Yelp Reports 1% Revenue Increase to $361.5 Million, Net Income Declines 27%

Yelp Inc. reported a slight increase in net revenue for the first quarter of 2026, reaching $361.5 million, up 1% from $358.5 million in the same period last year. The company recorded a net income of $17.7 million, a decrease of 27% compared to $24.4 million in the prior year. The decline in profitability was attributed to increased operational costs, including a rise in sales and marketing expenses, which grew by 5% to $153 million, and a 10% increase in the cost of revenue, which reached $38.4 million. The company’s adjusted EBITDA for the quarter was $79.4 million, reflecting a margin of 22%, down from 24% in the previous year.

Yelp's financial performance was impacted by a decrease in advertising revenue from its Restaurants, Retail & Other (RR&O) categories, which fell by 11% year-over-year. This decline was partially offset by a 1% increase in revenue from Services categories. The company also experienced a 6% drop in the number of paying advertising locations, with both Services and RR&O categories contributing to this decrease. The overall economic environment, characterized by challenges for local businesses, has been a significant factor in these trends.

Strategically, Yelp made notable advancements in its artificial intelligence (AI) initiatives, including the acquisition of Hatch, an AI lead management platform, for approximately $271.2 million. This acquisition is expected to enhance Yelp's capabilities in AI-driven services. The company also reported that its AI-powered call answering service, Yelp Host, has surpassed an annual run rate of 1.5 million calls, indicating strong adoption of its AI tools. Additionally, Yelp has expanded its partnerships with platforms like OpenAI and Alexa, further extending its reach in the local discovery ecosystem.

Operationally, Yelp's cash and cash equivalents decreased to $110.4 million as of March 31, 2026, down from $216.1 million at the end of 2025. The company utilized $167.9 million in investing activities, primarily due to the Hatch acquisition. Yelp's total liabilities increased significantly to $382.2 million, largely due to the new revolving credit facility established in April 2023. Looking ahead, Yelp anticipates continued challenges in the advertising market but expects sequential revenue growth in the second quarter, driven by its expanding other revenue streams. The company is targeting an annual run rate of $250 million in other revenue by the end of 2028, as it continues to invest in AI and marketing initiatives.