YELP Q4 Deep Dive: AI Investments and Margin Pressures Shape Outlook

YELP Q4 Deep Dive: AI Investments and Margin Pressures Shape Outlook

Kayode Omotosho

Fri, February 13, 2026 at 10:40 PM GMT+9 5 min read

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YELP

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Local business platform Yelp (NYSE:YELP) met Wall Street’s revenue expectations in Q4 CY2025, but sales were flat year on year at $360 million. On the other hand, the company’s full-year revenue guidance of $1.47 billion at the midpoint came in 2.8% below analysts’ estimates. Its non-GAAP profit of $0.89 per share was 1.3% below analysts’ consensus estimates.

Is now the time to buy YELP? Find out in our full research report (it’s free).

Yelp (YELP) Q4 CY2025 Highlights:

**Revenue:** $360 million vs analyst estimates of $359.6 million (flat year on year, in line)

**Adjusted EPS:** $0.89 vs analyst expectations of $0.90 (1.3% miss)

**Adjusted EBITDA:** $85.69 million vs analyst estimates of $80.98 million (23.8% margin, 5.8% beat)

**EBITDA guidance for the upcoming financial year 2026** is $320 million at the midpoint, below analyst estimates of $358.8 million

**Operating Margin:** 13.6%, down from 14.8% in the same quarter last year

**Market Capitalization:** $1.40 billion

StockStory’s Take

Yelp’s fourth quarter results were met with a negative market reaction, as the company reported flat year-over-year revenue and a slight miss on non-GAAP profit expectations. Management attributed the softness to persistent challenges in the restaurants, retail, and other (RR&O) category, which saw declining advertising revenue and lower engagement from both consumers and advertisers. CEO Jeremy Stoppelman highlighted that, despite these headwinds, strength in service-related advertising and the accelerated rollout of AI-powered features helped offset some of the pressures. Stoppelman noted, “Our focus on product innovation and a differentiated services experience once again drove our results in 2025.”

Looking to the year ahead, Yelp’s guidance reflects a cautious outlook, with management anticipating continued softness in the RR&O segment and increased investments in AI initiatives. Stoppelman outlined plans to expand the Yelp Assistant AI chatbot and integrate new tools from the recently acquired Hatch platform, positioning these moves as critical for long-term growth. CFO David Schwarzbach emphasized that increased operating expenses are expected as Yelp invests in technology and paid traffic acquisition, stating, “We expect many of the same trends that characterized 2025 to persist into 2026, continuing to negatively impact advertising revenue for the year.”

Key Insights from Management’s Remarks

Management cited the ongoing weakness in restaurant and retail advertisers as the main drag on results, while services and new AI-driven tools provided some relief.

Story Continues  

**Services category resilience:** Advertising demand from service providers, such as home and local services, continued to grow and set a new annual revenue record, even as restaurants and retail lagged.

**AI-powered product adoption:** The introduction of more than 55 new AI-powered features, including the Yelp Assistant chatbot, drove a sharp increase in user engagement for quote requests, with submissions via Assistant up over 400% year-over-year.

**RR&O category headwinds:** Revenue from restaurants, retail, and other businesses declined, reflecting both macroeconomic pressures and lower consumer dining frequency, leading to a drop in paying advertising locations.

**Expansion of data licensing:** Strong demand for Yelp’s proprietary content led to a significant acceleration in data licensing revenue, including a new agreement with OpenAI, which management sees as validation of Yelp’s value in the evolving AI search ecosystem.

**Acquisition of Hatch:** The recent purchase of Hatch, an AI lead management platform for service professionals, is intended to strengthen Yelp’s SaaS offerings and accelerate its roadmap for business-focused AI tools.

Drivers of Future Performance

Yelp’s outlook for 2026 is shaped by ongoing investments in AI, persistent RR&O softness, and a shift toward higher-margin products in services and data licensing.

**AI transformation and product rollout:** Management plans to fully launch the cross-category Yelp Assistant and enhance AI-powered tools for both consumers and businesses. These efforts are expected to drive engagement, streamline local discovery, and potentially diversify revenue streams beyond advertising.

**Hatch integration and SaaS growth:** The company is prioritizing rapid growth for Hatch’s lead management platform, aiming to cross-sell to Yelp’s base of service professionals. While near-term margins will be pressured by investment, management expects SaaS revenues to improve overall margin quality over time.

**Continued RR&O uncertainty:** Management remains cautious about the restaurant and retail advertising environment, citing high input costs and weaker consumer demand. These trends are expected to continue weighing on advertising revenue and overall growth in the near term.

Catalysts in Upcoming Quarters

Looking forward, the StockStory team will watch (1) the full launch and adoption rates of the cross-category Yelp Assistant, (2) progress on integrating Hatch and expanding its SaaS offerings to Yelp’s service professional customer base, and (3) signs of stabilization or improvement in RR&O advertising demand. The pace of data licensing growth and further AI-powered feature rollouts will also be important markers of execution.

Yelp currently trades at $21.81, down from $22.83 just before the earnings. In the wake of this quarter, is it a buy or sell? The answer lies in our full research report (it’s free for active Edge members).

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