Yelp Sees Advertiser Backlash Amid Economic Slowdown, Downgrades Outlook

Yelp has been downgraded due to a decline in advertisers as the macroeconomy shows signs of slowing. The company's earnings season highlights the disconnect between the stock market and consumer spending. Businesses heavily reliant on consumer spending are experiencing a decline, indicating a potential economic downturn.

Yelp Inc. (YELP) reported its second quarter (Q2) 2025 earnings, with the company's stock experiencing a 1.99% decline in premarket trading despite beating earnings per share (EPS) and revenue forecasts. The company reported an EPS of $0.67, a 31.37% increase over the anticipated $0.51, and revenue of $370.34 million, slightly exceeding the expected $365.69 million [2].

The company's strong financial health was evident, with a gross profit margin of 90.88% and a minimal debt-to-equity ratio of 0.05. Services revenue grew by 8%, while restaurant and retail revenue declined by 5%. The decline in paying advertising locations by 3% to 515,000 highlighted ongoing market pressures [2].

Despite the positive earnings report, Yelp's stock dipped to $33.5, currently trading near its 52-week low. The company's flat revenue guidance for the next quarter and concerns over macroeconomic conditions affecting advertiser spending contributed to the stock's decline. Wall Street's median 12-month price target for Yelp Inc. is $39.00, about 12.4% above its last closing price of $34.18 [1].

CEO Jeremy Stoppelman highlighted the company's strategic focus on AI, stating, "AI search API calls have accelerated, increasing by 20 times over the past year." CFO David Schwarzbach expressed confidence in future opportunities, saying, "We continue to believe in the opportunities ahead to create shareholder value" [2].

The company's performance reflects the broader economic uncertainty, with businesses heavily reliant on consumer spending experiencing a decline. The disconnect between the stock market and consumer spending suggests a potential economic downturn. Investors should closely monitor Yelp's future performance and the broader economic trends that may impact the company's growth prospects.

References:
[1] https://www.tradingview.com/news/reuters.com,2025:newsml_L8N3U011A:0-yelp-inc-reports-results-for-the-quarter-ended-june-30-earnings-summary/
[2] https://www.investing.com/news/transcripts/earnings-call-transcript-yelp-q2-2025-beats-eps-forecast-stock-dips-93CH-4179586