Semrush (SEMR 1.23%), a software company specializing in digital marketing analytics, released its Q2 2025 results on August 4, 2025. The company reported GAAP revenue of $108.9 million, up nearly 20% year over year (GAAP) and just ahead of the $108.82 million (GAAP) expected by analysts. Cash generation (GAAP cash flow from operations) declined year over year. Operating margin compressed and customer count dipped slightly, though Large enterprise customer metrics improved, with customers paying more than $50,000 annually increasing 83% year-over-year. The quarter showed mixed trends with healthy revenue expansion offset by tighter profitability and new pressure at the smaller customer end.

About Semrush and Its Key Focuses

Semrush is a digital marketing software platform that helps companies with search engine optimization (SEO), content marketing, and online visibility. Its core technology gathers and analyzes data across websites and keywords, helping marketers understand their online presence and improve digital campaigns.

The company’s recent business strategy focuses on deepening its proprietary technology, driving product innovation—especially with generative artificial intelligence—and expanding its reach with enterprise clients. Customer acquisition and retention, ongoing platform development, and strategic acquisitions round out its success factors.

Quarter in Review: Data and Drivers

GAAP revenue surpassed $100 million for the first time. Revenue was $108.9 million, up 20% year-over-year. Operating margin (GAAP) moved from positive 3.7% in Q2 2024 to a loss of (4.0)%, with GAAP operating loss was $4.3 million. On a Non-GAAP basis, operating income was $12.0 million—nearly flat year over year—but the non-GAAP operating margin contracted to 11.0%. Analysts note that GAAP operating expenses, especially research and development (R&D) and sales and marketing, rose faster than GAAP revenue, partly due to a large jump in stock-based compensation, which nearly doubled from a year prior.

Annual recurring revenue (ARR), a key metric for subscription software companies, climbed 15% year-over-year to $435.3 million. However, the number of paying customers declined sequentially to approximately 116,000 from approximately 118,000.

Enterprise growth stood out: customers spending over $50,000 annually increased by 83% year over year, while Semrush customers who pay more than $10,000 annually grew by 35%.

Product development stayed in focus, with launches such as AI Optimization—an enterprise solution for brand visibility in AI-powered search environments—and new AI toolkits for conversational search. These innovations are intended to maintain Semrush’s competitive edge, especially as the use of artificial intelligence in digital marketing accelerates.

Dollar-based net revenue retention ended at 105%, a tick below management’s previous target range. Management explained that this metric, which is slow to change and measured over a 24-month period, reflected softness in the SMB segment but noted strong adoption and cross-sell activity with enterprise accounts.

One-time actions included the debut of a $150 million share repurchase authorization. This indicates confidence in the business’s cash position and future.

The company provides an SEO platform with features such as keyword research, competitor tracking, site auditing, and analytics for marketers. The launch of its AI Optimization product family—a set of enterprise solutions designed for brand presence in AI-driven search—reflects a strategy to attract larger organizations seeking cutting-edge capabilities.

The platform’s new AI Toolkits help smaller businesses and freelancers manage their digital exposure in emerging AI-powered environments. Management reported rapid uptake of these entry-level products, backed by the company’s expanding trove of digital marketing data.

Looking Ahead: Guidance and Investor Watch Points

Management updated its guidance for the rest of fiscal 2025. Expected Q3 2025 revenue is $111.1 to $112.1 million, about 15% higher than a year ago at the midpoint. Non-GAAP operating margin is projected near 11.5%. The company revised full-year 2025 revenue outlook to $443.0–$446.0 million, representing approximately 18% year-over-year growth at the midpoint, down from a previous $448.0–$453.0 million range. Non-GAAP operating margin is anticipated to be approximately 12% for FY2025, and free cash flow margin is also forecast at approximately 12% (non-GAAP) for FY2025.

The reduced outlook reflects ongoing softness among smaller businesses, impacted by rising paid-search cost per click. Enterprise revenue targets remain in place, with expectations for continued growth as the company rolls out additional AI-driven solutions. Share repurchases may also become a growing feature of capital deployment as the year progresses.

SEMR does not currently pay a dividend.

Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.