VALUATION HIGHLIGHTS

1. Advertising constitutes 77% of the Trefis price estimate for Yelp's stock.

WHAT HAS CHANGED?

1. Yelp Q1 2026 Snapshot

Yelp reported mixed Q1 2026 results, beating estimates despite a 27% drop in GAAP net income to $18 million. Revenue ticked up 1% year-over-year to $361.5 million (beating the $353.5 million consensus), while GAAP EPS landed at $0.30, ahead of the $0.26 forecast. Top-line growth was entirely driven by the "Other Revenues" segment, which surged 75% to a record $29 million due to a booming DoorDash partnership, OpenAI data licensing, and the Hatchify acquisition.

Conversely, core advertising revenue fell 2.8% to $332.5 million as macro headwinds slowed retail and restaurant ad clicks. Driven by higher infrastructure and acquisition costs, Adjusted EBITDA fell 7% to $79.4 million, compressing margins to 22%.

2. Outlook

Yelp fully reaffirmed its full-year 2026 outlook and provided near-term guidance, balancing AI momentum against macro headwinds in local advertising. For Q2 2026, the company expects net revenue between $363 million and $368 million, with Adjusted EBITDA between $70 million and $75 million.

For the full year, Yelp reiterated its revenue target of $1.455 billion to $1.475 billion and its Adjusted EBITDA forecast of $310 million to $330 million. Management attributed its decision not to raise full-year targets, despite the Q1 top-line beat, to ongoing soft consumer demand in retail and restaurants affecting small business ad budgets. Looking long-term, Yelp established an aggressive growth target for its non-advertising "Other Revenues" segment, aiming to scale it to an annual run rate of $250 million by the end of 2028.

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.