Similarweb Ltd. ((SMWB)) has held its Q3 earnings call. Read on for the main highlights of the call.
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Similarweb Ltd. recently held its earnings call, revealing a generally positive sentiment with a focus on steady revenue growth and successful product launches, particularly in the areas of AI and app intelligence. Despite facing challenges such as a decline in net revenue retention and average revenue per user (ARPU), the company remains optimistic about future growth and profitability, emphasizing long-term contracts and new AI-driven products.
Revenue Growth
The company reported an 11% year-over-year increase in revenue, reaching $72 million, which aligns with expectations. This growth was primarily driven by a 15% increase in the customer base and the introduction of new products, including App Intelligence and Gen AI Intelligence.
Positive Free Cash Flow
Similarweb achieved its eighth consecutive quarter of positive free cash flow, totaling $3 million for the third quarter, with a free cash flow margin of 4%. This consistent performance underscores the company’s financial health and operational efficiency.
Gen AI Intelligence Milestone
Since its launch in April, the Gen AI Intelligence product has rapidly grown, achieving an annual recurring revenue (ARR) of over $1 million. This milestone highlights the product’s strong market acceptance and potential for future growth.
App Intelligence Growth
The App Intelligence product has seen significant adoption, with more than 580 customers and an ARR exceeding $10 million. This growth reflects the increasing demand for app intelligence solutions.
Increased Multiyear Contracts
A notable 58% of Similarweb’s ARR is now contracted under multiyear agreements, up from 45% last year. This shift indicates a growing commitment from customers and enhances revenue predictability.
Raised Profit Guidance
The company has raised its non-GAAP operating profit guidance to between $8.5 million and $9.5 million, significantly higher than previous expectations, reflecting confidence in its financial performance.
Decline in Net Revenue Retention
Similarweb experienced a decline in net revenue retention to 98%, attributed to strong expansion activity in 2024, particularly from large contracts booked in the previous year. However, retention remains strong among larger customers.
Sequential ARPU Decline
The company reported a slight decline in ARPU, which was due to the addition of customers below the average ARPU level. Similarweb is focusing on future upsell opportunities to address this decline.
Uncertain Deal Timing
The timing of some large deals, which were expected in the third quarter but booked earlier in the second quarter, resulted in uneven revenue recognition and contributed to a wider guidance range for the fourth quarter.
Forward-Looking Guidance
For the full year 2025, Similarweb has reiterated its revenue target, expecting total revenue to range between $285 million and $288 million, representing a 15% year-over-year growth at the midpoint. The company also raised its non-GAAP operating profit guidance, emphasizing disciplined execution and revenue durability, with 58% of ARR under multiyear contracts.
In summary, Similarweb Ltd.’s earnings call conveyed a positive outlook with steady revenue growth and successful product launches. While challenges such as a decline in net revenue retention and ARPU were noted, the company’s focus on long-term contracts and AI-driven products positions it well for future growth and profitability.