Yelp (YELP) Q4 2025 earnings review
Growth Engine Stalls: Revenue Turns Negative, Outlook Dims
Yelp hit a wall in Q4 2025. Total revenue contracted 1% YoY to $360M, missing the growth trajectory seen earlier in the year. The company's historic safety net—the Services segment—decelerated sharply to just 3% growth, failing to offset the accelerating collapse in Restaurants, Retail & Other (RR&O), which fell 12%. Management's FY26 guidance is sobering: flat revenue and a ~13% decline in Adjusted EBITDA as the company pivots to heavy AI investment. While the OpenAI partnership and Hatch acquisition offer long-term optionality, the core ad business is shrinking in volume.
🐂 Bull Case
Yelp signed an agreement with OpenAI and is pursuing further data licensing deals. With trusted proprietary content becoming a critical asset for LLMs, this high-margin revenue stream (already ~$10M run-rate in mid-2025) could scale significantly.
Despite operational headwinds, Yelp continues to return cash aggressively. The company repurchased $88.5M in shares in Q4 and authorized a new $500M buyback program, supported by a debt-free balance sheet and $319M in liquidity.
🐻 Bear Case
The thesis that 'Services will offset RR&O weakness' is broken. Services revenue growth slowed from 14% in Q1 to just 3% in Q4. Without this growth engine, Yelp has no offset for the structural decline in its other segments.
The platform is losing advertiser density. Paying Advertising Locations dropped 5% YoY to 496k, and Ad Clicks fell 8%. Revenue is being propped up solely by pricing (CPC +6%), which is unsustainable if engagement continues to bleed.
⚖️ Verdict: 🔴
Bearish. The core advertising business is contracting in volume, and the Services growth story has stalled. The pivot to 'AI transformation' is currently a cost center dragging down 2026 EBITDA guidance, with uncertain revenue timing.
Key Themes
Services Segment Hits the Brakes
Decelerating. Services revenue, Yelp's primary growth driver for years, slowed dramatically to +3% YoY in Q4 (down from +14% in Q1 25 and +7% in Q3 25). This deceleration exposes the company to the full brunt of the decline in other categories. If Services cannot grow mid-to-high single digits, the consolidated top line will remain negative.
Volume vs. Price Divergence
Yelp is earning more from fewer interactions—a classic sign of a maturing or declining platform. Ad Clicks declined 8% YoY, while Average Cost Per Click (CPC) rose 6%. With paying advertising locations dropping to 496k (lowest in recent history), the platform is losing breadth.
RR&O Segment in Freefall
Accelerating Decline. The Restaurants, Retail & Other (RR&O) segment revenue dropped 12% YoY in Q4, significantly worse than the 2-5% declines seen in previous quarters. Advertiser locations in this segment fell to 246k. Management cites 'macroeconomic uncertainty,' but the acceleration suggests structural churn.
AI Transformation & Data Licensing
Management is betting the house on AI. A definitive agreement with OpenAI was signed, and Other Revenue (which includes data licensing) accelerated to +33% YoY in Q4. However, this pivot requires heavy investment, weighing on 2026 profitability.
SaaS Expansion via Hatch Acquisition
Yelp acquired Hatch (AI lead management) to move beyond pure advertising into operational SaaS tools. Hatch had ~$25M ARR growing 70% as of Nov 2025. This diversifies revenue but currently has negative cash flow impact.
Aggressive Share Repurchases
Stable. Yelp repurchased $292M in shares during 2025, reducing share count by ~10% YoY. A new $500M authorization signals continued support, though this is financial engineering rather than organic growth.
Other KPIs
Decelerating. Dropped from 28% in 24Q4. The contraction is driven by revenue declines and investments in AI infrastructure. FY26 guidance implies further compression to ~21-22%.
Reversing. Down 5% YoY and down sequentially from 512k in Q3. This breaks the psychological 500k level, driven by shedding 25k locations in the RR&O segment YoY.
Stable. Up from $60M in 24Q4 despite lower earnings, aided by working capital timing. However, aggressive buybacks ($88.5M in Q4) exceeded FCF generation for the quarter.
Guidance
Stable/Stagnant. At the midpoint ($1.465B), this implies 0% growth vs FY 2025 ($1.465B). This assumes Services growth merely offsets continued RR&O declines.
Decelerating. The midpoint ($320M) represents a 13% decline from FY 2025 ($369M). Margins are compressing as the company funds its AI transition and integrates the loss-making Hatch acquisition.
Decelerating. Implies a year-over-year decline of ~1-2% compared to Q1 2025 ($358.5M). Suggests the negative trend from Q4 is continuing into the new year.
Key Questions
Services Segment Slowdown
Services revenue growth collapsed from 14% in Q1 to 3% in Q4. Is this purely macro-related, or have we reached saturation in the Home Services vertical? What gives you confidence this can re-accelerate in 2026?
Return on AI Investment
FY26 EBITDA guidance implies a ~$50M step down in profitability to fund AI and Hatch. Can you quantify the revenue contribution included in guidance from these initiatives, and when do you expect them to become accretive to margins?
RR&O Stabilization
With RR&O revenue declining 12% and paying locations shedding 25k YoY, is there a floor for this segment, or should we model mid-teens declines in perpetuity?