Yelp Inc. (YELP): Solid 3Q Results & AI Transformation Progress, But Revenue Trends Remain Pressured w/Growth Investment; Underweight & $18 PT

Yelp delivered upside across 3Q results, though the implied 4Q outlook was mixed — the company lowered prior FY26 Revenue guidance by ~1% at the midpoint while raising the low end of FY26 Adj. EBITDA guidance by ~$5M. In 3Q, revenue declined -1% Y/Y to $371M (vs. guidance of $365M-$370M), while Adj. EBITDA of $92M (24.9% margin, -120bps Y/Y) exceeded high end of guidance by ~$17M, supported by marketing optimizations, higher capitalized software development, and favorable variable expenses. Underlying advertising trends remain pressured by less favorable macro conditions, with Services revenue declining -2% Y/Y and Restaurants, Retail & Other declining -13%. Services paid advertising locations declined Y/Y, while RR&O locations increased +3% Y/Y, largely driven by multi-location advertisers adding locations without a matching increase in spend per location. Request-a-Quote projects grew ~10% Y/Y, with YELP Assistant accounting for ~10% of submissions. Other revenue grew +82% to $34M, s