10-K: Semrush Reports 2025 Net Loss Amid Adobe Merger, AI Push

Semrush Holdings, Inc. reported a net loss of $19.5 million for 2025, alongside an 18% revenue increase and ongoing plans for its acquisition by Adobe Inc. for $12.00 per share.

Summary

• The company entered into an Agreement and Plan of Merger with Adobe Inc. on November 18, 2025, under which it will be acquired for $12.00 per share in cash.
• Revenue for the year ended December 31, 2025, increased by 18% to $443.6 million, up from $376.8 million in 2024.
• The company reported a net loss of $19.5 million for 2025, a significant decrease from a net income of $7.4 million in 2024.
• Annual Recurring Revenue (ARR) grew to $471.4 million as of December 31, 2025, from $411.6 million as of December 31, 2024.
• The number of paying customers decreased by approximately 9,000 to 108,000 as of December 31, 2025, from 117,000 in 2024, primarily due to softness in the lower end of the market.
• ARR per paying customer increased to $4,369 as of December 31, 2025, from $3,522 as of December 31, 2024, driven by upsell activity and adoption of AI products.
• The dollar-based net revenue retention rate decreased to 104% as of December 31, 2025, from 106% as of December 31, 2024.
• Research and development expenses increased by $17.1 million to $97.2 million in 2025, reflecting continued investment in AI-specific products and platform enhancements.
• Sales and marketing expenses increased by $32.3 million to $176.6 million in 2025, primarily due to higher personnel costs and advertising.
• General and administrative expenses increased by $27.8 million to $106.4 million in 2025, partly driven by professional service costs related to the Adobe merger.
• Free cash flow for 2025 was $42.9 million, an increase from $35.3 million in 2024.
• Cash and cash equivalents significantly increased to $264.3 million as of December 31, 2025, from $48.9 million in 2024.
• The company launched an expanded suite of generative AI products, including the AI Visibility Toolkit and Enterprise AIO, with AI products surpassing $38 million in ARR in 2025.
• Enterprise platform ARR grew to $37 million in 2025.
• Semrush One, a flagship visibility intelligence solution integrating SEO and advanced AI search tracking, was introduced in October 2025.

Sentiment

Score: 4

Explanation: StockSavvy.ai views this as a mixed filing. While revenue growth and strategic AI investments are positive, the shift to a net loss and decline in customer count and retention rate are significant concerns, especially given the pending acquisition.

Positives

• Revenue increased by 18% to $443.6 million in 2025, demonstrating continued top-line growth.
• Annual Recurring Revenue (ARR) grew by $59.8 million to $471.4 million in 2025, indicating strong recurring revenue streams.
• ARR per paying customer increased significantly to $4,369 in 2025 from $3,522 in 2024, reflecting successful upsell and adoption of premium offerings, especially AI products.
• Substantial investment in research and development, increasing by $17.1 million to $97.2 million, focusing on innovative AI-specific products and platform enhancements.
• Successful launch of an expanded suite of generative AI products, including AI Visibility Toolkit and Enterprise AIO, with AI products generating over $38 million in ARR.
• Enterprise platform ARR grew to $37 million, highlighting success in targeting larger businesses.
• Free cash flow increased to $42.9 million in 2025 from $35.3 million in 2024, indicating improved cash generation from operations.
• Cash and cash equivalents significantly increased to $264.3 million as of December 31, 2025, from $48.9 million in 2024, strengthening liquidity.
• Stockholder approval for the Adobe merger was obtained on February 3, 2026, moving the acquisition closer to completion.

Negatives

• Reported a net loss of $19.5 million in 2025, a significant reversal from the net income of $7.4 million in 2024.
• The number of paying customers decreased by approximately 9,000 in 2025, attributed to macroeconomic pressures and increased paid search cost-per-click impacting SMBs.
• The dollar-based net revenue retention rate declined to 104% in 2025 from 106% in 2024, with anticipated continued pressures in the near term.
• Gross margin decreased to 81% in 2025 from 83% in 2024.
• Operating expenses increased across all categories: sales and marketing by $32.3 million, research and development by $17.1 million, and general and administrative by $27.8 million.
• Incurred significant expenses for professional services, including legal fees, related to the pending Adobe merger, contributing to increased general and administrative costs.
• The provision for income taxes was $9.4 million in 2025 despite a net loss, primarily due to increased profits in foreign subsidiaries and non-deductibility of certain expenses.

Risks

• The proposed acquisition by Adobe may be delayed or not occur at all, which could adversely affect business, results of operations, financial condition, and stock price.
• Efforts to complete the merger could disrupt relationships with third parties and employees, divert management's attention, or result in negative publicity or legal proceedings.
• The company is subject to restrictions on its business activities while the Merger Agreement is in effect, potentially preventing pursuit of attractive opportunities.
• Litigation has arisen, and more could arise, in connection with the Merger, potentially resulting in substantial costs, injunctions, or damages.
• Business and operating results may be negatively affected if paying customers do not renew or upgrade their premium subscriptions, or if they fail to purchase additional products.
• Failure to attract new potential customers, register them for free trials, and convert them into paying customers would negatively affect operating results.
• The market is intensely competitive, and failure to innovate and compete effectively could harm the ability to attract and retain customers.
• The company has incurred losses in the past and may not consistently maintain profitability in the future.
• Reliance on publicly available, internally developed, and paid third-party data sources means loss of access or unfavorable terms could harm the business.
• Inability to maintain and enhance the brand, or events damaging reputation, could impair customer base expansion and financial results.
• Dependence on executive officers and other key employees means loss of one or more could harm the business.
• Changes by search engines, artificial intelligence services, social networking sites, and other third-party services to their underlying technology or policies may limit the efficacy of certain products.
• If third-party applications change such that compatibility cannot be maintained, or if desired third-party applications are not integrated, demand for solutions could decline.
• Failure to maintain and improve methods and technologies, or anticipate new ones (e.g., AI), could lead to competitors surpassing offerings.
• Failures or loss of, or material changes with respect to, third-party hardware, software, and infrastructure (e.g., data centers, cloud environments) could adversely affect the business.
• Security breaches or unauthorized access to confidential or personal information could harm reputation and expose the company to significant liability.
• The use of artificial intelligence and other new technologies presents risks and challenges, including intellectual property risks, data protection concerns, and increasing government regulation (e.g., EU AI Act, California laws).
• Rapid advancements in AI-driven search technologies may alter user interaction with online content, potentially diminishing reliance on traditional search engines.
• Exposure to risks associated with payment processing and any disruption to such systems could adversely affect business and results of operations.
• A significant portion of operations outside the United States subjects the company to additional risks, including geopolitical instability, currency fluctuations (e.g., Euro appreciation), and increased complexity.
• Adverse or weakened general economic and market conditions may reduce spending on sales and marketing technology and information technology.
• Acquisitions or investments may not realize expected benefits, could be difficult to integrate, disrupt business, dilute stockholder value, and adversely affect financial condition.
• Potential for litigation for any of a variety of claims, which could harm reputation and adversely affect business, results of operations, and financial condition.
• Failure to raise additional capital or generate cash flows necessary to expand operations and invest in new technologies could reduce the ability to compete successfully.
• Increases in labor costs and an overall tightening of the labor market could adversely affect business, results of operations, or financial condition.
• Risk that contract workers could be reclassified as employees, leading to harm to business, financial condition, and results of operations.
• Potential for additional sales and other similar tax liabilities due to complex and evolving tax laws.
• If the use of cookies or other tracking technologies becomes subject to unfavorable legislation or regulation, activities could be restricted.
• Compliance with evolving data protection, privacy, and cybersecurity laws and regulations may be costly and breaches could lead to fines and reputational harm.
• Federal, state, and foreign laws regulating internet tracking software, commercial emails, and text messages could impact platform use and subject the company to enforcement or litigation.
• Required compliance with U.S. economic sanctions, export control, and anti-corruption laws, with potential for liability if violated.
• Failure to maintain effective internal controls over financial reporting could impair the ability to produce timely and accurate financial statements.
• Unanticipated changes in the effective tax rate and additional tax liabilities may impact financial results.
• Inability to adequately protect proprietary and intellectual property rights in data or technology.
• Claims by third parties of intellectual property infringement could adversely affect the business.
• Use of open source software could negatively affect the ability to offer and sell access to the platform and products, and subject the company to possible litigation.
• An active public market for Class A common stock may not be sustained and could be highly volatile, leading to potential investment loss.
• The issuance of additional stock in connection with financings, acquisitions, investments, or stock incentive plans will dilute all other stockholders.
• Failure to meet expectations of equity research analysts, or unfavorable commentary, could cause the stock price to decline.
• The dual class structure of common stock concentrates voting control with pre-IPO stockholders (78% as of December 31, 2025), limiting the ability of other stockholders to influence corporate matters.
• The share repurchase program may not be consummated at favorable prices or fully, and may not enhance long-term shareholder value, potentially increasing volatility or diminishing cash reserves.
• No expectation to declare any dividends in the foreseeable future.
• Provisions in charter documents and Delaware law could make an acquisition of the company more difficult, limit attempts by stockholders to replace the Board, and limit the market price of Class A common stock.
• Bylaws designate specific courts as the sole and exclusive forum for certain actions, potentially limiting stockholders' ability to obtain a favorable judicial forum.

Future Outlook

The company anticipates continued investment in research and development, particularly in AI-specific products, features, and enhancements to adapt to the evolving digital marketing landscape. It expects continued pressures on dollar-based net revenue retention due to ongoing softness at the lower end of the market. The proposed merger with Adobe is pending, with a target completion by August 18, 2026, subject to regulatory approvals, and may be extended to November 18, 2026. The company believes its existing cash and investments will be sufficient to meet operating and capital needs for at least the next 12 months.

Management Comments

• We expect increasing demand for third-party online visibility software, particularly enterprise and artificial intelligence solutions, to accelerate adoption of our platform and products.
• We believe this softness [in paying customers] is attributable to macro-economic pressures, industry-wide increases in paid search cost-per-click, and some consolidation in the market from AI.
• In the near term, we anticipate continued pressures on dollar-based net revenue retention as softness at the lower end of the market continues.
• We expect ARR per paying customer to continue to increase as customers adopt our premium offerings and we continue to introduce new products and functionality.
• We intend to continue investing in product development and generative AI to improve our data assets, expand our products and enhance our technological capabilities.
• We expect that our sales and marketing expenses will fluctuate as a percentage of revenue based on the timing of related costs.
• We plan to increase the dollar amount of our investment in research and development for the foreseeable future as we focus on developing new AI-specific products, features, and enhancements to our platform.
• We expect our general and administrative expenses to decrease as a percentage of revenue over time.
• Our future general and administrative expenses will be significantly dependent on our ability to successfully consummate the Merger as well as related expenses.
• We believe our existing cash, cash equivalents, and short-term investments, will be sufficient to meet our operating and capital needs for at least the next 12 months.

Industry Context

StockSavvy.ai notes that Semrush's strategic focus on AI-powered solutions and enterprise offerings positions it to capitalize on the evolving digital marketing landscape, where AI-driven search technologies are rapidly changing user behavior and content discovery. The decrease in paying customers at the lower end of the market, coupled with increased ARR per customer, suggests a market shift towards higher-value, integrated solutions, potentially driven by the complexity of modern digital visibility and the need for comprehensive tools. The acquisition by Adobe could further consolidate the market for digital experience platforms, intensifying competition for standalone SaaS providers.

Comparison to Industry Standards

• Semrush's platform is listed as a leader across 18 software categories by G2.com, Inc., including SEO, answer engine optimization, competitive intelligence, marketing analytics, content analytics, and social media analytics, reinforcing its strong market position.
• The dollar-based net revenue retention rate of 104% (2025) and 106% (2024) indicates strong customer value realization, though the slight decline suggests competitive or macroeconomic pressures that are common across the SaaS industry.
• The compounded average annual revenue growth rate of 30% between 2019 and 2025 demonstrates robust historical performance, aligning with high-growth SaaS companies in the digital marketing sector.
• The company's strategy of acquiring complementary businesses (e.g., Backlinko, Kompyte, Ryte, Exploding Topics, Third Door Media, TopicRanker) is a common industry practice for expanding capabilities and market reach, similar to how larger tech companies like Adobe itself grow their portfolios.
• The investment in AI-specific products and the launch of Semrush One align with broader industry trends where companies like Google and Microsoft are heavily integrating AI into their search and productivity tools, necessitating advanced AI optimization solutions for businesses to remain competitive.

Management Changes

Corporate Governance

Legal Proceedings

• Two lawsuits remain pending related to the Adobe merger: Steven Weiss v. Semrush Holdings, Inc., et al. (filed January 13, 2026) and Richard McDaniel vs. Semrush Holdings, Inc., et al. (filed January 15, 2026), both in the Supreme Court of the State of New York, County of New York.
• These lawsuits, filed by purported stockholders, allege that the Proxy Statement was materially incomplete due to certain misrepresentations and omissions in violation of New York common law, and seek to enjoin the consummation of the Merger.
• The company believes the claims asserted in these lawsuits are without merit but acknowledges that defending against them may result in substantial costs.
• In October 2025, the company became party to a stockholder class action and derivative complaint regarding the 2025 Repurchase Program.

Related Party Transactions

• In December 2025, the company entered into an arms-length agreement with Adobe Inc., pursuant to which Adobe purchased certain Semrush service offerings. This transaction is explicitly noted as not a related persons transaction as defined under Item 404 of Regulation S-K.

Stakeholder Impact

• Shareholders: Will receive $12.00 per share in cash upon the completion of the Adobe merger. Holders of Class B common stock will lose their concentrated voting control. There is a risk of stock price decline if the merger is not consummated.
• Employees: May experience uncertainty about their future with the company due to the pending acquisition by Adobe, potentially affecting retention.
• Customers: The pending merger could disrupt business relationships. However, continued investment in AI and enterprise solutions aims to enhance platform value and offerings.
• Suppliers and Service Providers: May experience disruption to business relationships due to the uncertainty surrounding the merger.
• Creditors: The company believes its existing cash and investments are sufficient for its operating and capital needs for at least the next 12 months, indicating stable short-term liquidity.

Next Steps

• Completion of the merger with Adobe Inc. by August 18, 2026, with a potential extension to November 18, 2026, to obtain required regulatory approvals.
• Continued investment in research and development to enhance the platform and release new AI-specific products and features.
• Focus on expanding the adoption of the Enterprise product portfolio, including Enterprise AIO and Enterprise Site Intelligence.
• Acquire new customers and expand the use of the platform by existing paying customers, particularly through premium offerings and AI search products.
• Integration of TopicRanker's technology into existing tools.
• Payment of the remaining holdback amount for the Exploding Topics acquisition in August 2026.
• Payment of the remaining deferred purchase payment for the Ryte acquisition in January 2026.
• Delisting of Brand 24 S.A.'s shares from the Warsaw Stock Exchange following 100% ownership achieved in February 2026.
• Compliance with new accounting pronouncements (ASU 2025-12, ASU 2025-11, ASU 2025-06, ASU 2024-03) in future fiscal years.

Key Dates

Recommendation

The pending acquisition by Adobe at a fixed price of $12.00 per share creates a clear ceiling for the stock price, limiting significant upside unless a superior offer emerges, which the company is restricted from soliciting. The recent net loss, decline in paying customers, and reduced net revenue retention rate indicate operational challenges that would typically warrant caution. However, the strong ARR growth, increased ARR per paying customer, and strategic investments in AI suggest underlying business strength and future potential if the merger does not proceed. Given the fixed acquisition price, holding the stock allows investors to capture the merger consideration if it closes, while acknowledging the limited upside and operational headwinds.

Keywords

Semrush, Adobe Acquisition, 10-K, Annual Report, SaaS, Online Visibility Management, SEO, AI, Generative AI, Digital Marketing, Financial Results, Net Loss, Revenue Growth, ARR, Customer Retention, Stock-based Compensation, Cybersecurity, Intellectual Property, Corporate Governance, Risk Factors, SEM, SMM, Content Marketing, Brand Marketing, Market Risk, Foreign Currency Risk