Yelp enters its third-quarter report with an odd mismatch between story and stock. Last quarter, management sounded more confident than it had in some time, pointing to stabilizing advertiser counts, healthier ad clicks and booming growth in newer businesses like Hatch, Yelp Host and data licensing. The market shrugged that off and then some: the shares have fallen about 32% since the last report while the S&P 500 sat essentially flat. The question on November 5 is whether the operating recovery management described is real enough to matter while profits are deliberately being squeezed.
The Street expects earnings of $0.43 a share, roughly 30% below the $0.61 posted a year ago, on revenue of $368.9 million, down about 1.9%. That earnings decline is largely self-inflicted. Management guided third-quarter adjusted EBITDA to just $70 million to $75 million, well below the $98 million of a year earlier and the $91 million in the second quarter, as it spends more on Hatch, consumer marketing and AI initiatives. Revenue consensus sits in the upper half of the company's $365 million to $370 million outlook, a reasonable bar given Yelp beat the top of its range by $6 million in the first quarter and $8 million in the second. Another beat of that size would be expected rather than celebrated. The full-year picture is more telling: consensus of $1.46 billion lands at the bottom of a range whose high end was shaved by $5 million last quarter, which leaves an implied fourth quarter somewhere in the mid-$350 million area. Analysts are effectively pricing in little help from the recovery narrative.
That narrative rests on a few specific metrics. Paying advertising locations improved to 510,000, down only 1% year over year after a 6% drop in the first quarter, and ad clicks narrowed their decline to 5% from 10%. Management credited Google core updates that leaned into user-generated content, giving Yelp an organic traffic tailwind at a time when peers have complained about AI overviews siphoning clicks. If locations hold near flat and click declines keep shrinking, the case for a 2027 revenue inflection gains real weight. If clicks slip back toward double-digit declines, the second quarter will look like a blip, particularly with restaurant, retail and other ad revenue still falling around 10% and macro softness starting to touch the services business.
Other revenue is the bright spot to test. It nearly doubled to a record $33 million last quarter, but Hatch run-rate growth slowed to 59% from 92% and the team expansion caused what management described as an adjustment period. Steady sequential dollar growth in Hatch would ease concerns about deceleration. Yelp Host, which tripled its call run rate to 2.4 million between January and July and added OpenTable and point-of-sale ordering integrations, and the ChatGPT data licensing relationship, with Request-a-Quote integration coming, are the newer catalysts that need visible follow-through.
Sentiment has improved notably, with readings now only mildly bearish versus deeply negative heading into the last report, yet the stock trades at $18.42, well below its 200-day average near $23.86 and close to the $17.27 low of its post-earnings range. With buybacks paused until 2027 to pay down the revolver, the 15% share count reduction that has cushioned per-share results will no longer do as much lifting.
Ultimately, this report hinges on whether the advertiser and traffic stabilization from the second quarter carries forward. Margin compression was flagged in advance; what Yelp must show is that the spending is buying durable demand, not just funding a slower decline.