Summary
Semrush's third quarter of fiscal 2025 showed a widening gap between growth and profitability. Revenue reached $112.1 million, up 15.1% from the prior-year quarter, and revenue for the first nine months of the year was $326.0 million, up 18.9%. Gross profit of $89.9 million rose 11.8% in the quarter. Gross margin, though, fell to 80.2% from 82.5%. Higher integration and data costs, more personnel, and greater depreciation all fed into cost of revenue during the period.
The bottom line flipped. Operating income of $1.7 million in the prior-year quarter turned into an operating loss of $4.5 million, and operating margin slid to (4.0)% from 1.8%. Net income attributable to Semrush of $1.1 million became a net loss of $2.1 million. Diluted earnings per share moved from $0.01 to a loss of $0.01 per share. Non-GAAP income from operations was $14.1 million, a 12.6% margin, against $12.1 million and 12.4% a year earlier. The gap between the GAAP loss and the non-GAAP profit comes from stock-based compensation, restructuring and other costs, and acquisition-related items that the company excludes.
Cash generation was the quarter's bright spot. Operating cash flow was $21.9 million, up from $8.1 million, and it reached $44.7 million for the first nine months, up from $35.1 million. Free cash flow, a non-GAAP measure, was $17.0 million at a 15.2% margin, compared with $6.2 million at 6.3% in the prior-year quarter, and $32.0 million year to date. Capital expenditures of $0.4 million were down from $0.5 million. Deferred revenue of $83.6 million rose 21.2%, and remaining performance obligations of $5.6 million climbed 375.4%.
Customer metrics cut both ways. ARR was $455.4 million as of September 30, 2025, up 14% from $400.7 million a year earlier. Dollar-based net revenue retention stood at 105%, down from 106% at December 31, 2024. Paying customers totaled roughly 114,000, a decline of about 2,000 during the quarter and below the roughly 117,000 reported a year earlier. Management pointed to continued softness among freelancers and less sophisticated users, macro pressure, rising paid search cost-per-click, and some consolidation caused by AI. ARR per paying customer rose to $4,000 from $3,414 as larger accounts carried more of the mix.
Enterprise demand is the counterweight. Customers spending more than $10,000 a year grew 30% year over year, and those spending over $50,000 grew more than 72%. Semrush launched Semrush One, which combines traditional SEO with AI search measurement, introduced an Enterprise Partner Program, and released Enterprise Site Intelligence and an Enterprise AI Visibility Index. AI portfolio ARR more than doubled from the second quarter of 2025. Headcount rose 7% in sales and marketing, 8% in research and development, and 11% in general and administrative versus the prior-year quarter, and the related personnel costs are what pushed the quarter to a GAAP operating loss.
Guidance points to similar top-line momentum with steadier margins. For the fourth quarter of 2025, management expects revenue growth at the mid-point of approximately 15.5% year over year and a non-GAAP operating margin of approximately 12.5%. For the full fiscal year 2025, guidance calls for revenue growth at the mid-point of approximately 18%, a non-GAAP operating margin of approximately 12%, and a free cash flow margin of approximately 12%. A $150.0 million share repurchase program was authorized on July 31, 2025, and no shares were bought back in the quarter. The main risks are the shrinking low-end customer base, cost pressure from data and personnel, a valuation allowance that keeps U.S. tax benefits from reaching the income statement, and the execution demands of a fast-moving AI product cycle.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q3 FY2025 | Q2 FY2025 | QoQ | Q3 FY2024 | YoY |
|---|---|---|---|---|---|
| Revenue | $112.1M | $108.9M | +2.9% | $97.4M | +15.1% |
| Gross profit | $89.9M | $87.8M | +2.4% | $80.3M | +11.8% |
| Gross margin | 80.2% | 80.6% | -0.4 pp | 82.5% | -2.3 pp |
| Research & development | $25.7M | $23.8M | +8.0% | $22.2M | +15.9% |
| Sales & marketing | $44.3M | $45.0M | -1.5% | $35.7M | +24.2% |
| General & administrative | $24.3M | $23.3M | +4.2% | $20.8M | +17.0% |
| Total operating expenses | $94.3M | $92.1M | +2.4% | $78.6M | +20.0% |
| Operating income (loss) | -$4.5M | -$4.3M | -3.3% | $1.7M | -363.3% |
| Operating margin | -4.0% | -4.0% | -0.0 pp | 1.8% | -5.8 pp |
| Net income (loss) | -$2.4M | -$6.8M | +64.7% | $718.0K | -433.6% |
| Net margin | -2.1% | -6.2% | +4.1 pp | 0.7% | -2.9 pp |
| Diluted EPS | -$0.01 | -$0.04 | +$0.03 | $0.01 | -$0.02 |
Risks
MD&A reports a decrease of approximately 2,000 paying customers during FY2025 Q3, primarily due to continued softness at the lower end of the market, which the company attributes to macroeconomic pressures and industry-wide increases in paid search cost-per-click. It anticipates temporary pressures on dollar-based net revenue retention as that softness continues, and net revenue retention was approximately 105% as of September 30, 2025 versus 106% as of December 31, 2024.
The filing cites some consolidation in the market from AI as a contributor to lower-end softness and the paying customer decrease in FY2025 Q3, even as the company invests in Enterprise AIO and AI Toolkits.
Gross margin declined to 80.2% in FY2025 Q3 from 82.5% in FY2024 Q3, down 2.3 pp, and operating margin declined to -4.0% from 1.8%, down 5.8 pp, as operating income swung to a loss of $4.49M from income of $1.70M.
Net income attributable to the company swung to a loss of $2.14M in FY2025 Q3 from income of $1.09M in FY2024 Q3, and diluted EPS declined to -$0.01 from $0.01. Year to date, net loss was $7.86M versus income of $4.89M, and diluted EPS declined to -$0.05 from $0.03.
Cost of revenue increased 30% in FY2025 Q3 and 35% year to date, driven by integration and data costs and AI inferencing costs, among other items, outpacing revenue growth and pressuring gross margin.
Sales and marketing expense rose 24% in FY2025 Q3 and 25% year to date, with headcount up 7% and 12%, and MD&A warns that new Enterprise sales personnel require training and may take several months or more to achieve productivity.
Stock-based compensation expense increased to $12.97M in FY2025 Q3 from $7.58M in FY2024 Q3, and to $35.52M year to date from $19.86M, contributing to GAAP operating losses while being excluded from non-GAAP income from operations.
Provision for income taxes decreased 98% in FY2025 Q3 and 29% year to date, and the company maintains a valuation allowance against U.S. net deferred tax assets; any future reversal is subject to actual performance and other considerations.
Other income, net decreased 26% in FY2025 Q3 and 6% year to date, with the year-to-date decline primarily driven by a $0.6M unfavorable change in foreign currency exchange gain or loss.
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
Summary, forecast, risks and KPIs are extracted from SEMrush Holdings, Inc.'s SEC filings for Q3 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.