SEMrush Holdings, Inc. (SEMR)·Q3 2025 Earnings Summary

Executive Summary

• Revenue grew 15% YoY to $112.1M; non-GAAP operating margin expanded to 12.6% and cash from operations rebounded to $21.9M (19.5% margin) . ARR rose $20M sequentially to $455.4M, driven by enterprise and AI product adoption .
• Versus consensus: revenue modestly beat ($112.08M vs $111.65M)* and EPS (S&P “Primary EPS”) beat ($0.111 vs $0.077); company’s GAAP diluted EPS was -$0.01, highlighting analyst focus on normalized EPS . Values retrieved from S&P Global.
• Q4 guide: revenue $117.5–$119.5M (midpoint +15.5% YoY) and ~12.5% non-GAAP operating margin; FY25 guide maintained at revenue $443.5–$445.5M, ~12% non-GAAP operating margin, ~12% FCF margin .
• Key catalysts: AI portfolio ARR more than doubled Q/Q, adding ~$10M; enterprise ARR grew 33% YoY; average ARR per paying customer rose to $4,000 (+17% YoY), while mix shift lowered total paying customers to ~114k .

What Went Well and What Went Wrong

What Went Well

• AI products gained significant traction: “AI portfolio ARR … more than doubling from Q2 to Q3,” adding ~$10M in ARR; more than 10% of customers now use at least one AI product .
• Enterprise momentum: enterprise ARR grew 33% YoY; customers spending >$50k annually rose 72% YoY; >$10k customers +30% YoY .
• Strong cash generation and margin: cash from operations $21.9M (19.5% margin) and non-GAAP operating margin 12.6% exceeded guidance . CFO: “Free Cash Flow was $17 million… margin of 15.2%” .

Management quotes:

• CEO: “Our Enterprise and AI products are becoming new revenue growth engines” .
• CEO on Semrush One: “A way to win in every search… all in a single tool” .
• CFO: “We achieved… non-GAAP operating margin of 12.6%, exceeding our guidance” .

What Went Wrong

• GAAP profitability: loss from operations (-$4.5M) and GAAP diluted EPS (-$0.01) despite non-GAAP strength; operating margin remained -4.0% .
• Mix and customer count: paying customers declined to ~114k as strategy focuses on higher-value segments (enterprise/AI) .
• FX headwind: guidance absorbs ~$10M incremental expense from euro strength (mix ~30% euro-denominated costs), masking underlying margin leverage .

Financial Results

Values retrieved from S&P Global.*

Beat/Miss vs Q3 consensus:

• Revenue: $112.08M vs $111.65M → modest beat* .
• EPS (S&P “Primary EPS”): $0.111 vs $0.077 → beat*. Note: Company reports GAAP diluted EPS of -$0.01 . Values retrieved from S&P Global.*

KPIs

Note: Net new ARR Q2 computed from ARR delta; company emphasized Q3 +$20M .

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• CEO strategic framing: “AI search is not replacing the SEO opportunity; it is compounding it… Semrush One offers marketers a way to win in every search… all in a single tool” .
• Data advantage: “27 billion keywords, 43 trillion backlinks, and over 800 million domains… assembled one of the largest prompt databases in the world” .
• CFO on margin and FX: “We are reiterating… ~12% for both non-GAAP operating margin and Free Cash Flow margin… guidance now absorbs an incremental expense headwind of approximately $10 million, resulting from recent exchange rate movements” .
• CFO on cash and FCF: “With $275.7 million in cash and equivalents and growing Free Cash Flow, we are well-positioned” .

Q&A Highlights

• Semrush One differentiation: Integrated workflows across SEO and AI; disruptive introductory pricing; unified visibility across traditional search and LLM platforms .
• ARR inflection vs Q2: Net new ARR rebounded strongly (+$20M), driven by AI adoption and enterprise product demand; expected to continue .
• 2026 drivers: Pure organic comp post-2024 acquisitions, multiple new products (AI Toolkit, AI Optimization, Site Intelligence), scaled enterprise sales capacity .
• Capital deployment: Prioritize organic investment in AI/enterprise; selective M&A; buybacks paused due to litigation .
• Seasonality/mix: Enterprise dynamics bias back-half strength; products increasingly link AI and SEO, making separation of growth drivers less relevant .

Estimates Context

• Q3 2025 consensus vs actual: Revenue estimate $111.65M vs actual $112.08M → modest beat*; EPS estimate $0.077 vs actual $0.111 (S&P “Primary EPS”) → beat*. Values retrieved from S&P Global.*
• Note: Company reported GAAP diluted EPS of -$0.01; analysts’ “Primary EPS” likely reflects normalized adjustments not disclosed per-share by the company . Given Q4 guide and AI/enterprise momentum, street models may need to reflect higher ARR exit rate and non-GAAP margin trajectory, while incorporating FX headwinds .

Key Takeaways for Investors

• Enterprise and AI are the new growth engines: AI ARR added ~$10M and doubled Q/Q; enterprise ARR +33% YoY; ARPU rising to $4,000 with underpenetrated AI and enterprise bases .
• Quality of revenue improving: Paying customers declined to ~114k as mix shifts upmarket, but net revenue retention stable overall (105%) and stronger in enterprise (~125%), supporting durable expansion .
• Margins and cash: Non-GAAP operating margin expanded to 12.6% and cash from operations margin rebounded to 19.5%; FY25 margins maintained despite FX headwinds .
• Guidance: Q4 revenue $117.5–$119.5M and ~12.5% non-GAAP margin; FY25 revenue $443.5–$445.5M, ~12% non-GAAP and ~12% FCF margin maintained .
• Competitive positioning: Deep data moat and brand in SEO extended to AI visibility; Semrush One creates a unified platform advantage across search and LLM ecosystems .
• Watch items: FX sensitivity (~30% costs in euros), litigation temporarily pausing buybacks, and continued CPC pressure at the low end noted in Q2 .
• Actionable: Lean into enterprise/AI adoption trajectory for estimate revisions; monitor Semrush One monetization and conversion, Q4 enterprise seasonality, and FY margin delivery relative to FX backdrop .