Semrush’s second quarter was met with a sharply negative market response as investors digested mixed signals from its business segments. Management cited persistent weakness in the lower end of its customer base, particularly among freelancers and less sophisticated users, as a key factor, with CEO William Wagner highlighting, “This customer segment includes freelancers and less sophisticated users who have historically had the highest churn rate of our customer cohorts.” The company’s shift in resource allocation away from these lower-value segments, prompted by rising paid search costs and declining unit economics, further shaped quarterly performance.

Is now the time to buy SEMR? Find out in our full research report (it’s free).

While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.

Our Top 5 Analyst Questions From Semrush’s Q2 Earnings Call

• Scott Randolph Berg (Needham): Asked if downmarket pressures were broad-based or isolated to certain products. CFO Brian Mulroy confirmed the softness was mainly within the freelancer and less sophisticated segments, driven by higher paid search costs.
• Elizabeth Mary Elliott Porter (Morgan Stanley): Inquired why downmarket weakness persists despite stable macro conditions. CEO William Wagner noted, “Post pandemic, there was a big boom in freelancers who are doing marketing, and I think that has largely subsided.”
• Lucas John Horton (Northland Capital Markets): Requested a breakdown of enterprise and AI product growth between existing and new customers. Wagner shared about 60% are upgrades from existing customers, with 40% net new, and highlighted further product launches planned.
• Jackson Edmund Ader (KeyBanc Capital Markets): Questioned the rationale behind reducing marketing to lower-end segments while offering tools designed to help these customers. Wagner explained the decision reflected poor unit economics and capital allocation priorities, not a retreat from supporting all segments.
• Adam R. Hotchkiss (Goldman Sachs): Asked about the trajectory for SMB and freelancer segments. Mulroy clarified that softness is concentrated among the smallest, least sophisticated users, with SMBs and mid-market customers continuing to show momentum.

Catalysts in Upcoming Quarters

In the coming quarters, the StockStory team will be closely monitoring (1) the pace at which enterprise and AI products approach targeted annual recurring revenue milestones, (2) stabilization or further declines in the lower-value customer base, and (3) management’s ability to maintain margin discipline despite ongoing currency headwinds and shifting customer mix. The effectiveness of new AI product rollouts and customer retention within the enterprise segment will also be essential signposts.

Semrush currently trades at $7.44, down from $9.25 just before the earnings. Is the company at an inflection point that warrants a buy or sell? Find out in our full research report (it’s free).

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