Executive Summary

Q2 FY25 delivered solid top-line and profitability: revenue $276.4M (+17% YoY), non-GAAP operating income $45.3M (16% margin), and non-GAAP diluted EPS $0.44; free cash flow reached a record $57.2M (21% of revenue) .
Revenue exceeded prior Q2 guidance ($273–$275M) issued in June; FY25 guidance was raised for non-GAAP operating income ($177–$182M from $157–$167M), non-GAAP EPS ($1.36–$1.39 from $1.22–$1.29), and free cash flow ($240M from $220M), while total revenue was maintained at $1.116–$1.121B and services mix lowered to ~4.5% (from 5%) .
Enterprise strength continued (largest quarterly expansion; enterprise net dollar retention ~120%), while churn ticked up slightly in smaller customer segments; DBNRR was 113% overall and ARR rose to $1.093B (+17% YoY) .
New pricing and packaging launched for new customers in June showed encouraging early “lower P, higher Q” behavior and monetization of previously free collaborators; management also enabled limited-time access to AI tools to all users through 12/31/2024 to accelerate adoption .
Consensus estimates from S&P Global were unavailable due to a mapping issue, but company beat guidance and raised full-year profitability/FCF, setting a positive narrative into ENGAGE and Q3; services mix shift to partners modestly trims revenue mix near term .

What Went Well and What Went Wrong

What Went Well

Enterprise momentum: “largest quarterly expansion in our company’s history” with enterprise NDRR ~120%; ARR reached $1.093B (+17% YoY) and customers >$100K ARR grew 23% YoY to 2,056 .
Profitability and cash generation: non-GAAP operating income $45.3M (16% margin), non-GAAP diluted EPS $0.44, and record free cash flow $57.2M (21% of revenue) .
Strategic product/pricing progress: new model launched in June for new customers with “lower P with a conforming Q or a higher Q” dynamic and limited-time AI access for all users to drive engagement through year-end .

What Went Wrong

SMB softness: full churn rate increased slightly to ~4.5% due to elevated churn in smaller segments; overall DBNRR moderated to 113% from 114% in Q1 and 116% in Q4 .
Services mix headwind: greater partner delivery led management to lower FY25 services revenue mix assumption to ~4.5% (from 5%), modestly trimming reported revenue mix despite underlying demand .
Margins in subscription vs total: subscription gross margin of 87% and total gross margin of 84% are strong, but reflect ongoing investment in modernization and AI as the company balances growth and profitability .

Financial Results

Metric	Q4 2024	Q1 2025	Q2 2025	Q2 2025 Consensus
Revenue ($USD Millions)	$256.9	$263.0	$276.4	N/A*
GAAP EPS ($)	N/A	$(0.06)	$0.06	N/A*
Non-GAAP Diluted EPS ($)	N/A	$0.32	$0.44	N/A*
Non-GAAP Operating Income ($USD Millions)	$39.6	$42.1	$45.3	N/A*
Non-GAAP Operating Margin (%)	15%	16%	16%	N/A*
Total Gross Margin (%)	85%	84%	84%	N/A*
Subscription Gross Margin (%)	88%	88%	87%	N/A*
Free Cash Flow ($USD Millions)	$56.3	$45.7	$57.2	N/A*

*Consensus unavailable: S&P Global data could not be retrieved due to mapping; values would be from S&P Global.

Segment breakdown:

Metric	Q4 2024	Q1 2025	Q2 2025
Subscription Revenue ($USD Millions)	$244.0	$249.1	$263.5
Professional Services Revenue ($USD Millions)	$12.9	$13.9	$12.9
Capabilities as % of Subscription (%)	34%	35%	35%

KPIs:

KPI	Q4 2024	Q1 2025	Q2 2025
ARR ($USD Billions)	$1.031	$1.056	$1.093
Dollar-Based Net Retention Rate (%)	116%	114%	113%
Avg ARR per Domain-Based Customer ($)	$9,672	$9,906	$10,291
Customers with ARR ≥ $100k (count)	1,904	1,970	2,056
Customers with ARR ≥ $50k (count)	3,924	4,028	4,140
Customers with ARR ≥ $5k (count)	N/A	19,977	20,198
Full Churn Rate (%)	4%	~4%	~4.5%

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Total Revenue	FY25	$1.116–$1.121B	$1.116–$1.121B	Maintained
Non-GAAP Operating Income	FY25	$157–$167M	$177–$182M	Raised
Non-GAAP EPS (Diluted)	FY25	$1.22–$1.29	$1.36–$1.39	Raised
ARR	FY25	Growth 14%–14.5%	$1.177–$1.180B (14.2%–14.5%)	Clarified/Updated
Free Cash Flow	FY25	$220M	$240M	Raised
Services Revenue Mix	FY25	~5% of total	~4.5% of total	Lowered
Total Revenue	Q3 FY25	N/A	$282–$285M	New
Non-GAAP Operating Income	Q3 FY25	N/A	$42–$44M	New
Non-GAAP EPS (Diluted)	Q3 FY25	N/A	$0.29–$0.31	New

Earnings Call Themes & Trends

Topic	Previous Mentions (Q4 2024, Q1 2025)	Current Period (Q2 2025)	Trend
Pricing & Packaging	Announced upcoming simplification to reduce friction and improve SMB conversion ; new model launching Jun 24 for new customers; modest near-term contribution, meaningfully accretive over time .	Model launched for new customers in June; early “lower P, higher Q” true-up behavior adds ARR; some existing customers may move early .	Improving execution
AI Initiatives	First AI features GA; >1/3 of enterprise customers used within weeks . In Q1, ~50% of enterprise plans used AI; launched Analyze Data .	~50% sequential growth in AI users; ~47k users saved ~1M hours; limited-time AI access for all users through Dec 31, 2024; minimal gross margin impact due to efficiency gains .	Accelerating adoption
Enterprise vs SMB	Enterprise strong; SMB pressure worsened in Q4; guided conservatively . Q1: enterprise fastest-growing; SMB trends consistent .	Enterprise NDRR ~120%; largest quarterly expansion; SMB churn modestly higher; full churn ~4.5% .	Enterprise strength; SMB soft
Services Mix/Partners	FY25 services ~5% .	Services delivery shifting to partners; FY25 services mix to ~4.5% .	Mix lower near-term
Share Repurchase	Authorized $150M; plan to commence and largely complete by FY25 Q4 .	Repurchased 918k shares for $40M in Q2; $110M remaining; program continues .	Ongoing
Macro/Bookings Linearity	Q4 macro pressure in SMB; conservative posture . Q1 bookings built through quarter .	Bookings linearity similar to prior quarter; momentum built through quarter .	Stable

Management Commentary

“Q2 was a strong quarter highlighted by continued growth in the enterprise… over 70 customers expanding their Smartsheet annualized recurring revenue by more than $100,000 this quarter.” — Mark Mader, CEO .
“We continue to see considerable strength in our enterprise segment highlighted by large deals, our largest quarterly expansion in our company's history and an enterprise NDRR that remains at 120%… we repurchased 918,000 shares for a total of $40 million.” — Pete Godbole, CFO .
“Lower P with a conforming Q or a higher Q… we were really pleased to see confirming data come out of that [first true-up week].” — Mark Mader on new pricing model .
“Smartsheet will grant limited time access to our AI tools to all users through December 31, 2024.” — Mark Mader on AI activation .
“We are raising our non-GAAP operating income… and raising our non-GAAP net income per share… We now expect services revenue to be around 4.5% of total revenue.” — Pete Godbole on FY25 guidance .

Q&A Highlights

Pricing model adoption and ARR impact: Management observed early positive true-up behavior (“more users, more value… more ARR”) and expects some existing customers to move early, contributing to bookings; monetization now includes previously free editors, while guests/viewers remain free .
AI rollout and cost: Company enabled AI access to all users for limited time; gross margin impact expected to be de minimis due to more efficient models; future plan to include AI in trial workflows .
Net retention trajectory: NRR expected to track down consistent with ARR guidance due to SMB pressure; enterprise NDRR remains strong (~120%) .
Services mix shift: FY25 services lowered to ~4.5% of total due to partner-delivered services; absent this shift, FY revenue guide would have increased .
Buyback cadence: Program continues through the year; $110M remaining authorization as of quarter-end .

Estimates Context

S&P Global consensus data for Q2 FY25 was unavailable due to a mapping issue, preventing direct comparisons to Wall Street estimates; however, the company exceeded its own Q2 revenue guidance ($276.4M vs $273–$275M) and raised FY25 profitability and free cash flow guidance, which typically prompts upward revisions to non-GAAP EPS and FCF models .
Management also added Q3 revenue guidance ($282–$285M), non-GAAP operating income ($42–$44M), and EPS ($0.29–$0.31), providing clearer near-term benchmarks for analysts .

Key Takeaways for Investors

Enterprise-led durability: Strong large-deal activity, record expansion, and enterprise NDRR ~120% underpin growth despite SMB headwinds; ARR rose to $1.093B (+17% YoY) .
Profitability and cash discipline: Raised FY25 non-GAAP operating income ($177–$182M) and EPS ($1.36–$1.39), and FCF ($240M), alongside active buybacks ($40M repurchased in Q2) .
Pricing model is a key catalyst: Early data supports “lower P, higher Q” thesis and monetization of previously free collaborators; expect accelerating license counts and capabilities cross-sell over time .
AI adoption accelerating: Broad activation through year-end and efficiency gains likely support engagement without margin drag; an adoption narrative into ENGAGE could be a near-term sentiment driver .
Near-term mix shift: Lower services mix (~4.5%) due to partner delivery reduces reported services revenue but supports ecosystem scale; topline revenue guide maintained .
Watch SMB churn and NRR: Overall DBNRR softened to 113% and churn ticked up in smaller segments; improvements hinge on product modernization and pricing transition progress .
Setup into Q3: Clear revenue/EPS guidance and ENGAGE event cadence give tangible checkpoints; execution on pricing transition and AI could be near-term trading catalysts .

Additional Documents

8-K earnings press release for Q2 FY25 (full financials, reconciliations, and guidance) .
Q2 FY25 earnings call transcript (prepared remarks and Q&A detail) .
Prior quarter references for trend analysis: Q1 FY25 8-K and call , Q4 FY24 call .
No additional company press releases beyond the Q2 earnings release were found in the period window; one third-party “shareholder investigation” notice was present but not issuer guidance .

Disclaimer on estimates: S&P Global consensus data for SMAR was unavailable due to a mapping issue; any consensus values would be retrieved from S&P Global if accessible.

SMARTSHEET INC (SMAR)·Q2 2025 Earnings Summary