffic being de minimis. Organic gains come from SEO, app downloads, partner networks, and Google's algorithmic changes favoring user-generated content.

“I think our area has been different when it comes to AI overviews. Our categories that we get a lot of traffic in are highly monetizable. And while you do occasionally see AI overviews, they're usually not right at the top. And so I think there's some element of Google trying to preserve its own revenue there that is a bit protective.”

asked by Kishan Patel (Analyst) · answered by Jeremy Stoppelman