Skip to content
    YELP
    Earnings call· Jun 2026(Q2 FY26)

    YELP Q2 FY26 earnings call YELP

    Aug 6, 2026 Source

    Executive summary

    Yelp Q2 FY26 — AI Initiatives Drive Other Revenue Growth Amidst Macro Headwinds

    Yelp continued its AI transformation in Q2 FY26, with strong growth in AI-driven "other revenue" streams and positive consumer traffic trends. Despite these product advancements, the company faced a challenging economic environment impacting traditional advertising revenue, leading to a slight overall revenue increase and a decline in net income. Management remains confident in its strategic investments to drive long-term profitable growth.

    Highlights

    5

    • Net revenue increased by 1% year over year to $376 million, exceeding the high end of outlook.

    • Other revenue grew by 98% year over year to a record $33 million, driven by AI-driven offerings and data licensing.

    • Yelp Host reached an annual run rate of 2.4 million calls handled in July, more than tripling from January.

    • Hatch annual run rate revenue grew 59% year over year to $35 million in June.

    • Adjusted EBITDA of $91 million, representing a 24% margin, exceeded the high end of outlook.

    Concerns

    5

    • Net income decreased by 28% year over year to $32 million, representing an 8% margin.

    • Adjusted EBITDA decreased by 9% year over year.

    • RR&O ad revenue decreased by 10% year over year to $102 million.

    • Paying advertising locations declined by 1% year over year to 510,000.

    • Full-year FY26 Adjusted EBITDA guidance narrowed to $315 million to $325 million, indicating a lower upper bound.

    Guidance & targets

    8
    CategoryTargetConfidence
    Annual run rate other revenue
    $250 million
    high materiality
    High
    Stock-based compensation expense as percentage of revenue
    less than 6%
    medium materiality
    High
    Free cash flow returned to shareholders
    more than 50%
    high materiality
    High
    Q3 FY26 Net Revenue
    $365 million to $370 million
    high materiality
    High
    Full-year FY26 Net Revenue
    $1.460 billion and $1.470 billion
    high materiality
    High
    Q3 FY26 Adjusted EBITDA
    $70 million to $75 million
    high materiality
    High
    Full-year FY26 Adjusted EBITDA
    $315 million and $325 million
    high materiality
    High
    Resume share repurchases
    2027
    medium materiality
    High

    Operational metrics

    17
    Adjusted EBITDA
    $91 million-9% year-over-year
    Q2 FY26

    Adjusted EBITDA decreased year-over-year but exceeded the company's outlook.

    Net income margin
    8%
    Q2 FY26

    Net income decreased by 28% year over year to $32 million, representing an 8% margin.

    Services ad revenue
    $241 millionflat year-over-year
    Q2 FY26

    Services ad revenue remained flat despite challenging economic conditions.

    RR&O ad revenue
    $102 million-10% year-over-year
    Q2 FY26

    Restaurants, Retail, & Other ad revenue declined.

    Paying advertising locations
    510,000-1% year-over-year
    Q2 FY26

    Overall decline in paying advertising locations, with services locations flat and RR&O locations decreasing.

    Ad clicks
    -5%year-over-year
    Q2 FY26

    Decline in total ad clicks driven by RR&O categories.

    Average CPC
    +1%
    Q2 FY26

    Average cost per click increased due to mix shift towards services ads.

    Other revenue
    $33 million+98% year-over-year
    Q2 FY26

    Record other revenue driven by new AI-driven offerings and data licensing.

    Yelp Assistant project submissions growth
    +10%year-over-year
    Q2 FY26

    Yelp Assistant contributed to project submissions and monetization in the services category.

    Yelp Host annual run rate calls handled
    2.4 millionmore than tripling from January
    July

    Yelp Host, an AI-powered call answering service for restaurants, scaled significantly.

    Hatch annual run rate revenue
    $35 million59% year-over-year
    June

    Hatch, acquired in February, showed strong revenue growth.

    Stock-based compensation expense as percentage of revenue
    7%-3 percentage points year-over-year
    Q2 FY26

    Reduction in stock-based compensation as a percentage of revenue.

    Diluted shares outstanding reduction
    15%year-over-year
    Q2 FY26

    Reduction in diluted shares outstanding due to share repurchases.

    Share repurchases
    $15 million
    Q2 FY26

    Amount of shares repurchased in the second quarter.

    Share repurchases
    $25 million
    Q3 FY26 (subsequent)

    Amount of shares repurchased subsequent to Q2 in the third quarter.

    Total share repurchases year-to-date
    $200 million
    YTD FY26

    Cumulative share repurchases for the year.

    Remaining share repurchase authorization
    $339 million
    present

    Remaining amount under the existing share repurchase authorization.

    Industry KPIs

    3
    MetricValueDetails
    Advertising revenue by segment$343 millionUSD
    Share buyback capital returned$15 millionUSD
    Ai feature adoption monetization10%%

    Product announcements

    3
    ProductTypeDetails
    Yelp Assistantupdate
    Yelp Hostupdate
    ChatGPT Integration (Yelp ratings and reviews)launch

    Deals & partnerships

    8
    HatchAcquisition of an AI lead management company to accelerate Yelp's strategy in services businesses.

    Yelp acquired Hatch in February to enhance its AI lead management capabilities for services businesses. The team size was significantly increased in Q2 to accelerate Hatch's roadmap.

    OpenAIData licensing partnership to power ChatGPT's local experience.

    Yelp ratings and reviews recently began powering ChatGPT's local experience in relevant categories. A 'Quest to Quote' integration with ChatGPT is coming soon.

    OpenTableIntegration with Yelp Host for restaurant reservations.

    Yelp Host now integrates with OpenTable, enabling consumers to book and manage reservations automatically via Yelp Host.

    Apple MapsData licensing for local discovery.

    Long-standing partnership where Yelp's data is found in Apple Maps.

    YahooData licensing for local discovery.

    Yelp's data is found in Yahoo.

    AmazonData licensing for local discovery.

    Yelp's data is found in Amazon.

    DuckDuckGoData licensing for local discovery.

    Yelp's data is found in DuckDuckGo.

    BingData licensing for local discovery.

    Yelp's data is found in Bing.

    Risks & headwinds

    3
    Challenging economic environment for local businessesRemainder of the year

    RR&O ad revenue decreased by 10% year over year; paying advertising locations decreased by 1% year over year; full-year FY26 Adjusted EBITDA guidance narrowed to $315 million to $325 million.

    Mitigation: Investments in AI transformation, Hatch, and consumer marketing; focus on driving strong growth in 'other revenue'.

    Hatch integration and adjustment periodQ2 FY26

    Resulted in an adjustment period in Q2 after significantly increasing team size.

    Mitigation: Saw improved trends in July; excited by Hatch's growth potential with increased product velocity and added sales headcount.

    Pause in share repurchase programCurrently paused, expected to resume in 2027

    $339 million remaining under existing authorization; $200 million total repurchases for the year to date.

    Mitigation: Working to pay down revolving credit facility; expect to resume repurchases in 2027.

    What to watch in Q3 FY26

    5

    Hatch Revenue Growth & Integration

    next quarter
    CurrentAnnual run rate revenue grew 59% YoY to $35 million in June
    TargetContinued acceleration in Hatch revenue growth

    Why it matters

    Hatch is a key driver for the high-growth "other revenue" segment and AI lead management strategy.

    While this resulted in an adjustment period in the quarter, we saw improved trends in July. Looking ahead, we see a considerable opportunity in AI lead management. With increased product velocity and added sales headcount that continues to ramp, we're excited by Hatch's growth potential in the year ahead.

    Q&A highlights

    7

    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

    2 min read6 chapters

    Detailed Narrative

    01

    AI Transformation & Product Momentum

    Yelp is advancing its AI strategy, focusing on conversational local discovery and new tools for businesses. The Yelp Assistant shows early positive engagement, driving project submissions in services. Yelp Host, an AI-powered call answering service, has significantly expanded its capabilities with new languages, OpenTable integration, and commission-free food ordering functionality, reaching a 2.4 million annual call run rate.

    02

    "Other Revenue" Growth Drivers

    The "other revenue" segment saw substantial growth, driven by the acquisition of Hatch, data licensing agreements (including with OpenAI for ChatGPT), and food ordering. Hatch's annual run rate revenue grew 59% YoY to $35 million in June, with increased investment in its product roadmap and sales headcount.

    03

    Advertising Performance & Macro Headwinds

    While Services ad revenue remained flat, RR&O ad revenue declined by 10% YoY, reflecting a challenging economic environment for local businesses. Paying advertising locations decreased by 1% YoY, though this was an improvement from Q1. The company noted a slight increase in average CPC due to a higher proportion of services ad clicks.

    04

    Capital Allocation & Shareholder Returns

    Yelp is evolving its capital allocation to balance growth investments, strategic acquisitions, and shareholder returns. The company aims to return over 50% of free cash flow annually through share repurchases. $15 million was repurchased in Q2, and an additional $25 million in Q3, bringing the YTD total to $200 million. Repurchases are currently paused to pay down the revolving credit facility, with plans to resume in 2027.

    05

    Consumer Traffic & SEO Improvements

    The company observed encouraging traffic trends, including improvements in app installs and page views. These gains are attributed to product team efforts on SEO, increased app downloads, and positive algorithmic changes from Google favoring user-generated content, which has benefited Yelp.

    06

    Data Licensing & AI Ecosystem Reach

    Yelp is expanding its reach by licensing its data to power local discovery across the AI ecosystem. Partnerships include OpenAI (for ChatGPT's local experience), Apple Maps, Yahoo, Amazon, DuckDuckGo, and Bing. A "request to quote" integration with ChatGPT for services businesses is also anticipated.

    AI-generated summary of the company’s earnings call. Not investment advice.