Yelp (YELP)

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 GAAP profit of $0.61 per share was 13.9% above analysts’ consensus estimates.

Company Overview

Founded by PayPal alumni Jeremy Stoppelman and Russel Simmons, Yelp (NYSE:YELP) is an online platform that helps people discover local businesses through crowd-sourced reviews.

Businesses must meet their customers where they are, which over the past decade has come to mean on social networks. In 2020, users spent over 2.5 hours a day on social networks, a figure that has increased every year since measurement began. As a result, businesses continue to shift their advertising and marketing dollars online.

A company’s long-term performance is an indicator of its overall quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Over the last three years, Yelp grew its sales at a tepid 7.1% compounded annual growth rate. This was below our standard for the consumer internet sector and is a tough starting point for our analysis.

This quarter, Yelp’s $360 million of revenue was flat year on year and in line with Wall Street’s estimates.

Looking ahead, sell-side analysts expect revenue to grow 2.8% over the next 12 months, a deceleration versus the last three years. This projection doesn't excite us and implies its products and services will see some demand headwinds.

For social network businesses like Yelp, gross profit tells us how much money the company gets to keep after covering the base cost of its products and services, which typically include customer service, data center, and other infrastructure expenses.

Yelp’s gross margin is one of the highest in the consumer internet sector, an output of its asset-lite business model and strong pricing power. It also enables the company to fund large investments in product and marketing during periods of rapid growth to achieve higher profits in the future. As you can see below, it averaged an elite 90.7% gross margin over the last two years. That means Yelp only paid its providers $9.26 for every $100 in revenue.

Yelp produced a 90% gross profit margin in Q4, in line with the same quarter last year. On a wider time horizon, the company’s full-year margin has remained steady over the past four quarters, suggesting its input costs have been stable and it isn’t under pressure to lower prices.

Consumer internet businesses like Yelp grow from a combination of product virality, paid advertisement, and incentives (unlike enterprise software products, which are often sold by dedicated sales teams).

Yelp does a decent job acquiring new users, spending 44.8% of its gross profit on sales and marketing expenses over the last year. This decent efficiency indicates relatively solid competitive positioning, giving Yelp the freedom to invest its resources into new growth initiatives.

Investors frequently analyze operating income to understand a business’s core profitability. Similar to operating income, EBITDA is a common profitability metric for consumer internet companies because it removes various one-time or non-cash expenses, offering a more normalized view of profit potential.

Yelp has been a well-oiled machine over the last two years. It demonstrated elite profitability for a consumer internet business, boasting an average EBITDA margin of 25.3%. This result isn’t surprising as its high gross margin gives it a favorable starting point.

Analyzing the trend in its profitability, Yelp’s EBITDA margin rose by 2.6 percentage points over the last few years, as its sales growth gave it operating leverage.

This quarter, Yelp generated an EBITDA margin profit margin of 23.8%, down 4.1 percentage points year on year. Since Yelp’s EBITDA margin decreased more than its gross margin, we can assume it was less efficient because expenses such as marketing, R&D, and administrative overhead increased.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Yelp’s EPS grew at an astounding 64.8% compounded annual growth rate over the last three years, higher than its 7.1% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

We can take a deeper look into Yelp’s earnings quality to better understand the drivers of its performance. As we mentioned earlier, Yelp’s EBITDA margin declined this quarter but expanded by 2.6 percentage points over the last three years. Its share count also shrank by 13.4%, and these factors together are positive signs for shareholders because improving profitability and share buybacks turbocharge EPS growth relative to revenue growth.

In Q4, Yelp reported EPS of $0.61, down from $0.62 in the same quarter last year. Despite falling year on year, this print easily cleared analysts’ estimates. Over the next 12 months, Wall Street expects Yelp’s full-year EPS of $2.26 to grow 19.2%.

Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.

Yelp has shown robust cash profitability, driven by its attractive business model that enables it to reinvest or return capital to investors while maintaining a cash cushion. The company’s free cash flow margin averaged 19.9% over the last two years, quite impressive for a consumer internet business.

Taking a step back, we can see that Yelp’s margin expanded by 8.7 percentage points over the last few years. This shows the company is heading in the right direction, and we can see it became a less capital-intensive business because its free cash flow profitability rose more than its operating profitability.

Yelp’s free cash flow clocked in at $72.27 million in Q4, equivalent to a 20.1% margin. This result was good as its margin was 3.5 percentage points higher than in the same quarter last year, building on its favorable historical trend.

Companies with more cash than debt have lower bankruptcy risk.

Yelp is a profitable, well-capitalized company with $319.4 million of cash and $24.88 million of debt on its balance sheet. This $294.5 million net cash position is 20.6% of its market cap and gives it the freedom to borrow money, return capital to shareholders, or invest in growth initiatives. Leverage is not an issue here.

We enjoyed seeing Yelp beat analysts’ EBITDA expectations this quarter. On the other hand, its full-year revenue guidance missed and its full-year EBITDA guidance fell short of Wall Street’s estimates. Overall, this quarter could have been better. The stock traded down 6.2% to $21.40 immediately after reporting.

Updated: February 12, 2026 at 9:30 PM EST

Before investing in or passing on Yelp, we urge you to understand the company’s business quality (or lack thereof), valuation, and the latest quarterly results - in that order.

In our opinion, Yelp is a solid company. Although its revenue growth was uninspiring over the last three years and analysts expect growth to slow over the next 12 months, its admirable gross margins are a wonderful starting point for the overall profitability of the business. Plus, Yelp’s impressive EBITDA margins show it has a highly efficient business model.

Yelp’s EV/EBITDA ratio based on the next 12 months is 3.2x. This valuation is reasonable, but the company’s shakier fundamentals present too much downside risk. We're pretty confident there are superior stocks to buy right now.

Wall Street analysts have a consensus one-year price target of $33.38 on the company (compared to the current share price of $21.92).