Yelp's Q3 2025 Earnings Call: Contradictions Emerge on Macroeconomic Impact, AI Opportunities, and Strategic Positioning

Date of Call: November 6, 2025

Financials Results

• Revenue: $376 million, up 4% YOY, $6 million above the high end of outlook
• EPS: $0.61 per diluted share, up 2% YOY (net income $39 million)
• Operating Margin: Net income margin 10% (net income up 2% YOY); adjusted EBITDA margin 26%, down 3% YOY (adjusted EBITDA $98M, $13M above the high end of outlook)

Guidance:

• Q4 net revenue expected to decrease from Q3; full-year net revenue now guided to $1.460B–$1.465B (down $8M at the midpoint)
• Full-year adjusted EBITDA now expected to be $360M–$365M (up $8M at the midpoint); Q4 expenses expected roughly consistent with Q3
• Headcount expected to be approximately flat year-over-year by end of 2025; SBC reductions will pressure adjusted EBITDA but not net income
• Continue share repurchases through 2025 (remaining authorization $127M)

Business Commentary:

• Revenue and Profitability Growth:
• Yelp delivered record net revenue of $376 million for Q3, with a net income margin of 10% and an adjusted EBITDA margin of 26%.

• The growth was driven by a 7% year-over-year increase in Services revenue and the integration of data-light partnerships.

• Services Revenue Growth and AI Impact:

• Services revenue increased by 7% year-over-year to a quarterly record $244 million.

• The increase was driven by improvements to the request flow in the AI chatbot, Yelp Assistant, and increased project submissions through the platform.

• RR&O Revenue Decline and Macroeconomic Pressures:

• RR&O revenue declined by 2% year-over-year to $114 million.

• The decline was attributed to macroeconomic pressures and competitive pressures in RR&O categories, as well as reduced spend on paid project acquisition.

• Data Licensing and AI Search Opportunities:

• Yelp is experiencing strong demand for data licensing products, particularly in AI search, with opportunities expanding as third-party integrations become more prevalent.
• The quality of conversations with LLM-based players supports the value of Yelp's highly trusted content for AI search experiences.

Sentiment Analysis:

Overall Tone: Neutral

• Company reported record net revenue ($376M, +4% YOY) and strong margins (net income margin 10%, adj. EBITDA margin 26%) and highlighted AI/product momentum, while management trimmed full-year revenue guidance and cited persistent macro uncertainty and expected Q4 revenue decline.

Q&A:

• Question from Alex (Goldman Sachs): Are the macro pressures broad-based into Services or concentrated in RR&O?
  Response: Management: Macro pressures persist but are concentrated in RR&O; Services demand remains relatively consistent despite seasonal declines.

• Question from Cal Bartyzal (Craig-Hallum Capital Group): Any additional color on expanding opportunities for Yelp data licensing and AI search integrations?
  Response: Management: Strong interest and high-quality conversations with AI search players; data licensing and APIs are early-stage but promising opportunities.

• Question from Cal Bartyzal (Craig-Hallum Capital Group): With RepairPal integration and DoorDash partnership, what benefits do you expect (CPC uplift, more resilient ad spend)?
  Response: Management: RepairPal rollout is contributing to services revenue; DoorDash expands restaurant footprint by ~200k and is expected to drive incremental (other) revenue.

• Question from Josh Beck (Raymond James): Should DoorDash be modeled as lead generation/deep-link ordering on Yelp?
  Response: Management: Yes—it's a direct integration/deep-link into DoorDash ordering, expanding on-platform transactions and monetization as consumers transact on Yelp.

• Question from Josh Beck (Raymond James): How are you thinking about the breadth of the AI strategy and where it could head next year?
  Response: Management: AI is transformative; prioritized paths include cross-category Yelp Assistant, AI-powered SaaS (Yelp Host/Receptionist) and data licensing/APIs—multiple monetization vectors, early innings.

• Question from Josh Beck (Raymond James): What should we watch in the restaurant vertical as indicators of recovery in spend?
  Response: Management: Monitor dine-out activity and macro consumer spend (esp. lower/mid incomes) and restaurant input-cost inflation—margin recovery as inflation laps would enable more advertising.

• Question from Nitin Bansal (BofA Securities): Scale and revenue contribution potential for Yelp Host and Receptionist next year and early adoption feedback?
  Response: Management: Early but positive—Yelp Host has handled thousands of calls and hundreds of reservations; large TAM with 500k+ advertisers suggests meaningful upside.

• Question from Nitin Bansal (BofA Securities): What's driving accelerating average pricing and how is it affecting advertiser ROI and retention?
  Response: Management: Auction-driven dynamics—fewer clicks with comparable budgets has raised CPCs; focus is on improving cost-per-lead and value delivery; churn unchanged year-over-year.

• Question from Sergio Segura (KeyBanc Capital Markets): What are you seeing from logged-out Yelp Assistant and what efficiencies are driving the improved EBITDA outlook?
  Response: Management: Logged-out rollout is early but services projects are up ~400% YOY; EBITDA gains stem from disciplined expense management, flat headcount, and capitalizing software for new AI products.

Contradiction Point 1

Macroeconomic Impact on Services Revenue

It involves differing explanations of the impact of macroeconomic factors on the growth of services revenue, which is a critical revenue stream for Yelp.

What are the key factors impacting the Services and RR&O segments in the current macro environment? - Cal Bartyzal(Craig-Hallum Capital Group LLC, Research Division)

2025Q3: RR&O faces more caution in advertiser spend due to macroeconomic uncertainties. - David Schwarzbach(CFO)

What caused the slowdown in services revenue growth this quarter? Has the category's resilience to macroeconomic factors changed? - Sergio Roberto Segura(KeyBanc Capital Markets Inc. Research Division)

2025Q2: We saw a degree of softness in services revenue growth due to macro and policy changes impacting consumer sentiment from April. - Jeremy Stoppelman(CEO)

Contradiction Point 2

AI Search API and Data Licensing Opportunity

It highlights differing perspectives on the scale and momentum of AI search API and data licensing opportunities, which are strategic for Yelp's future growth.

Can you elaborate on the growth acceleration in the Other segment, especially in AI search opportunities? - Cal Bartyzal(Craig-Hallum Capital Group LLC, Research Division)

2025Q3: Early opportunities in API are in the $10 million revenue run rate scale today on a rolling annual basis. - Jeremy Stoppelman(CEO)

Can you provide more details on the AI search API and data licensing, the momentum you're seeing, and how large an opportunity you see it as? - Sergio Roberto Segura(KeyBanc Capital Markets Inc. Research Division)

2025Q2: Yelp is positioning itself as a key content provider for AI search products, with a $10 million annual run rate in this area. - Jeremy Stoppelman(CEO)

Contradiction Point 3

Ad Spend Resilience and Macroeconomic Impact

It involves the company's resilience in the face of macroeconomic challenges, which directly affects advertiser spend and overall revenue.

What's your outlook on the macro environment, particularly in the Services and RR&O segments? - Cal Bartyzal(Craig-Hallum Capital Group LLC, Research Division)

2025Q3: Broad macro pressures emerged in the spring and persisted through Q2 and Q3, with continued fourth-quarter expectations. - David Schwarzbach(CFO)

You noted April spending remained steady below seasonal norms with positive early May signals. Can you provide more details on quarter-to-date trends and any notable vertical breakdowns? - Sergio Segura(KeyBanc Capital Markets Inc., Research Division)

2025Q1: Advertiser sentiment remained resilient in Q1, with services performing well despite macro pressures. - Jeremy Stoppelman(CEO)

Contradiction Point 4

AI-driven Innovations and Cost Efficiencies

It highlights differing opinions on the impact and implementation of AI-driven innovations on cost efficiencies and product offerings, which could influence strategic direction and financial expectations.

What are the cost efficiencies driving the EBITDA outlook improvement? - Sergio Segura (KeyBanc Capital Markets Inc., Research Division)

2025Q3: AI-driven innovations like Yelp Host and Receptionist enhance product offerings. - David Schwarzbach(CFO)

How are your AI solutions and new features impacting the business, specifically in terms of cost efficiencies or consumer frequency? - Jason Cryer (Craig Hallam)

2024Q4: AI benefits are widespread, improving consumer experience with Yelp Assistant and ad matching. It enhances efficiency in software development and content moderation. - Jeremy Stoppelman(CEO)

Contradiction Point 5

Positioning in AI-powered Search and Content Licensing Opportunities

This contradiction involves differing perspectives on Yelp's strategic positioning in AI-powered search and the potential for content licensing opportunities, impacting potential revenue streams and partnerships.

Can you elaborate on the growth acceleration in the Other segment, particularly regarding AI search opportunities? - Cal Bartyzal (Craig-Hallum Capital Group LLC, Research Division)

2025Q3: We have highly trusted content, critical for AI search platforms like LLMs. Our data licensing and API offerings are gaining momentum. - Jeremy Stoppelman(CEO)

How is Yelp positioned in the current environment with rapid changes in search and AI? And why is the full-year guidance slowing from current exit rates? - Sergio Segura (KeyBanc Capital Markets)

2024Q4: Yelp is well-positioned in AI-powered search due to trusted content and local expertise. Yelp Assistant is transforming the search experience. - Jeremy Stoppelman(CEO)