SEMR Q1 Earnings Call: Enterprise and AI Products Lead Growth, Profitability Misses Expectations

Marketing analytics software Semrush (NYSE:SEMR) reported Q1 CY2025 results beating Wall Street’s revenue expectations, with sales up 22.4% year on year to $105 million. The company expects next quarter’s revenue to be around $108.7 million, close to analysts’ estimates. Its non-GAAP profit of $0.02 per share was 74.9% below analysts’ consensus estimates.

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StockStory’s Take

Semrush’s first quarter results reflected a pivotal phase for the company, as management attributed revenue growth primarily to expanding adoption of its Enterprise SEO Solution and a focus on higher-value customers. CEO Bill Wagner pointed to the strong performance of Semrush’s enterprise offerings, noting nearly 200 paying enterprise customers with average annual recurring revenue (ARR) per customer exceeding previous expectations. Wagner also highlighted early success with the company’s new AI Toolkit, which he described as one of Semrush’s fastest-growing products. CFO Brian Mulroy emphasized that this performance was driven by both increased average revenue per customer and continued customer base growth, supported by cross-sell and up-sell strategies. Management acknowledged intentional shifts toward larger, higher-quality accounts, stating this was expected to result in different seasonal trends compared to prior years.

Looking ahead, Semrush’s outlook is anchored by management’s conviction that AI-driven search and enterprise solutions will be major growth drivers in the coming quarters. Wagner described AI as a “once-in-a-generation opportunity” and outlined plans to double down on AI product innovation, including the upcoming launch of its AI Optimization product for enterprise customers. He stated, “We expect Semrush will become the go-to source companies will turn to, to analyze, monitor and proactively shape their brand presence within these new AI-driven search environments.” Mulroy reaffirmed the company’s commitment to expanding its enterprise product suite and noted that new solutions, along with enhancements to customer onboarding and data capabilities, are expected to improve adoption and retention. Management cautioned, however, that ongoing macroeconomic and geopolitical uncertainties could lead to elongated sales cycles and deferred customer spending, which are reflected in the company’s reiterated guidance.

Key Insights from Management’s Remarks

Semrush’s first quarter performance was propelled by enterprise customer momentum, rapid uptake of new AI products, and ongoing initiatives to streamline user onboarding and product accessibility.

• Enterprise Segment Expansion: Management credited the strong quarter to higher adoption of the Enterprise SEO Solution, with nearly 200 enterprise customers and average ARR per enterprise account around $60,000, surpassing initial targets. The company views the enterprise market as a significant long-term growth driver.

• AI Product Traction: The introduction of the AI Toolkit, targeting smaller businesses and freelancers, was identified as one of the fastest-growing product launches in the company’s history. Management cited over $4 million in ARR from AI products within a short timeframe and emphasized the potential of AI Optimization, now in open beta for enterprise customers.

• Shift Toward Higher-Value Customers: CFO Brian Mulroy explained that Semrush intentionally shifted focus toward attracting and retaining larger, higher-value customers, particularly in the enterprise segment, resulting in changes to seasonal sales patterns and a higher average revenue per customer.

• Enhanced Data Platform: CEO Wagner underlined the strategic value of Semrush’s data platform, which he described as a “data warehouse for digital marketing” capable of turning fragmented signals across digital channels into actionable insights. This data advantage is seen as a core differentiator and an enabler for future AI-driven solutions.

• Product Accessibility Initiatives: Wagner detailed efforts to reduce friction for customers, including the rollout of new onboarding flows and the forthcoming AI Assistant. These initiatives are designed to accelerate value delivery, especially for small and midsize businesses, and are part of a broader strategy to make digital marketing tools more accessible to all customer segments.

Drivers of Future Performance

Semrush’s forward guidance is shaped by anticipated growth from new AI-driven products, deeper enterprise penetration, and ongoing investments in its data platform and onboarding experience.

• AI Product Expansion: Management believes that continued investment in AI-enabled solutions—including the upcoming launch of AI Optimization for enterprises—will support both revenue growth and higher average deal sizes. Wagner suggested that the combination of core SEO and AI products will be additive, rather than cannibalistic, to overall customer spend.

• Enterprise Momentum and Upsell: The company expects its enterprise segment to be the primary growth engine, with further cross-sell and up-sell opportunities. Mulroy highlighted a growing pipeline of enterprise accounts and projected that average ARR per enterprise customer could eventually exceed $100,000 as additional solutions are adopted.

• Macro and Currency Headwinds: Management acknowledged that macroeconomic challenges and currency fluctuations, particularly related to the euro, could create headwinds to margin expansion despite strong operating leverage and cost discipline. These risks are factored into the company’s reaffirmed guidance for margins and cash flow.

Catalysts in Upcoming Quarters

In the coming quarters, we will watch for (1) continued growth in enterprise customer adoption and expansion of the AI product suite, (2) measurable improvements in onboarding efficiency and customer retention, and (3) the impact of macroeconomic and currency headwinds on margin progression. Progress on these fronts will be key markers of Semrush’s ability to execute its strategy and sustain profitable growth.

Semrush currently trades at a forward price-to-sales ratio of 3.3×. In the wake of earnings, is it a buy or sell? Find out in our full research report (it’s free).

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