What happened

Shares of SEMrush Holdings (SEMR 3.48%) were pulling back this week after the ad-targeting software company posted in-line results in its third-quarter earnings report, but offered disappointing guidance.

As of Thursday's close, the stock was down 24.5% for the week.

So what

Shares of SEMrush fell every day this week as investors seem to be questioning the company's valuation in the wake of the latest earnings report and after the Federal Reserve said that a pivot on interest rate hikes in the near term was unlikely.

In its third-quarter earnings report Monday night, SEMrush said revenue rose 34% to $65.8 million, which topped estimates at $64 million. The company finished the quarter with 94,000 paying customers, up 17% from the quarter a year ago, and it said annual recurring revenue was up 33% to $267 million, in line with its revenue under generally accepted accounting principles (GAAP).

Dollar-based net revenue retention, which accounts for the last four quarters, was 122%, down from 125% in the second quarter, which means that revenue from existing customers increased 22%.

On the bottom line, the company reported a GAAP loss per share of $0.06, which was better than the consensus at $0.09.

CEO Oleg Shchegolev's comments may explain why the stock is down sharply since the report snce he seemed to predict slowing growth ahead:

We delivered solid growth despite a more challenging demand environment. We saw steady new customer growth, which was partially offset by lower expansion from existing customers. Interest in our products remains high, however at the moment, customers are more cautious and closely scrutinizing their spending.

Now what

SEMrush called for slower growth in the fourth quarter, forecasting a top-line increase of 25% to 26% to $67.25 million to $67.75 million, which was the below the conensus at $68.2 million. It also called for an adjusted net loss of $11.5 million to $12.5 million, or a per-share loss of $0.08.

Like other software-as-a-service stocks, SEMrush shares are down sharply over the past year as growth has slowed. While the company, which helps businesses improve ad targeting and reach the right audience, looks promising, it's likely to struggle as the ad market retrenches.