Marketing analytics software Semrush (NYSE: SEMR) met Wall Street’s revenue expectations in Q2 CY2025, with sales up 19.7% year on year to $108.9 million. On the other hand, next quarter’s revenue guidance of $111.6 million was less impressive, coming in 2.9% below analysts’ estimates. Its GAAP loss of $0.04 per share was significantly below analysts’ consensus estimates.
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Semrush (SEMR) Q2 CY2025 Highlights:
- Revenue: $108.9 million vs analyst estimates of $108.8 million (19.7% year-on-year growth, in line)
- EPS (GAAP): -$0.04 vs analyst estimates of $0.02 (significant miss)
- Adjusted Operating Income: $11.96 million vs analyst estimates of $12.01 million (11% margin, in line)
- The company dropped its revenue guidance for the full year to $444.5 million at the midpoint from $450.5 million, a 1.3% decrease
- Operating Margin: -4%, down from 3.7% in the same quarter last year
- Free Cash Flow was -$3.57 million, down from $18.51 million in the previous quarter
- Customers: 116,000, down from 118,000 in the previous quarter
- Net Revenue Retention Rate: 105%, down from 106% in the previous quarter
- Market Capitalization: $1.26 billion
“We posted strong revenue growth in the second quarter and were especially pleased by the accelerated adoption of our AI and Enterprise products,” said Bill Wagner, CEO.
Company Overview
Started by Oleg Shchegolev while still in university, Semrush (NYSE: SEMR) is a software-as-a-service platform that helps companies optimize their search engine and content marketing efforts.
Revenue Growth
A company’s long-term sales performance can indicate its overall quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Over the last three years, Semrush grew its sales at a decent 22.9% compounded annual growth rate. Its growth was slightly above the average software company and shows its offerings resonate with customers.
This quarter, Semrush’s year-on-year revenue growth was 19.7%, and its $108.9 million of revenue was in line with Wall Street’s estimates. Company management is currently guiding for a 14.6% year-on-year increase in sales next quarter.
Looking further ahead, sell-side analysts expect revenue to grow 18.5% over the next 12 months, a deceleration versus the last three years. Despite the slowdown, this projection is admirable and indicates the market sees success for its products and services.
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Customer Retention
One of the best parts about the software-as-a-service business model (and a reason why they trade at high valuation multiples) is that customers typically spend more on a company’s products and services over time.
Semrush’s net revenue retention rate, a key performance metric measuring how much money existing customers from a year ago are spending today, was 106% in Q2. This means Semrush would’ve grown its revenue by 6% even if it didn’t win any new customers over the last 12 months.
Semrush has a decent net retention rate, showing us that its customers not only tend to stick around but also get increasing value from its software over time.
Key Takeaways from Semrush’s Q2 Results
We struggled to find many positives in these results. Its full-year revenue guidance was lowered and slightly missed and its revenue guidance for next quarter fell short of Wall Street’s estimates. Overall, this was a weaker quarter. The stock traded down 13.6% to $7.99 immediately after reporting.
Semrush’s latest earnings report disappointed. One quarter doesn’t define a company’s quality, so let’s explore whether the stock is a buy at the current price. What happened in the latest quarter matters, but not as much as longer-term business quality and valuation, when deciding whether to invest in this stock. We cover that in our actionable full research report which you can read here, it’s free.
