VALUATION HIGHLIGHTS

1. Advertising constitutes 78% of the Trefis price estimate for Yelp's stock.

WHAT HAS CHANGED?

1. Yelp Q4 2025 Snapshot

Yelp Inc. reported mixed results for the fourth quarter of 2025, with modest revenue growth and solid profitability offset by softer forward guidance. The company generated about $360 million in revenue, roughly flat year over year but slightly ahead of expectations, while GAAP earnings per share came in at $0.61, beating analyst estimates. Net income was about $38 million, reflecting some margin pressure despite continued strength in higher-growth services advertising categories such as home and professional services. However, advertising demand tied to restaurants and retail remained weak, and the number of paying advertising locations declined year over year.

2. Outlook

Yelp expects modest revenue growth but lower profitability in 2026 as it ramps up investment in artificial intelligence and product development. Management guided full-year 2026 revenue to about $1.455 billion to $1.475 billion, roughly in line with 2025 levels and below some analyst expectations for stronger growth. At the same time, the company projected adjusted EBITDA of $310 million to $330 million, down from about $369 million in 2025, reflecting increased spending tied to its AI transformation, the integration of the Hatch lead-management platform, and higher traffic acquisition costs.

For the first quarter of 2026, Yelp expects revenue of $350 million to $355 million and adjusted EBITDA of $58 million to $63 million, both below the prior-year quarter, signaling a softer start to the year. Overall, the guidance suggests relatively stable demand but near-term margin pressure as the company prioritizes investment in AI-driven capabilities and product improvements.

POTENTIAL UPSIDE & DOWNSIDE TO TREFIS PRICE

Local Advertising

• Yelp's Active Local Business Accounts: Yelp had over 496,000 active local business accounts in 2025. We currently forecast the number of active local business accounts to steadily increase, as it continues to expand aggressively, reaching around 600,000 by the end of our forecast period.

Yelp Deals revenue

• Yelp's revenue from Yelp Deals, partnership and other services: This figure grew to $59 million in 2022 and further up to $63 million in 2024. We expect the division's revenues to grow to $83 million by the end of our forecast period.

Sales And Marketing Expenses

• S&M as a percentage of Revenue: We currently expect Yelp's selling and advertising expenses (S&M) to increase slightly from around 39% in 2025 to 41% by the end of the forecast period. Given the increasing competition in the online business review and recommendations space, Yelp may have to incur increasing amounts of marketing expenses going forward.

BUSINESS SUMMARY

Yelp is a local business search, review, and recommendation service that allows consumers to access ratings and read reviews on local hotels, restaurants, salons, dentists, and mechanics on their website Yelp.com. These businesses are reviewed and rated by contributors.

Yelp generates revenue mainly from local business advertising, display advertising, and additional services like Yelp Deals, and deals with reservation services like OpenTable. It competes primarily with other online business reviews services like Google Places, Yahoo Local, Angi (formerly Angie's List), CityLocal, and Gumtree; display advertising players like Google, Yahoo, Facebook, and AOL; and daily deal sites like Groupon and LivingSocial.

SOURCES OF VALUE

Local Advertising is Yelp's most valuable business

Yelp is a local-business review platform in the United States and 96% of total revenue generated through advertisements. Its local advertising platform leverages the power of inbound marketing, which leads to a higher customer conversion rate than traditional display advertising. We expect its local advertising revenue to grow in the coming years, as it expands into multiple international markets.

Huge repository of local business reviews and large user base

Yelp has one of the largest databases of local businesses in the markets in which it operates, particularly in the United States. As of the end of 2025, the platform hosted about 330 million cumulative user reviews and covered over 8.4 million claimed local business locations. This extensive repository of user-generated content helps attract roughly 74 million monthly unique visitors across desktop and mobile platforms, making Yelp a highly attractive advertising and marketing platform for local businesses seeking to reach new customers

Growing Importance of Digital Discovery for Local Businesses

Consumers increasingly rely on online platforms to discover and evaluate local businesses before making purchasing decisions. This shift toward digital discovery supports long term demand for platforms like Yelp that aggregate reviews and provide search and recommendation tools.

Expansion of AI Driven Advertising Tools

Yelp is investing in artificial intelligence to improve ad targeting, automate interactions between businesses and consumers, and enhance search results. These capabilities could improve advertiser return on investment and strengthen engagement on the platform over time.

Strategic Focus on Higher Value Services Categories

The company has been gradually shifting its advertising mix toward services related categories such as home services and professional services. These segments often have larger marketing budgets and higher customer lifetime value, which could support more stable revenue growth compared with restaurant focused advertising.