Shares of Yelp (YELP) plunged 7.26% in pre-market trading on Friday, despite the company reporting better-than-expected second-quarter results. The stark contrast between the positive earnings report and the stock's negative reaction highlights growing investor concerns about the company's future outlook and competitive positioning.

For the quarter ended June 30, Yelp reported earnings of $0.67 per diluted share, significantly surpassing the FactSet analyst consensus of $0.51. Revenue also beat expectations, coming in at $370.4 million compared to the anticipated $365.9 million. However, these strong results were overshadowed by the company's forward-looking statements and analyst commentary.

Yelp slightly lowered its full-year 2025 net revenue guidance to a range of $1.47 billion to $1.48 billion, down from the previous forecast of $1.47 billion to $1.49 billion. This adjustment, albeit minor, suggests potential headwinds in the coming quarters. Adding to the pessimism, a Bank of America Securities analyst revisited the stock with a cautious outlook, citing structural and competitive challenges facing the company. These factors appear to be overshadowing the positive Q2 performance, leading to the significant pre-market selloff as investors reassess Yelp's long-term prospects in an increasingly competitive digital landscape.