Yelp delivers record revenue with 4% growth as AI initiatives gain momentum

Yelp Inc. announced on August 7, 2025, its second quarter financial results showing record net revenue of $370 million, marking a 4% increase from the same period in 2024. The review platform, which connects consumers with local businesses, exceeded the high end of its second quarter outlook range by $3 million, driven primarily by growth in advertising revenue from Services businesses.

According to the earnings report, net income reached $44 million, or $0.67 per diluted share, compared to $38 million, or $0.54 per diluted share, in the second quarter of 2024. Net income margin increased one percentage point from the prior year to 12%. Adjusted EBITDA grew 10% to $100 million, representing a 27% margin and exceeding the high end of the company's outlook range by $11 million.

The San Francisco-based company demonstrated profitability while navigating what management described as "heightened macroeconomic uncertainties." During the quarter, Yelp repurchased approximately 1.9 million shares at an aggregate cost of $65.9 million, continuing its capital return strategy.

Services categories lead revenue growth

Services advertising revenue increased 8% year-over-year to $241 million, driven by greater advertiser demand and record average revenue per location. According to the shareholder letter, the addition of revenue from RepairPal, Inc., which Yelp acquired in November 2024, contributed significantly to Services growth in the second quarter.

"Services revenue increased by 8% year over year, driven by growth in the Home Services category as well as the Auto Services category, which includes revenue generated from RepairPal," the company stated in its earnings materials.

The company began testing a booking integration with RepairPal in the Yelp app during the quarter, expanding the platform's capabilities in the automotive services sector. RepairPal contributed approximately two percentage points of year-over-year growth in total advertising revenue.

Meanwhile, advertising revenue from Restaurant, Retail & Other businesses decreased 5% year-over-year to $113 million. According to the company, this decline reflected lower advertiser demand due to continued challenges in the operating environment for businesses in these categories and competitive pressures from food ordering and delivery providers.

AI technology drives user engagement

Yelp continued its artificial intelligence development during the second quarter, implementing several AI-powered features across its platform. The company rolled out natural language search capabilities, which now leverage AI to provide results for some natural language queries from users.

Request-a-Quote projects remained flat year-over-year, but excluding projects acquired through paid search initiatives, they increased approximately 10% year-over-year. This growth was driven by improvements to the flow and Yelp Assistant, the company's AI chatbot, which maintained strong momentum.

"Project submissions through Yelp Assistant increased by more than 400% year over year," the company reported. Yelp plans to drive continued growth by rolling out additional entry points later in the year, including making the assistant available to logged-out users.

The company also initiated testing of Yelp Host, an AI-powered call answering service for restaurants, with early results described as promising. A tailored version for Services businesses, called Yelp Receptionist, is planned for testing in the second half of 2025.

Data licensing revenue reaches $10 million annual run rate

Yelp's data licensing business showed substantial acceleration during the quarter. AI search API calls increased 20 times over the past year and more than 10 times in just the last two months. According to the shareholder letter, the company's annual run rate revenue related to AI search increased to more than $10 million over the last two months.

"This momentum demonstrates the expanded reach of our trusted content and reflects Yelp's value as an essential partner in emerging AI-powered search products," management stated.

The company continued to onboard new licensing partners, reflecting growing demand for Yelp's trusted content from AI search providers. This represents a new revenue stream that monetizes Yelp's extensive database of business information and user reviews.

Advertising metrics show mixed trends

Total paying advertising locations decreased 3% year-over-year to 515,000, as the decline in Restaurant, Retail & Other categories offset growth in Services. However, average revenue per location increased substantially to a record level, primarily driven by performance in Services categories.

Ad clicks decreased 7% year-over-year, primarily driven by macro pressures and increased competition in Restaurant, Retail & Other categories. To a lesser extent, reduced spend on paid project acquisition in the current-year period also contributed to the decline.

Average cost-per-click increased 11% year-over-year, reflecting growth in Services advertiser demand and fewer clicks overall as the company focused on improving the quality of ad clicks.

New advertising products and partnerships

The company launched Co-branded Showcase Ads during the quarter, enabling brand advertisers to promote their local business partners alongside customized offers or messages with images or videos on Yelp. The product addresses demand from large brands seeking to connect with local audiences.

"We're excited to partner with Yelp on the Local Co-branded Showcase Ads campaign and to work alongside our valued local business partners," said André Moraes, Head of PepsiCo's AFH Digital Lab, in a statement included in the earnings materials. "Just halfway through the campaign, we've already seen promising results—including a more than 25% drop in cost per lead for our restaurant partners and lift in restaurant visits."

Yelp continued expanding local advertiser reach through various partnerships, including leveraging on-Yelp search intent to surface relevant Yelp ads to users on other platforms like Facebook and Bing.

Disciplined expense management drives margin expansion

The company achieved its strong profitability through disciplined expense management and maintaining headcount approximately flat year-over-year, excluding the RepairPal team acquired in November 2024.

Stock-based compensation expense as a percentage of revenue decreased two percentage points year-over-year to 9% in the second quarter. According to management, the combined impact of efforts to reduce stock-based compensation and continued share repurchases is expected to benefit GAAP profitability in coming years, particularly earnings per share.

"We remain committed to delivering value to shareholders and plan to hold headcount approximately flat again in 2025 as we utilize AI to deliver operational efficiencies," the company stated.

Sales and marketing expenses decreased 4% from the prior year to $145 million, primarily due to lower marketing spend on acquiring Services projects through paid search and reduced workplace operating costs. Product development expenses declined 5% to $78 million, mainly driven by lower employee-related costs and capitalization of more employee-related costs.

Updated 2025 guidance reflects cautious outlook

For 2025, Yelp narrowed its outlook ranges. The company now expects net revenue between $1.465 billion and $1.475 billion, compared to the previous range. Adjusted EBITDA is expected between $350 million and $360 million.

For the third quarter of 2025, the company anticipates net revenue remaining approximately flat with the second quarter, in the range of $365 million to $370 million. Third quarter adjusted EBITDA is expected between $80 million and $85 million.

"With heightened macroeconomic uncertainties, we did not see a seasonal increase in revenue of the magnitude that we would typically expect in the second quarter," management explained. "We anticipate that this dynamic will persist in the third quarter."

Legislative impact on tax obligations

In July 2025, the One Big Beautiful Bill Act was signed into law, restoring certain favorable corporate tax provisions, including permitting full expensing of domestic research and development expenses. Based on preliminary analysis, Yelp expects its cash tax payments for the remainder of 2025 to be reduced by approximately $25 million to $35 million.

The company currently does not expect the legislation to have a material impact on its estimated annual effective GAAP tax rate in 2025.

Strong balance sheet supports strategic investments

Yelp ended the quarter with $301 million in cash, cash equivalents and marketable securities, maintaining a debt-free balance sheet. Cash provided by operating activities was $58 million during the second quarter.

As of June 30, 2025, the company had $202 million remaining under its existing share repurchase authorization. Management plans to continue repurchasing shares for the remainder of the year, subject to market and economic conditions.

The company's capital allocation strategy consists of three main elements: maintaining a healthy cash balance for operations, retaining balance sheet capacity for potential acquisitions to accelerate strategy, and returning excess capital to shareholders through share repurchases.

Marketing industry implications

The results highlight several important trends for the marketing community. The strong performance of Services advertising, particularly in Home Services, reflects the ongoing digital transformation of local service providers. Meanwhile, the challenges in Restaurant, Retail & Other categories underscore the competitive pressures these businesses face from aggregator platforms.

Yelp's expansion of AI-powered features aligns with broader industry trends toward conversational search experiences. The 400% increase in project submissions through Yelp Assistant demonstrates consumer adoption of AI-powered interaction methods for service requests.

The company's data licensing revenue growth reflects the increasing value of trusted, verified business information in AI-powered search environments. As search engines integrate more AI features, publishers and platforms with high-quality content are finding new monetization opportunities.

For digital marketers, Yelp's focus on improving ad quality over quantity, evidenced by higher cost-per-click rates and fewer but more valuable clicks, suggests a maturation of local advertising markets. The success of Co-branded Showcase Ads indicates opportunities for large brands to connect with local audiences through platform partnerships.

Timeline

• November 2024: Yelp acquires RepairPal for approximately $80 million
• February 13, 2025: Yelp reports record 2024 revenue of $1.41 billion with Services driving 15 consecutive quarters of double-digit growth
• April 24, 2025: Google Q1 earnings show AI features driving search transformation
• May 2025: Artificial intelligence search features begin impacting traditional publisher traffic patterns
• June 2025: Microsoft releases research showing 53% higher purchase rates through AI-powered search interactions
• July 23, 2025: Google reports AI Overviews now drive over 10% additional queries globally
• July 25, 2025: One Big Beautiful Bill Act signed into law, affecting corporate tax provisions
• August 7, 2025: Yelp announces Q2 2025 results with record revenue and AI initiative progress

Key Terms Explained

Revenue Revenue represents the total income generated by Yelp from all business activities during the quarter. The company's record $370 million in Q2 2025 revenue reflects a 4% year-over-year increase, demonstrating business momentum despite macroeconomic uncertainties. Revenue streams include advertising fees from local businesses, subscription services, and data licensing partnerships. This metric serves as the primary indicator of Yelp's business scale and growth trajectory, with Services categories contributing the majority of advertising revenue growth.

Services Services encompasses Yelp's fastest-growing business category, including Home, Local, Auto, Professional, Pets, Real Estate, Financial and Event Services. This segment generated $241 million in advertising revenue during Q2 2025, representing an 8% year-over-year increase. Services businesses typically require higher customer engagement and longer decision-making processes compared to restaurants or retail, making Yelp's review platform particularly valuable for consumer research. The category's strong performance reflects the digital transformation of local service providers seeking online visibility.

Advertising Advertising constitutes Yelp's primary revenue source, generating $354 million in Q2 2025 through pay-per-click campaigns, display advertisements, and sponsored placements. Local businesses purchase advertising to increase visibility in search results and attract customer inquiries. The advertising model operates on performance-based pricing, where businesses pay for consumer interactions such as website clicks, phone calls, or quote requests. Yelp's advertising effectiveness depends on matching relevant businesses with consumer search intent across various categories.

AI (Artificial Intelligence) AI technology powers Yelp's next-generation features, including natural language search, Yelp Assistant chatbot, and automated call answering services. The company's AI initiatives showed significant traction in Q2 2025, with project submissions through Yelp Assistant increasing 400% year-over-year. AI capabilities enable more sophisticated user interactions, moving beyond traditional keyword-based searches to conversational experiences. This technology transformation positions Yelp to compete with emerging AI-powered search platforms while enhancing user engagement and business lead quality.

EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) EBITDA measures Yelp's operational profitability by excluding non-operational expenses and accounting treatments. The company's adjusted EBITDA of $100 million in Q2 2025 represents a 27% margin, demonstrating efficient expense management and business model scalability. This metric helps investors evaluate Yelp's core business performance independent of capital structure decisions or accounting policies. Strong EBITDA generation supports continued investment in product development and strategic acquisitions while maintaining shareholder returns through share repurchases.

Quarter Quarter refers to the three-month financial reporting period, with Q2 2025 covering April through June 2025. Quarterly results provide regular insights into business performance trends, seasonal patterns, and strategic initiative progress. Yelp's Q2 2025 quarter showed record revenue achievement despite missing typical seasonal increases due to macroeconomic uncertainties. The quarterly reporting cycle enables management to adjust strategies, update guidance, and communicate progress on long-term objectives to investors and stakeholders.

Growth Growth measures year-over-year percentage increases in key business metrics, reflecting Yelp's expansion and market share gains. The company achieved 4% revenue growth in Q2 2025, with Services advertising showing 8% growth while Restaurant, Retail & Other segments declined 5%. Growth rates indicate business momentum and competitive positioning within the local advertising market. Sustained growth requires continuous product innovation, market expansion, and advertiser value creation, particularly as digital advertising markets mature and competition intensifies.

Margin Margin represents profitability as a percentage of revenue, indicating operational efficiency and pricing power. Yelp's 12% net income margin and 27% adjusted EBITDA margin in Q2 2025 both increased from prior-year periods, demonstrating improved cost management. Higher margins result from disciplined expense control, automation benefits, and revenue mix optimization toward higher-value Services categories. Margin expansion enables increased investment in growth initiatives while generating superior shareholder returns through improved earnings per share.

Business Business refers to the local establishments that advertise on Yelp's platform and the company's own operational performance. Yelp serves over 515,000 paying advertising locations across various categories, from restaurants to professional services. The platform's value proposition centers on connecting local businesses with potential customers through reviews, search visibility, and lead generation tools. Business success on Yelp depends on review quality, advertising investment, and customer service excellence, while Yelp's business model relies on delivering measurable results for these local establishments.

Year Year indicates the annual comparison period used to measure performance trends and business development. Year-over-year metrics provide context for quarterly results by accounting for seasonal variations and longer-term strategic impacts. Yelp's 2025 full-year guidance of $1.465-$1.475 billion revenue reflects management's expectations for continued growth despite economic uncertainties. Annual performance evaluation encompasses multiple quarters, strategic initiative outcomes, and market position changes, providing comprehensive assessment of business trajectory and competitive strength in the local advertising ecosystem.

Summary

Who: Yelp Inc. (NYSE: YELP), led by co-founder and CEO Jeremy Stoppelman and CFO David Schwarzbach, reported results to shareholders and the investment community.

What: Yelp announced record Q2 2025 net revenue of $370 million (4% growth), $44 million net income (16% growth), and $100 million adjusted EBITDA (10% growth), while expanding AI-powered features including Yelp Assistant and data licensing services.

When: The financial results were announced August 7, 2025, covering the quarter ended June 30, 2025, with an earnings webcast held at 2:00 p.m. PST.

Where: The earnings announcement was made from San Francisco, with results distributed through Yelp's Investor Relations website at yelp-ir.com, covering the company's operations across local business categories.

Why: The strong financial performance demonstrates Yelp's successful execution of its product-led strategy focused on Services categories and AI technology, despite macroeconomic uncertainties affecting advertiser spending in traditional categories like restaurants and retail.