Summary
Semrush closed the second quarter of fiscal 2025 with revenue of $108.9 million, up 19.7% from the prior-year quarter. Year-to-date revenue reached $213.9 million, up 21.0%. Gross profit of $87.8 million rose 15.5% in the quarter, but gross margin slipped to 80.6% from 83.6% a year earlier as cost of revenue grew faster than the top line. Integration and data costs, personnel, hosting and merchant fees all pushed that line higher. Annual recurring revenue was $435.3 million as of June 30, 2025, up 15% year over year, and the company counted roughly 116,000 paying customers.
Profitability swung the other way. Loss from operations was $4.34 million for the quarter, against income from operations of $3.39 million in the prior-year quarter, and the operating margin fell to negative 4.0% from 3.7%. Net loss attributable to the company was $6.57 million, versus net income of $1.66 million a year earlier, and diluted loss per share was $0.04 compared with diluted earnings per share of $0.01. For the first six months of the year, the operating loss was $4.42 million and the net loss attributable to the company was $5.72 million.
Higher spending explains much of the gap. Headcount rose 16% in sales and marketing, 12% in research and development and 19% in general and administrative versus the prior-year quarter, and non-cash compensation moved up sharply. On a non-GAAP basis, income from operations was $12.0 million for an 11.0% margin, compared with $12.2 million and 13.4% a year earlier.
Cash generation thinned out. Operating cash flow was $0.68 million in the quarter, down 94.4% from $12.14 million in the prior-year quarter. For the first six months, operating cash flow of $22.79 million was down 15.3% from $26.92 million. Capital expenditures of $0.60 million for the quarter compared with $2.15 million a year earlier. Free cash flow, a non-GAAP measure that also subtracts capitalized internal-use software costs, was negative $3.6 million for the quarter, after positive $7.6 million a year earlier.
Deferred revenue ended the quarter at $81.73 million, up 22.7% from a year earlier, and remaining performance obligations rose to $3.01 million from $1.21 million. The customer base keeps tilting toward larger accounts. Customers paying more than $50,000 a year grew 83% year over year and those paying more than $10,000 grew 35%. Dollar-based net revenue retention was 105%, compared with 106% at December 31, 2024. ARR per paying customer rose to $3,756 from $3,253.
The soft spot sits at the low end. Semrush lost roughly 2,000 paying customers during the quarter, mostly freelancers and less sophisticated users who have historically churned the most, leaving the count near 116,000. Management tied the decline to macroeconomic pressure and an increase in paid-search cost per click. That same pressure drove a lower outlook. Third-quarter revenue guidance is $111.1 million to $112.1 million, roughly 15% growth at the midpoint, with a non-GAAP operating margin near 11.5%. For the full fiscal year 2025, revenue guidance is $443.0 million to $446.0 million, about 18% growth at the midpoint, with a non-GAAP operating margin near 12% and a free cash flow margin near 12%.
A $150 million share repurchase program, authorized on July 31, 2025, carries no time limit and can be suspended or ended at any time. Management also flagged a possible reversal of the valuation allowance on U.S. deferred tax assets if results hold, and it is still assessing the U.S. tax legislation enacted in July 2025. The risks it names are demand softness at the low end, foreign exchange swings and the need for enterprise and AI products to offset churn in the smaller customer tiers.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q2 FY2025 | Q1 FY2025 | QoQ | Q2 FY2024 | YoY |
|---|---|---|---|---|---|
| Revenue | $108.9M | $105.0M | +3.7% | $91.0M | +19.7% |
| Gross profit | $87.8M | $85.1M | +3.1% | $76.0M | +15.5% |
| Gross margin | 80.6% | 81.1% | -0.5 pp | 83.5% | -2.9 pp |
| Research & development | $23.8M | $21.9M | +8.6% | $19.3M | +23.4% |
| Sales & marketing | $45.0M | $41.3M | +9.0% | $35.0M | +28.6% |
| General & administrative | $23.3M | $22.0M | +6.0% | $18.3M | +27.3% |
| Total operating expenses | $92.1M | $85.2M | +8.1% | $72.6M | +26.9% |
| Operating income (loss) | -$4.3M | -$74.0K | -5771.6% | $3.4M | -228.0% |
| Operating margin | -4.0% | -0.1% | -3.9 pp | 3.7% | -7.7 pp |
| Net income (loss) | -$6.8M | $655.0K | -1134.7% | $1.4M | -597.9% |
| Net margin | -6.2% | 0.6% | -6.8 pp | 1.5% | -7.7 pp |
| Diluted EPS | -$0.04 | $0.01 | -$0.05 | $0.01 | -$0.05 |
Risks
Gross margin declined to 80.6% in FY2025 Q2 from 83.6% in FY2024 Q2, down 2.9 pp, and operating margin fell to -4.0% from 3.7%, down 7.7 pp, as operating income swung to a loss of $4.35 million from income of $3.39 million. Cost of revenue rose 41% in the quarter against revenue growth of 19.7%, driven by higher integration and data costs and personnel costs.
Operating expenses increased across all categories in FY2025 Q2, with sales and marketing up 29%, research and development up 23%, and general and administrative up 27% versus FY2024 Q2, driven by headcount increases of 16%, 12%, and 19%, respectively, and higher stock-based compensation. This spending contributed to the swing to an operating loss and to operating cash flow decreasing 94.4% to $0.68 million in FY2025 Q2.
During the three months ended June 30, 2025, the company experienced a decrease of approximately 2,000 paying customers, primarily due to softness at the lower end of the market where freelancers and less sophisticated users have historically had the highest churn rate. Management attributed this softness to macro-economic pressures and increases in paid search cost-per-click in the fiscal quarter, and dollar-based net revenue retention rate was approximately 105% as of June 30, 2025 compared with 106% as of December 31, 2024.
Under the newly announced 2025 Repurchase Program, the company is authorized, but not obligated, to purchase up to $150.0 million of Class A common stock. The program may be suspended, modified, or terminated at any time, and repurchases could increase trading price volatility, reduce cash reserves, and not enhance long-term shareholder value.
The company is investing in Enterprise AIO and AI Toolkits and says its product development organization is critical to enhancing differentiation and retention in an evolving landscape. Failure to keep pace with AI-powered search platforms or enterprise AI demands could weaken retention and cross-sell momentum.
The provision for income taxes increased 2% in FY2025 Q2 and 5% in FY2025 year to date compared with the prior-year periods, primarily due to increased profits in foreign subsidiaries, the non-deductibility of certain equity awards, and required capitalization of research and development costs. The One Big Beautiful Bill Act enacted on July 4, 2025 has multiple effective dates and the company is still assessing its impact.
SaaS KPIs
All quarters →ARR per Paying Customer
Paying Customers
ARR
Dollar-Based Net Revenue Retention
Free cash flow
Free cash flow margin
Non-GAAP operating margin
Non-GAAP income from operations
Customers Paying More Than $10,000 Annually
Summary, forecast, risks and KPIs are extracted from SEMrush Holdings, Inc.'s SEC filings for Q2 FY2025 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 6, 2026.