Similarweb Ltd. Stock

Hello, and welcome, everyone, joining today's Similarweb Q2 Fiscal 2026 Earnings Call. [Operator Instructions] Please note this call is being recorded. [Operator Instructions] It is now my pleasure to turn the meeting over to Rami Myerson, Vice President, Investor Relations. Please go ahead.

Thank you, operator. Welcome, everyone, to our second quarter 2026 earnings conference call. Joining me today are our CEO and Co-Founder, Or Offer; our Chief Financial Officer, Ran Vered; and Maoz Lakovski, our Chief Business Officer. This morning, we released our results for the second quarter and published an investor presentation with a strategic overview of the business as well as a summary presentation of second quarter results on our Investor Relations website at ir.similarweb.com.

Certain statements made on the call today constitute forward-looking statements, which reflect management's best judgment based on the currently available information. These statements involve risks and uncertainties that may cause actual results to differ from our expectations. Please refer to our earnings release and our most recent Annual Report on Form 20-F filed with the SEC on March 2, 2026, for more information on the risk factors that could cause actual results to differ from our forward-looking statements.

Additionally, certain non-GAAP financial measures will be discussed on the call today. Reconciliations to the most directly comparable GAAP financial measures are available in the earnings release and the earnings presentation. We will begin with Or and Ran's highlights of the quarter, and then we will open up the call to questions from sell-side analysts.

With that, I'll turn the call over to Or. Or, please go ahead.

Thank you, Rami, and welcome, everyone, today. I'm extremely proud of how the Similarweb team delivered in the second quarter. Similarweb is at inflection point. Our core business is getting stronger while AI is opening a significant new growth opportunity. Larger deals, longer commitments, improving retention and expanding profitability are validating the strength of our business.

At the same time, strong demand from leading AI companies demonstrate that our proprietary digital data has become critical infrastructure for the AI ecosystem. Over the last several quarters, we have been very focused on 3 things: strengthening our data moat, deepening our relationship with the largest enterprise in the world; and positioning Similarweb to capture the enormous opportunity created by AI. In Q2, we started to see those pieces come together. We delivered the strongest quarter in Similarweb history for net new ARR.

We had one of the strongest quarter ever for gross retention. We achieved positive GAAP operating profit for the first time ever, NRR improved to 100% across all customers and 107% for customers above $100,000 of ARR. We exceeded our expectation for both revenue and operating profit and are raising our full year guidance for the second time this year.

AI-related revenue reached 13% of revenue in the second quarter, up from 11% at the end of the fourth quarter of 2025, and we will continue to expand it moving forward. And perhaps most importantly, we signed 3 very large multiyear enterprise contracts representing more than $60 million of accumulated contract value. So when I look at this quarter, I see more than just a strong set of numbers.

I see evidence that the strategy we've been executing is working. Let me walk you through why I believe this is so important. And let's start with the financial performance. Revenue grew 9% year-over-year to $77.2 million above the top end of our guidance. We also delivered non-GAAP operating profit above our expectation and for the first time in our history, positive GAAP operating profit.

This is a direct result of the operational disciplines we have been implementing across the company. We have been very focused on improving sales productivity, sharpening our go-to-market execution and becoming more efficient across the organization. At the same time, we continue to invest in the opportunities where we believe we can generate the highest long-term returns.

We generated $8.7 million of normalized free cash flow in the quarter, representing an 11% free cash flow margin. Moving into the second half of 2026 and beyond, we remain committed to expanding our margin and leveraging the operational efficiencies that come with our increased scale. So we are seeing the combination we have been working on: growth, improving retention, profitability and strong cash generation.

Our customer metrics also continue to improve. NRR increased to 100% across all customers and to 107% for customers above $100,000 of ARR. This is particularly encouraging because as we discussed in the last several quarters, we have been focused on improving the expansion motion with our existing enterprise customers.

We are seeing better gross retention, stronger customer engagement and increasing demand for additional Similarweb data and products. And we believe there is more room for -- improve from here. But the part of the quarter that I'm most excited about is what we are seeing with the largest enterprise. Our strategy to move upmarket is working. During Q2, we signed 3 very large multiyear contracts with a cumulative value of more than $60 million.

Those are strategically important contracts. They are also very different from the way Similarweb historically sold. For many years, our model was primarily a land and expand model. We would land the customer with a relatively small initial contract and then expand over time across additional products, teams and geographies. That model remains important, but something new is happening.

The largest companies in the world are increasingly looking at Similarweb not simply as a software application, but as strategic source of digital data. And when they do that, the size and scope of relationship change dramatically. Those contracts require a significant amount of work across sales, R&D, data scientists, finance and legal. And I want to recognize the entire team because those deals are truly company-wide efforts.

The strategic ALO go-to-market team that we created at the end of 2025, specifically focused on AI, LLM and OEM opportunities has been instrumental in this success. The team is building relationships with some of the most sophisticated companies in the world and is creating a pipeline that is materially larger than what we have historically seen.

In fact, in July, we signed a fourth large contract and we continue to see a very strong pipeline of additional opportunities like never before. And let me explain to you why this is different. Historically, large 7-figure contracts were relatively rare for Similarweb. As recently as 2025, we were still seeing large 7-figure opportunities infrequently a handful of times a year at most.

That has changed. The number and size of opportunities we're seeing from Large Enterprise has increased significantly. And I believe there is a very important reason for that. AI is changing the economics of data. Let me explain you what I mean. Historically, the value an enterprise could extract from Similarweb was limited in part by the number of people who could actually work with the data.

You had an analyst that analysts needed to understand our data. They needed to know how to query it. They needed to analyze it. They needed to connect different data sets. And then they needed to turn those insights into recommendation for the business. That is powerful, but it's still constrained by human capacity.

AI fundamentally changed this equation. Now you can take Similarweb digital data and make it available to AI systems that can analyze enormous amount of information across thousands of questions and use case at a speed at scale that humans simply cannot match. The result is that the ROI from the same underlying data can increase dramatically.

And this is the part of the story that I think is still underappreciated. AI doesn't make our data less valuable, it make our data much more valuable. Because the better the AI becomes its reasoning, the more valuable high-quality, comprehensive and trusted the data become. This is why I believe the opportunity for Similarweb goes far beyond simply selling data for LLM training. But still, the LLM opportunity is big and growing.

One of the largest contracts we signed this quarter is with a leading big tech company for data used to train its large language model. Following this expansion, this customer become our third customer with more than $10 million of ARR engagement. It is remarkable to see how Similarweb data become a fundamental source of digital intelligence for top large language model in the world.

But what excites me even more is that the other large contracts are not only about LLM training, they demonstrate that enterprise can use Similarweb data at scale for many different AI-driven use case and applications. And that is much bigger opportunity because if our data can be used across multiple AI use case and applications inside a Large Enterprise, the potential consumption of our data increased dramatically.

One customer can have multiple teams, multiple teams can have multiple use case and each use case can consume more data. That creates powerful expansion opportunity. The more use case we unlock, the more valuable our data becomes. And more valuable the data become, the more Similarweb can expand within the organization. This is a very different model from selling seats of software.

We are increasingly monetizing access to data and the consumption of the data, and we believe AI will accelerate this transition. Similarweb has become an enterprise data company. You can already see this transformation in our business. The portion of our business driven by customers generating over $100,000 in ARR has reached almost 70%, a significant rise from 63% a year ago.

Furthermore, the share of our revenue tied to a multiyear commitment expand to 66%, up from 57% a year ago. And we see this momentum continue. Those metrics underscore a fundamental transition. Similarweb has become more deeply integrated in the world's largest and most enduring enterprise organization. We are increasingly an enterprise-focused business, providing digital data to some of the largest, most sophisticated companies in the world.

And our goal is to become even more deeply embedded in those organizations, not just with one product, not just with one team, but across multiple teams, multiple products and multiple use cases. This is the expansion opportunity in front of us. Let me now turn into our AI strategy.

Over the last several quarters, we have talked about our AI strategy through 3 pillars: powering AI system with our data, building an AI-native product ourselves and expanding distribution throughout the AI ecosystem. We are seeing strong progress across all 3. First, we are powering LLM and AI Agent. We continue to see strong demand from leading AI companies for our digital data for both pretraining and post-training use case, but we are also seeing increased demand from AI Agents.

Agents need trusted, structured and comprehensive information about the digital world in order to perform their task efficiently. Our data is built for both human and Agent, and that is becoming increasingly important. Second, we are building our own AI-native products. Gen AI intelligence is shaping up as a huge opportunity. It's lucrative, fast-growing market that is top of mind for every CMO and executive at Large Enterprise right now.

We're already seeing an early sign we can win here and become a leader at this category. Our solution helps brands understand how they can show up across Generative AI platforms. We think it's an entirely new category, and our data give us a real edge. And earlier this year, we launched Similarweb AI Studio. The response has been extremely strong.

AI Studio changed the way people interact with Similarweb. Instead of needing to know exactly which report to open or which data set to use, user can simply ask a business question in natural language and receive an actionable answer with insights and recommendation. This dramatically expands who can use Similarweb. And importantly it creates a new consumption-based monetization model.

We believe this is the direction the industry is moving. Third, we are expanding distribution. Increasingly, research and decision-making are happening inside AI platforms. So we want Similarweb to be there. Our data available through MCP on Claude and ChatGPT. During the quarter, we expanded our relationship with Perplexity to bring Similarweb digital data directly into its AI-native workflow, and we expand our partnership with Manus following the successful launch of Similarweb data on the platform.

Those partnerships are more than integration. They are new distribution channels for Similarweb. They allow us to reach users who we couldn't not reach through our traditional go-to-market motion. They expand our TAM, and they reinforce our position as a critical data layer for AI-driven research and decision-making.

So now let me walk you through what I believe is happening. First, our core business is getting healthier. Gross retention is improving, NRR is inflected, sales productivity is improving, and we are seeing better expansion across enterprise customer. Second, our enterprise strategy is working.

We are seeing larger contracts, longer commitments, more multiproduct relationship and increasing demand from the world's largest companies for digital data. And third, AI is dramatically expanding the opportunity for our data. It's created new customers, new use case, new distribution channels and new ways to monetize consumption.

Those 3 things reinforce each other, and this is why I believe Q2 represents an important inflection point for Similarweb. And as I have to say before, AI is the engine, but data is the fuel. Regarding the CEO search, we are making good progress, and we are interviewing very strong candidates.

And with that, I will hand it over to Ran, our CFO.

Thank you, Or. It is great feeling to deliver a strong set of results and raise guidance for the year. I'll provide highlights of our financial performance and guidance for the third quarter and the full year of 2026. Turning to our quarterly results. We generated $77.2 million of revenue in Q2, a 9% increase year-over-year and above the guidance range we provided.

Revenue growth was driven by good performance across the book of business, including new sales and upsells as well as growth in AI-related revenues that reached 13% of revenues in the second quarter, up from 11% at the end of the fourth quarter of 2025. I would like to remind you that the second quarter of 2025 provided a tough comparison for this quarter.

We expect revenue growth to accelerate in the second half of 2026, supported by the growth in ARR in the second quarter and the accelerated momentum in our business as Or discussed. Non-GAAP operating profit for the quarter was $6.5 million, reflecting an 8% margin compared to $2.4 million in the second quarter of 2025.

Non-GAAP operating profit was also above our guidance range, thanks to top line growth and disciplined cost control that more than mitigated FX headwinds. We continue our efforts to offset the headwinds to profit presented by the strengthening of the Israeli shekel versus the U.S. dollar. As a reminder, approximately half of our employees are based in Israel. Non-GAAP finance expenses was $108,000.

Non-GAAP tax expense was $1.2 million in the quarter compared to $86,000 and $1.2 million in the second quarter of 2025. To help with your modeling, we expect these items to remain approximately at this level on a quarterly basis for the rest of the year. Non-GAAP diluted earnings per share was $0.06 compared to $0.01 in Q2 2025.

ARR contracted under multiyear contracts continue to expand to 66% of ARR from 57% last year. We believe that this metric is very important and demonstrate the durability of our revenues and the importance of our data to our customers. Good cash generation and strong balance sheet are critical for our business at any stage.

We generated $8.7 million of normalized free cash flow and 11% free cash flow margin despite the FX headwinds. We believe we will generate positive normalized free cash flow on a quarterly basis going forward. We ended the quarter with approximately $73.9 million of cash and cash equivalents and no debt. We also have an available line of credit of $75 million. Our remaining performance obligations, RPO, totaled $345 million at the end of Q2, up 26% year-over-year. We expect to recognize approximately 66% of total RPO as revenue over the next 12 months.

The growth in RPO provides us with confidence in our full year guidance. We are also proud that our deferred revenue increased to a total of $141 million, a 21% increase year-over-year. In Q2, overall NRR was 100% across all customers and 107% for customers with over $100,000 of ARR. We are proud of the improvement in NRR in the quarter, which came through earlier than expected.

We expect further improvement in NRR over 2026. At the end of the second quarter, we had 1,815 customers with ARR above $25,000 compared to 1,809 in 2025. This sequential trend reflects our decision to prioritize go-to-market resources and focus on large-scale opportunities within our existing customer base over smaller inbound SMB deals.

Consistent with this focus, the average account value for this cohort grew 19% year-over-year to $149,000. The number of customers with ARR over $100,000 increased to 473 at the end of Q2, up 9% compared to 2025. Average account value for this customer cohort increased 18% to $438,000 compared to 2025.

We believe that accounts generating more than $25,000 and $100,000 of ARR that account for 90% and 69% of ARR, respectively, demonstrate that Similarweb is an enterprise-focused data company. Moving to guidance; for the full year of 2026, we are raising our revenue guidance range and expect total revenue in the range of $340 million to $380 million, representing approximately 12% year-over-year growth at the midpoint of the range.

In Q3 2026, we expect total revenue in the range of $80.5 million to $82.5 million, representing [ 17.5% ] year-over-year growth at the midpoint, accelerating versus Q2 2026. For the full year, we are raising our guidance for non-GAAP operating profit to be between $24 million and $26 million. Non-GAAP operating profit for the third quarter of 2026 is expected to be in the range of $7.5 million to $9.5 million.

With that, Or and I are ready to take -- to answer your questions. Following Q&A, Or will share some closing remarks. Operator, please open the line for questions.

[Operator Instructions] And we'll take our first question from Raimo Lenschow with Barclays.

Congratulations. That's an amazing evolution. Or, can you talk a little bit more about those customers that you signed and they are kind of showing up in the pipeline? Is this kind of using the similar rep data in a much broader sense than we've seen classically?

And in theory, if that's the case and we open it up for more end users, then in a way, the sky is the limit because like you should like every single customer could do a lot more with your data. So that we -- it sounds almost like we are at the beginning of a very great journey here. Can you talk a little bit more on that?

Yes. So first of all, yes, thank you for the question. And yes, you're right. The most advanced enterprise are now realized that with AI, they can get -- they can first crunch much more data and they can get much more better insight and recommendation and the ROI dramatically for the same data is now much higher, and they can consume much more data.

So we're seeing this trend. It's very exciting, and we're very happy about that. And we think that we continue to see this great success with onboarding more enterprise to use our data in that approach.

And then Ran, if you think about it, where are we sitting on this new approach of getting against the big enterprise, where are we on sales capacity, et cetera? Like can the organization kind of support the growth that potentially is coming your way?

Right now, yes, we are set up correctly. We're starting with the engagements we currently have in our book of business. We already work with the biggest and best enterprise in the world, and we start rolling up and start increasing those engagements.

We'll take our next question from Ken Wong with Oppenheimer & Company.

Fantastic. I think you guys mentioned that NRR potentially could trend up still. I'm just looking at the levels of -- there's a big step-up. What gives you the confidence there? How much of that is mechanical? I recall you guys already were exiting at a pretty high rate after Q1 and how much of that is kind of underlying activity that you're seeing that gives you confidence that, that number could keep trending higher?

Yes. We have a very, very high confidence because the NRR we report to the market, as we said, is the average of the previous 4 quarters. And because we know that this quarter NRR was very, very high, we already know that the next quarter's NRR will continue to increase.

And just to add on that, we see very strong -- Or mentioned it in the prepared remarks, we see very strong GRR trends. And the changes that we did last -- at the beginning of the year that the account management are more focused on expansion, this is a focus on GRR.

We already see the fruit of this change. So we see very strong GRR that continues to be at a very strong level. And on top of it, the account management that are focused on expansion provide us with the confidence that the NRR is going to increase.

Understood. And then, Or just on the really strong pipeline results, again, fantastic in terms of what you guys saw in Q2. When you look at the quarter, how much of that execution was some of the labors from last year, you guys kind of refreshed the go-to-market, you added capacity.

How much of that is, as you said, truly an underlying change in terms of some of the customer actions like where data is now kind of proliferating across organizations or is there still more of that to come?

I think, as I said in the earnings, a lot of it came just focusing the people on doing the right things that can produce the highest outcome. One of them that we changed and took some of our best people and just put them on the ALO team, we call it, the strategic sales team to build better, bigger relationship with the top enterprise and basically unlock this potential.

So just moving those priorities, including the account manager, focusing on expansion, all of those decision of changing strategy really are bearing the fruits. So these are the result of that.

We'll take our next question from [ Arun ] Bhatia with William Blair & Company.

Hi, it's Willow Miller on for Arjun Bhatia. Nice quarter. A couple of quarters ago, you saw some variability in, I believe, 2 large AI deals. I believe you closed one last quarter. But can we get an update on the second? Is that still in the pipeline and how are you thinking about the timing of closing it?

Yes. Funny enough, this second one is still in the pipeline. And we still think that this is another nice big surprise that can come by the end of the year. Yes.

We'll take our next question from Patrick Walravens with Citizens.

Great. This is Kincaid on for Patrick. Super excited to see this narrative playing out for you guys. Is it possible to get a little bit of color when I think about the $60 million as well as just the total spectrum of these new deals, you mentioned it's not just pretraining and post-training, but it also includes like correct me if I'm wrong, like Agents in production that want to understand how the Internet is structured and where they should go next. Can you give us a sense of like how that ARR is split? Is it 50% post-training, 25% pretraining and 25% in production? What's that breakdown?

I cannot go specifically to the full breakdown, but we had -- what we said, we had 3 big deals. Each one of them is above 8-figure engagement. Only one of them is for LLM training pre and post. So only one is pre and post. The other 2 are just big enterprise leveraging our data in different ways than LLM training that is much more exciting and very big opportunity.

Yes. Maybe just to add [indiscernible] the way we think about it, the various markets that we're seeing tailwinds and demand in different markets. One is the LLM that we were speaking about. The other one is OEMs, so build on top of our data. Then we have the brands and last we have the investors.

And we see great demand across the board in all of them for large deals to integrate our data at scale because of the ability to digest and ingest more data at scale with AI. So what we've seen in the past, which was deal every now and then, deal every quarter of our pipeline. So now it's becoming much more sustainable, much more robust. It helps us increase our TAM and increase our average deal value.

Spectacular. And then if you have any update with specifics on your Gen AI intelligence product, I've always found that one fascinating.

Yes. There is -- the demand there is increasing. We do see a nice increase there. And I think there is now more strategic team start building up on the Gen AI data that we have that's becoming very interesting for brands to connect the full journeys of the users with what people are asking those LLMs and the outcomes. So everything around how the interaction with LLM change the consumer behavior. So this is -- we're seeing also a very big success on that.

[Operator Instructions] We'll take our next question from Scott Berg with Needham.

Really nice quarter here. Or, you obviously spoke a lot about the new use cases that you're seeing in some of these large deals. They're not all LLM training exercises. But as you think about the new use cases, are you changing the pricing of the platform to evolve with some of these new use cases or are the pricing mechanisms the same?

The pricing is the same because most of those big deals are around data. So it's more about consumption and data access. It's less about the software. And so the price didn't change and just selling much more data and much -- many more different data sets because as I said, AI is changing the equation. Now companies can consume much more data and get much more ROI of data.

Very helpful there. And then Ran, as we think about a couple of these deals here, these large deals, are there any onetime revenues to be cognizant of -- from these? I believe that maybe one of them has some onetime revenues. And if there is, what is the timing of those revenues look like for modeling purposes?

Scott, thanks for the question. So those deals are ARR deals. And if there is a onetime element, it's really quite negligent and material. And usually, it's recognized on the initiation of the deal or a couple of months later at max. But those deals are pure ARR deals with, again, a small and immaterial amount of onetime, if at all.

We'll take our next question from Luke Horton with Northland Securities.

Congrats again on the great quarter here. Obviously, the momentum is really building on the enterprise side. Just curious if you're -- if there's anything to call out on the kind of SMB or smaller customer cohort. Are they seeing any sort of macro pressures or I guess, how is growth looking on the smaller customer cohort side?

Nothing special there. I think overall, the traffic was going down, the visitor traffic to the website, the world change and there is less traffic coming from [ SaaS ] or like market broader. But overall, AOV is the same, [indiscernible] is the same. And I think a lot of more commercial people are moving now to drive more expansion as we can see this opportunity.

Okay, great. And then just wondering about as far as adding net new customers, are you seeing any trends with initial customer contracts coming in at higher price points now? And kind of how much of the focus is on the cross-sell and upsell with existing customers versus kind of outbound net new customers?

So I think that most of our tenure senior commercial people that were doing outbound and enterprise new sell, we removed them more to focus on expansion. As I said before, we have an amazing book of business, and we already engaged with most of the best and biggest companies in the world. And now we just come and have a huge opportunity on cross-sell and upsell with this new change that's happening with AI.

At this time, there are no further questions in queue. I will now turn the meeting back to Or Offer for closing remarks.

So thank you for all the questions today. So now let me recap what we discussed today at the call. When we entered to 2026, we said this was going to be a transformation year for Similarweb. We said we were moving from building to scaling. We said our priorities were to strengthen our data mode, deepen our enterprise relationship and scale our AI-first solutions.

6 months into this year, we are seeing tangible evidence that this strategy is working. We delivered the strongest net new ARR quarter in our history. We achieved positive GAAP operating profit for the first time ever. We improved NRR to 100%. We signed multiple transformational enterprise contracts, and we continue to see expanding demand for our data from AI companies and Large Enterprise.

There is still a lot of work ahead of us. We need to continue improving execution. We need to continue to expand our enterprise relationship, and we need to continue building the best digital data infrastructure for the AI era. Thank you, everyone, on the call for your continued support. We're looking forward to speaking to you again over the coming weeks. Thank you all.

Thank you. This brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect.

Greetings, and welcome to the Similarweb First Quarter Fiscal Year 2026 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce Rami Myerson, Vice President, Investor Relations. Please go ahead.

Thank you, operator. Welcome, everyone, to our first quarter 2026 earnings conference call. Joining me today are our CEO and Co-Founder, Or Offer; our Chief Financial Officer, Ran Vered; and Maoz Lakovski, our Chief Business Officer. This morning, we released our results for the first quarter and published an investor presentation with a strategic overview of the business as well as a summary presentation of first quarter results on our Investor Relations website at ir.similarweb.com.

Certain statements made on the call today constitute forward-looking statements, which reflect management's best judgment based on the currently available information. These statements involve risks and uncertainties that may cause actual results to differ from our expectations. Please refer to our earnings release and our most recent annual report filed on Form 20-F for more information on the risk factors that could cause actual results to differ from our forward-looking statements.

Additionally, certain non-GAAP financial measures will be discussed on the call today. Reconciliations to the most directly comparable GAAP financial measures are available in the earnings release and the earnings presentation. We will begin with Or and Ran's highlights of the quarter, and then we will open up the call to questions from sell-side analysts.

With that, I'll turn the call over to Or. Or, please go ahead.

Thank you, Rami, and welcome, everyone, joining the call today. Just before I start reviewing Q1 results, I want to address the announcement we made this morning. Today is a symbolic day for me. Today is exactly 5 years since our IPO and running Similarweb as a public CEO. This is also my 19th year of service since start working on Similarweb in June 2007. My promise to myself and to my wife was always that when I reach 20 years of service, I will realign my priorities and spend more time with my family. This moment is about to be reached as I enter my 20th year leading Similarweb next month.

Similarweb has been my life work. I founded this company nearly 20 years ago. And as I approach that milestone, I believe this is the right moment to begin identifying the leader who will take the company forward. The Board and I are fully aligned on the timing and the process, and we have intentioned a search with a leading executive search firm. I will continue to serve as the CEO through the conclusion of the search and the transition period with my successor, with the leadership transition expected to be completed by mid-2027.

I remain fully focused on the execution of our strategy for our shareholders, our customers and our employees. We came out with a great Q1 results and have a very strong confidence for this year's performance. There is no change in our strategy, our operation or our financial outlook. I'm proud of the business we have built and confident in what lies ahead.

With that, let me turn to our first quarter 2026 results. I'm super proud of the performance of the whole Similarweb team during an eventful first quarter that included a month of conflict in the Middle East. Once again, we demonstrated our ability to deliver and the resilience of our business.

Turning to the highlights of the first quarter. Revenue and operating profits came in the top end of the guidance range. We delivered 10 quarters of positive normalized free cash flow. Our NRR has stabilized, and we expected these metrics to improve in 2026, driven by execution of our customer expansion playbook. Gross retention trends in the quarter were excellent.

The pipeline of the commercial opportunities is very strong, growing and providing confidence for the remaining of the year and beyond. AI-related revenues continue to expand and adoption of our AI solution is growing. First quarter performance provide a solid base for 2026, and we have decided to raise the lower end of our guidance for 2026 to reflect increased confidence.

Turning to our results. Revenue grew 10% year-over-year to $73.9 million at the top end of our guidance range. We are starting to see tangible returns on the investments we made in the sales force and product portfolio in 2025. Sales productivity increased for the third quarter in a row, and this has contributed to the best Q1 increase in ARR since 2022.

We reported non-GAAP operating profit at the top end of our guidance range. We generated $6.6 million in normalized free cash flow in the first quarter, reinforcing our commitment to profitable and durable growth. Net revenue retention for all customers was 98% and 103% for customers above $100,000. We are very encouraged that those metrics have stabilized in the first quarter and that gross retention continues to improve. We are focused on driving an improvement in NRR, specifically in the upsell motion in 2026 by executing our customer expansion playbook and leveraging our diverse product portfolio.

Demand for our GenAI data and solution is truly amazing. Our AI revenues continue to expand, and we are engaging with more AI native companies as well as companies of all sizes that have realized that they need to understand what's happening in the new digital world.

During the quarter, we signed one of the large LLM contracts that were pushed back from the fourth quarter of 2025. We continue to progress on the second and third deal as well as on multiple deals for our unique digital data in view of the digital world. We believe we are well positioned to be an AI winner with multiple commercial opportunities across data, product and distribution partners, and we are excited about the potential.

Let me run through our AI data and product strategy, how we power the ecosystem, build AI-first solution and expand distribution at scale. First, we are powering LLM and AI agents. We are seeing strong traction in licensing our data directly to leading LLM companies for both pre- and post-training use case. At the same time, autonomous agents require trusted, structured digital intelligence to operate efficiently. That's exactly what we provide. Our data is built for both humans and agents, and we see accelerating demand for both.

Second, we are building our own AI native solution. With GenAI Intelligence, we are helping brands to improve their GenAI visibility and sentiment. We are seeing strong market validation on this front, including recognition of our leadership by G2. We believe our data provides an important competitive advantage in this new market, and we are on a journey to become a market leader in this category as well.

Last quarter, we launched Similarweb AI Studio and the response from the customers has been truly amazing. AI Studio is an AI-powered interface that allows users to ask business questions in plain language and multiple languages and instantly receive actionable insights. What used to take time and specialized skills can now happen quickly and easily across all of our data sets.

AI Studio expands the number of users who can leverage Similarweb, increases engagement, enables faster and smoother insight generation and unlock a new consumption-based monetization model. We are seeing strong adoption and utilization across our customer base, AI Studio represents a huge shift in how users interact with Similarweb data.

Third, we are expanding distribution at scale. Through partnership with leading LLM and agent platforms such as Manus and through MCP integration, we are embedding Similarweb directly into AI ecosystem. We want to meet our users where they are and increasingly, research and decision-making is happening inside the new AI platform.

Last quarter, we shared that our MCP was available in Claude. And today, I'm super proud to share that we have launched MCP integration with ChatGPT. This integration is the same as our MCP Claude Connector, providing seamless access to our data and tools.

Claude and ChatGPT are 2 of the largest AI platform in the market. And today, hundreds of our customers can plug in Similarweb data directly into them, building automation, powering agents and asking complex question on the fly and receive insight, recommendation and action wherever they choose to work.

Yesterday, we announced an expansion of our partnership with Manus, which we told you about last quarter. This partnership has been a big success, and we are glad to expand the data Manus user can access and also enable our customers to connect to Manus via an MCP to generate even more valuable seamlessly combining our data and Manus tools and capabilities. This ecosystem partnership unlocking new customers, expand our TAM and position our digital data as critical ingredients for AI-driven research and decision-making.

Our AI pipeline is expanding rapidly with a healthy combination of large deals and continued expansion across our enterprise customers. We're excited about the potential this rich pipeline of opportunities provide.

Our mission is to help companies win in the digital world, and we gain more market share. As part of this mission, we continue to develop and launch innovative products that empower our customers with the tools and capabilities of more than 650 online stores and marketplaces.

Retail Intelligence gives brands, sellers and retailers a unified view of shopper behavior, digital shelf performance, product mix, availability and pricing across segments, e-commerce channels. It also adds keyword optimization, competitive benchmarking and digital shelf automation. As AI reshapes product discovery and retailers expand marketplace and retail media networks, Retail Intelligence help customers understand where demand is forming, how brands are winning and which action can improve sales performance so that they can win in a highly competitive e-commerce market.

Also during March, we also launched Similarweb Ad Intelligence, leveraging the synergies with the Admetricks, which we acquired in 2024. Ad Intelligence delivers a unified view of paid media across search, social and display and soon LLM ads, revealing who's investing, what's bringing more traffic and who gaining share across every channel and region and help brands understand paid marketing ROI.

The solution addresses the most severe pain points advertising face today, knowing what competitors are spending and where, if ad spending is generating the decent return and helping advertisers identify where they are overspending, underspending or missing opportunities across channels.

Until now, advertisers had to rely on fragmented data that leads to inefficient ad spend and wasted budget. With this product, we empower brands, agencies and publishers to work smarter, helping them to spot growth opportunities, benchmark performance and optimize spend across every channel and market.

To summarize, during the first quarter, we have taken action to improve our performance. We are sharpening our go-to-market strategy, refining processes and building scalable playbook to drive cross-sell and expansion. We are seeing encouraging signs of improvement across the business, and this has increased our conviction in 2026. We believe that we are well positioned to capture long-term AI-driven opportunities. Our AI-first portfolio is scaling, ecosystem partnerships are expanding, and we are targeting high-growth segments like LLM companies, large big tech players and OEM with our own dedicated go-to-market teams and focus -- remain focused on disciplined execution and acceleration. And with that, I will hand it over to Ran.

Thanks, Or. I'll provide highlights of our financial performance and guidance for the second quarter and full year of 2026.

Turning to our quarterly results. We generated $73.9 million of revenue in Q1, a 10% increase relative to Q1 2025 at the top end of our guidance range. Revenue growth was driven by good performance across the book of business, including new sales and upsells as well as growth in AI-related revenues.

Non-GAAP operating profit for the quarter was $2.4 million, reflecting a 3% margin compared to a loss of $1.3 million in the first quarter of 2025. Non-GAAP operating profit was also at the top end of our guidance range, thanks to top line growth and disciplined cost control.

Non-GAAP interest expense was $3,000 and the non-GAAP tax expense was $1.3 million in the quarter compared to $0.1 million and $1.2 million, respectively, in the first quarter of 2025. To help with your modeling, we expect these items to remain at approximately these levels on a quarterly basis for the rest of the year.

Non-GAAP diluted earnings per share was $0.01 compared to a loss per share of $0.03 in Q1 2025. We are proud that 64% of our ARR is contracted under multiyear contracts, up from 52% last year. We believe that this metric, coupled with strong ARR, demonstrates the durability of our revenues. It also provides us with confidence in the value we provide to our customers.

Good cash generation and a strong balance sheet are critical for our business at any stage of life cycle. We generated $6.6 million of normalized free cash flow, reflecting seasonal strength. We believe we will generate positive normalized free cash flow on a quarterly basis going forward, although we are aware of seasonal fluctuations. We ended the quarter with approximately $65 million of cash and cash equivalents and no debt. We also have an available line of credit of $75 million.

After 10 consecutive quarters of normalized positive free cash flow, the business has a solid core and the financial flexibility to weather market headwinds while staying focused on our long-term goals to maximize shareholder value. Our remaining performance obligation totaled $298 million at the end of Q1, up 18% year-over-year. We expect to recognize approximately 70% of total RPO as revenue over the next 12 months. The growth in RPO provides us with confidence in our full year guidance.

In Q1, overall NRR was 98% across our customers and 103% for customers with over $100,000 of ARR. We are encouraged by the stabilization in NRR in the quarter, which reflects an improvement in GRR and quarterly NRR. We expect an improvement in NRR over 2026. The trend in GRR continued to improve and in the first quarter, we reached a new 2-year peak.

Customer count increased by 5% year-over-year to 6,038 but declined sequentially by 1% from 6,128 in the fourth quarter. The decline was mainly due to self-service customers that have not renewed their annual subscriptions or have moved to monthly subscriptions. We have reviewed this KPI and compared it to the self-help customer account that are above $25,000 ARR. This accounts for 86% of our ARR. At the end of Q1, customer count of this cohort was 1,840, increasing by 2% year-over-year. Average account value for this cohort was $132,000, up 9% compared to 2025.

We believe that the number of accounts generating more than $25,000 and $100,000 of ARR demonstrates that Similarweb is an enterprise-focused company and provides a more meaningful representation of the underlying trends of the business. Accordingly, we plan to disclose this cohort going forward and will no longer disclose total logo count.

Moving to guidance. For the full year of 2026, we are raising the lower end of our revenue guidance and expect total revenue in the range of $307 million to $315 million, representing 10% year-over-year growth at the midpoint of the range. In Q2 2026, we expect total revenue in the range of $74.5 million to $76.5 million, representing 6% year-over-year growth at the midpoint.

I would like to remind you that strong revenue growth in the second quarter of 2025 benefited from a pull forward of onetime revenue from the third quarter of 2025 and provides a tough comparison for this quarter. As Or mentioned, the solid pipeline provides us with confidence in the revenue growth acceleration during the second half of the year.

For the full year, we are raising our guidance for non-GAAP operating profit to be between $70 million and $90 million. Non-GAAP operating profit for the second quarter of 2026 is expected to be in the range of $3 million to $5 million. We continue our efforts to offset the headwinds to profit presented by the strengthening of the Israeli shekel versus the U.S. dollar. Approximately half of our employees are based in Israel. The expansion of our R&D center in Prague, which provides an excellent source of high-quality talent is helping diversify our cost base.

With that, Or and I are ready to answer your questions. Following Q&A, Or will share some closing remarks.

Operator, please open the line for questions.

[Operator Instructions] Our first question is from Arjun Bhatia with William Blair.

Or, congrats on the IPO milestone and the run as CEO. I know it's not -- you're not leaving yet, but it has been great working together. Maybe one question on just the guidance and the LLM contract that you closed. I assume that's in the numbers yet, but as I'm looking at sort of the back half ramp in implied in revenue, it still seems quite steep. So I would love to hear just your confidence in the ramp in the second half of the year. How much of that is still dependent on the second LLM contract closing and just maybe where we are in sort of that process at this point?

Of course, thank you, Arjun, for the kind words. And yes, we're seeing a very strong pipeline over this quarter, this Q2. We are already in the middle of the quarter. And we have very strong confidence with the second part of the year. The team did an excellent job in the past few months, not only closing the one deal that's left, also continue to have in the pipeline the second deal and open the pipeline with many other deals. So we're seeing a very strong traction. We started the year with a dedicated team only focusing on this LLM and OEM opportunities, and they really are executing very well. So we have a very strong confidence for the year and for the second part of the year.

Okay. Perfect. And then you sounded quite bullish just on NRR trajectory moving forward, changes that you're seeing that are giving you confidence that you can drive more upsell and cross-sell with your existing customer base because I think generally, that metric has been sort of flat to down over the last several quarters. So curious on the inflection there.

Yes, of course, I think it's an excellent question. The NRR we're reporting to the street is the average last 4 quarters of NRR. And we're already seeing an improvement with our NRR and GRR in the past 2 quarters that is not fully seen yet in the average. So we already know that the NRR is going to be better going forward. And we also see the great pipeline being built on the current customer want to buy more of our data. So we think and are bullish on the NRR going upward going forward. .

Maybe just to add...

Just to complement on that, Arjun. The GRR that we saw in Q1 was the strongest in the last 2 years. And we also -- we didn't, of course, share Q2 yet, but we're also seeing the trend of the GRR continuing to be very strong in Q2. So we are quite confident that along the year, the NRR metrics is going to improve.

Our next question is from Scott Berg with Needham & Company.

Lucas on for Scott here. Maybe to start, could you just talk about the sales productivity during the quarter? There's obviously been a lot of GTM changes over the last year plus. So just curious if productivity is beginning to normalize, kind of where you guys would like to see it that?

Yes. We track this metric closely. And overall, in the past 3 quarters, we're seeing a nice increase. Every quarter, it's getting better. And we're very happy. There's 2 commercial teams, one driving new sales and the other one driving expansion. And we're very happy with the expansion progress in the past quarter and also the new sales expansion was remarkably well and hopefully continue to get better productivity going forward.

Got it. And then just as a quick follow-up. As you guys are kind of thinking about capital allocation from here, any thoughts on a potential share buyback, just given kind of where the current stock is trading at?

I think it's a good question. We did discuss about it. We didn't -- we don't have a specific decision yet. It's a good -- tough to think about going and seeing how the year is progress, but it's definitely something that can be on the table.

Just to complete on that, I think we are very focused on the operational areas of our business and generating normalized free cash flow is one of the top priorities. So we focus on that. Once we see also this trend picking up, as said, we will consider all available options for capital allocation.

Our next question is from Adam Hotchkiss with Goldman Sachs.

I guess, Or, to start on the AI front and MCP front, in particular, I'm wondering if that is playing a role at all in your new customer conversations and AI expansions at renewal, thinking lowering the barrier to agents, does that actually improve your win rates, bring more RFPs to the table? I'm just curious how that's sort of played out in your customer conversations so far?

Yes. It's a good question. I think it's mostly improving our GRR and retention. We going to our existing customers and present them the opportunity to use our data for MCP and connection, if it's through Claude integration or OpenAI and then suddenly, they're getting much more ROI from our data and much more users in the organization can leverage ROI from our data. So right now, I would say it's driving more retention and usage-based consumption that's driving upsell. From the new sales, I think our new solution for Gen AI visibility that help them understand their, measure their visibility on chatbot. This is driving the win rate more in this specific solution.

Okay. Great. That's really helpful. And then as we think about customer growth, Ran, and I fully understand the sort of $100,000 customer cohort seems to be continuing quite strongly. Just anything to call out on Q1 and marrying the high gross retention comments with sort of that lower end sub-$25,000 ARR customer cohort and then some of the churn we saw there?

Yes, because -- so first of all, we are introducing a new metric that we are going to share is about the customers that are above $25,000, which means that this cohort is a cohort that only our go-to-market can sell. Below $25,000, we have a motion of the no touch or the self-serve. So we decided, this is not really resonate with our focus of enterprise.

In terms of the GRR, we see a very good traction, and you can see it also on the average account value that we shared on our presentation in terms of the $100,000. So you can see that those customers the $100,000 plus or $25,000 plus are generating better average account value. And this is why the general return of the dollar value is much better.

Our next question is from Austin Cole with Citizens.

Or, my congratulations to you on announcing your next chapter here. It's been great to work with you. I did want to ask you a more high-level question around pricing because it just -- it seems that Similarweb is changing a lot just with the LLM deals and MCP connectors, new partnerships. And even your own tools like AI Studio that are based in natural language. And actually, one of your competitors earlier this week announced that they're shifting to more of a platform fee plus consumption structure. I'm just wondering what your thoughts are on all this and whether a fee-based model or more -- shifting more towards consumption over time is going to be the better way to leverage your data assets?

Yes. I would answer quickly and also I think Maoz here can follow up for me and give more context, but this is the overall trend in the industry as AI taking more places and more agent to agent. I think it makes sense to move to more consumption based, you can really charge per outcome. And we're selling data bottom line and the more data we give, the more usage they have, they get more ROI. And for us, it's much better to price like that. So it's an overall trend, and we follow with that, and we see good success. And I think that over the next few quarters, this will become bigger and bigger.

And maybe Maoz, if you want anything to add on top of that?

Yes. Maybe just to add, I mean, we don't price by seats, even today. So we made this transformation actually a while ago. And the way we monetize is by data access, so you can buy different data that you want to use and then consumption on top of it. Some of our products are more data-oriented, less platform oriented, and they are definitely leveraging this already. I think we're also seeing kind of big potential with the distribution channels, with AI, chatbots and how users can use us within this kind of environment, and it's definitely a consumption play. And it's very evident also from our NRR improvement. So we have the right infrastructure from a data access and consumption, and we are definitely doubling down on this vision. This is our monetization strategy.

Great. And then just as a quick follow-up. As you think about the data asset today, where maybe some of those gaps if they exist? And where do you see the most opportunity to kind of widen that moat in 2026? And what maybe opportunities are you evaluating in the market?

I think all of the new solution has great coverage. But as long as we continue to increase our data coverage, we can able to monetize more if this is on our App Intelligence and to add more countries or the 2 new products I discussed in the earnings, the Retail Intelligence. We are covering 650 different retail. The more we have, the more retail in different countries, we can sell to more customers. And from Ad Intelligence that we just launched, and it's very exciting, and it's mostly web ad advertisement. And now we're adding the new LLM advertisement. ChatGPT announced that they're going to include ads in their free products, and they are scaling it. And I think we are the first company in the world now to bring this data into the market. And this quarter, we're going to start selling and bring it in front of customers. So it's very exciting.

Our next question is from Luke Horton with Northland Securities.

Just wanted to go back to kind of -- it looks like total customer count, that growth decelerated quite a bit in the quarter. But I guess, would you say that's more of a function of focusing more on growing with the existing accounts that you have? Or would there be anything to call out with pain points with adding net new customers?

No, not exactly. The number we provide to the street is a combination of touch customer and self-serve customers that come to the website and buy with credit cards. If they decide to pay yearly, so they've been counted in this 6,000-plus number because this number that we're reporting from 2021 is -- it's yearly paying customer. And over the years, we start adding yearly self-serve customers. So it starts increasing this number. But as we go and marketing, we start to do a lot of AB testing to see if they want to charge the self-serve on monthly or yearly, you can offer the customer what is the default. And then it's changing those numbers. And every time they do a test, AB test around that, it changed those numbers. So we realize it's not a good indication. It's not going to help you understand the performance of the business. So it's just better for us to focus on the enterprise, the sales motion customers. And so we're going to start reporting the $25,000 customers and above to remove this noise.

Okay. Got it. And then also just wanted to ask on the search process for a new CEO. Congrats, by the way, Or, for almost 20 years here and getting Similarweb to where it is. But I guess, specifically, are you guys looking internally for a potential new CEO? Or would this be an external hire? Or I guess, just any more details around the process that you could give?

Yes. So it will be external search. And now that we announced to the Street, we can probably start the search. We really have a top executive search firm to start working today, and we will report to the Street as we get progress.

Our next question is from Tyler Radke with Citi.

This is Andrew Gerard on for Tyler Radke. So just a couple of quick ones. So on the customers above $100,000, I saw the net adds kind of stabilize here from 4Q. So just kind of wanted your puts and takes on kind of what it will take and what sort of products will help kind of reaccelerate this net add number going through the rest of the year?

And then just a really quick follow-up on MCP and kind of your consumption-based revenue. Just understanding that it's early, any kind of details on the margin structure there for those sites for those revenue streams compared to kind of some of your core seats would be great.

Yes. I would start with the second question about the margin. I think the margin are the same or even better in this consumption model because there's no UI. So every time historically, when customers used to buy data from us, our API, first, they become more sticky and retention was better. But also they're much more profitable because it's more integrated into the workflow. So you need less customer success people to support those customers and make more sticky and there's no UI on top of that. So I think margin will get -- will be better.

And regarding the $100,000, sounds this year, we have good momentum there. I think the team is focusing to get the bigger account get bigger -- like our top account to get bigger because in those giant customers, we are barely penetrated as we should be. So we focused on increasing those. But I think it will continue to grow nicely over the year. We start seeing more and more new land at 6 figures. We had a very strong quarter of landing a lot of 6 figures at land, which didn't happen historically. So we had a good quarter on that front also.

Thank you. There are no further questions at this time. I would like to pass the floor back over to management for any closing remarks.

Before we conclude, I would like to highlight 4 key takeaways. The first quarter was a solid start to the year and came in a better than expected, and we are raising the low end of our guidance for both revenue and non-GAAP operating profit for the full year to reflect the improving in the fundamentals.

Second, we are witnessing improving fundamentals and growth drivers. NRR has stabilized. Gross retention is strong and sales productivity continued to improve. Multiyear ARR increased, and we extended our track record of profitability and free cash flow.

Third, our leadership in digital data has become even more valuable as AI adoption accelerates.

And fourth, we're remaining focused on disciplined execution and scaling what we have built. AI is a significant tailwind for data companies like us.

Thank you, everyone, on the call for your continued support. We look forward to speaking to you again over the coming weeks.

Thank you. This does conclude today's conference. A recording of the webcast will be available on the IR website following the call. We thank you again for your participation. You may disconnect your lines at this time.

Greetings. Welcome to Similarweb Fourth Quarter Fiscal 2025 Earnings Call. [Operator Instructions] Please note, this conference is being recorded.

I will now turn the conference over to Rami Myerson, Vice President, Investor Relations. Thank you. You may begin.

Thank you, operator. Welcome, everyone, to our fourth quarter 2025 earnings conference call. Joining me today are our CEO and Co-Founder, Or Offer; our Chief Financial Officer, Ran Vered, who started with us in late December 2025; and Maoz Lakovski, our Chief Business Officer, who is joining us as well.

Yesterday, after market close, we released our results for the fourth quarter and published a discussion of our results in a letter to shareholders on our Investor Relations website at ir.similarweb.com. Today's webcast will be accompanied by an earnings presentation, which is new and underscores our commitment to Investor Relations and transparent communication. The webcast can also be accessed from our Investor Relations website.

Certain statements made on the call today constitute forward-looking statements, which reflect management's best judgment based on the currently available information. These statements involve risks and uncertainties that may cause actual results to differ from our expectations. Please refer to our earnings release and our most recent annual report filed on Form 20-F for more information on the risk factors that could cause actual results to differ from our forward-looking statements.

Additionally, certain non-GAAP financial measures will be discussed on the call today. Reconciliations to the most directly comparable GAAP financial measures are available in the earnings release and the earnings presentation. Today, Or and Ran will walk through the highlights of the quarter and the full year, review the progress we are making on our profitable growth strategy and provide our initial outlook for 2026. Following our prepared remarks, we will open up the call to questions from sell-side analysts.

With that, I'll turn the call over to Or. Or, please go ahead.

Thank you, Rami. Welcome, everyone, joining the call today, and a special welcome to Ran, who joined us as our new CFO in December 2025.

I will begin with our Q4 and full year 2025 highlights, then cover our strategy and the progress we made in 2025, rolling out our innovative solution and conclude with our 2026 priorities and goals.

Now let's look at our Q4 2025 performance on Slide 5. Revenue grew 11% year-over-year to $72.8 million. This was below our guidance, mostly due to the timing of 2 large LLM data training contracts that did not close yet, but remain active in our pipeline. Given the size and complexity of those AI contracts, sales cycles can take longer to complete. That said, once closed, we expect them to represent a very big multiyear revenue opportunities with strong expansion potential. We are working hard to close those deals.

In addition, and despite the delay of those deals, we slightly exceeded the midpoint of our non-GAAP operating profit targets for the quarter through disciplined cost management. Despite the low topline performance, we delivered our ninth consecutive quarter of positive free cash flow and achieved our second consecutive year of positive operating profit. We generated approximately $13 million in free cash flow for the year, reinforcing our commitment to profitable and durable growth.

Net revenue retention for all clients was 98% and 103% for clients above $100,000. We are focused on driving improvement in these metrics in 2026 by executing our customer expansion playbook. Later on, I will expand on the drivers behind that optimism and the action we are taking. Finally, customer demand for our AI offering continued to expand. AI-related revenue reached 11% of sales in the fourth quarter, up from 8% at the end of the second quarter of 2025, driven by our portfolio rated AI solution which we also will cover later in the presentation.

Turning to Slide 6 and our key messages. First, 2025 was a build deal. We build the platform to win in the AI era, while the market was dynamic we lean into the opportunity forming around AI. We accelerated product innovation and launched new offerings such as App Intelligence, which was the fastest-growing product we had in 2025. We introduced an ad intelligence, Gen AI intelligence, AI agent and MCP integrations, which is a new industry standard for AI systems to access our data.

Most recently, we launched an AI studio which is an AI-powered chatbot interface that make it easier for more users to access our data and actionable insights and recommendations. These are commercial products already gaining traction. As said, in Q4, 11% of our revenue came from AI-related use case. We see AI as magnificat [indiscernible] tailwind going forward.

Second, we demonstrated the strength and durability of our model with AI revenue free ex year-over-year and achieved our second consecutive year of positive operating profit and free cash flow.

One important highlights is that 60% of ARR is now multiyear, up from 49% a year ago. This is an important metric as it reflects deeper customer relationship stronger alignment with our value proposition and greater revenue visibility. Most importantly, it shows that our customers are choosing to commit to our data and products for a longer period of time, which is a strong vote of confidence in the value we deliver.

In addition, 63% of ARR comes from customers generating over $100,000 annually enforcing how embedded we are in mission-critical use case in the enterprise segment.

Third, our data mode matters more than ever. AI models and systems are only as strong as the data behind them. Our proprietary digital data now powers enterprises, LLM and AI agents, the quality of our data has been validated by both third parties and customers. For example, we expanded our integration within the Bloomberg terminal. This positions similar well as a premium alternative data provider for institutional investors and provide another proof point or the quality of the data we provide.

And finally, 2026 is transformation here. We are moving from building to scaling as AI become embedded into workflow and trusted digital data become a strategic asset. We believe similar web is well positioned to power the next generation of digital intelligence.

Let me walk you through how we are executing our strategy to build an AI-driven data powerhouse on Slide 7. Our strategy is built on 3 pillars: strengthening our data not deepening enterprise relationship and third, scaling AI first integrated solution. So let's start with the first one, durable data mode.

We are a leader in the digital market data. For more than a decade, we invest hundreds of millions of dollars in developing and deeping our data mode, building deep expertise in collecting and estimating digital behavior at global scale. We continue to invest in R&D to enhance the quality, accuracy and the breadth of the data sets that power our digital intelligence.

We continue to expand coverage, accuracy and freshness across web, app, search ads and now chat-based channels staying at the front wherever digital traffic is shifting. This is a hard to replace assets with compounding advantage and significant long-term commercial potential. AI depends on it. It's not replacing it.

Second, we are powering leading enterprise with our trusted digital data. Many of the world's largest and most sophisticated companies are already our customers. We see significant opportunity to scale those relationships by applying our proven expansion playbook. -- increasing multiproduct adoption over time and driving higher no.

We already have 2 large tax customers generating over $10 million in ARR, those are broad multiuse case relationship across multiple teams and function. Both have expanded into a data agreement that powered the LLMs, positioning similar as a critical building block within the Reintec. Enterprise expansion will be a key focus area for us in 2026 and beyond.

Third, we are doubling down on AI-first integrated solution. And we will continue to expand our AI portfolio to establish ourselves as a winner in the AI transformation. Our data sets are uniquely positioned to power both enterprise users and AI systems, a dual strategy built for people and for agents. Through ecosystem partnerships like [indiscernible] data is embedded directly into AI-native workflows especially for research-driven use case, just as financial data become essential for research platforms, chatbots, we believe that digital market data can play a similar role across all platforms. we expect it become a meaningful commercial growth driver.

As we execute on our 3 pillars, we remain fully committed to operational excellence to drive durable, profitable and cash generated growth. As you can see on Slide 8, we made significant steps forward on our strategy in 2025. As we build similar web for the next stage in our journey.

Starting with the data note. In 2025, we launched multiple new data sets to further extend our 360-degree visibility across the digital world and establish our leadership in digital data. We significantly expanded our coverage across app data, ad spend data, chatbot activity data and Gen AI visibility. These data sets are very unique -- and we believe we are uniquely positioned to provide a comprehensive view across web, app, search, e-commerce, advertising and emerging AI-driven channels and covering the full digital journey across touch points.

Moving to the enterprise pillar. We delivered a solid performance in 2025. Our $100,000 customers grew 12% year-over-year and now represent 53% of ARR. Revenue for multiyear contracts increased significantly to 60% of ARR from 49% in 2024.

Lastly, on our AI-first solution. We launched our innovative offering, AI Studio, AI Agent embedded across our business solution to accelerate time to insight, Gen AI intelligence model which help brands measure their visibility and sentiment across generative AI platforms and a new chatbot MCP integration, including partnerships like Manus, which opened an exciting new distribution and monetization channel.

Our partnership with Manus extends our data sets into agent-driven workflow, where autonomous AI agents capable of performing complex tax activities execute marketing analysis, competitive assessment and strategic planning. Manus, which was recently acquired by Meta is one of the fastest scaling start-up in history. And this is collaboration offer us revenue opportunities to scale with it.

Furthermore, Manus provides access to a much broader set of potential end users beyond our core subscriber space, expanding our term by empowering millions of users with our data. This milestone partnership reinforced our value proposition as a central data layer for the next generation of agenetic tools and serves as a strategic blueprint for more integration to come.

Those are some of the steps we took to strengthen our data mode, deepen enterprise relationship and position SimilarWeb to win in the AI era.

Slide 9 captures our AI data and product strategy, how we power the ecosystem, build AI First solution and expand its tradition and scale. First, we are powering LLM and AI agents. We are seeing strong traction, licensing our data directly to leading LLM companies for both pre and post training use case. This is a strategic priority for us, and we expect it to become increasingly strong revenue stream for us over time.

At the same time, autonomous agents require trusted structured digital intelligence to operate efficiently that's exactly what we provide. Our data is built for both human and agent and we see accelerating demand from both.

Second, we are building our own AI native solution. With Gen AI intelligence, we are helping brands to improve their Gan AI visibility and sentiment. We are seeing strong market validation on this front, including the recognition of our leadership by G2Crowd and we have recently launched it in a self-serve with adoption from hundreds of customers. We believe our data provides an important competitive advantage in this new market, and we are on a journey to become a market leader in this category as well.

We are also transforming our traditional software into an agent first model launching workflow-specific AI agents across marketing and sales use case. This move customers from insights to action with a faster time to value and stronger ROI. This effort is helping us to get to many more users, grow adoption and [indiscernible]. We are very excited about the potential of our own agentic strategy.

Third, we are expanding distribution at scale. Our partnership with leading LLM and agent platform such as Manus and for MCP integration, we embedding similar web directly into AI ecosystem. Our MCP is already available in cloud and will soon be integrated into ChatGPT, enabling AI systems to seamlessly access our data, so users can consume similar web insights directly within the workflows. Those ecosystems partnership unlock new customers, expand our TAM and position our digital data as a critical ingredient for AI-driven research and decision-making.

We believe we are well positioned to be an AI winner with multiple commercial opportunities across data products and partnerships, and we are excited about the potential.

I would like to spend a moment on the AI Studio on Slide 10 because this is more than just a new product launch. AI Studio represents a huge shift in how users interact with similar web data. Historically, our platform delivered a powerful data-driven insight, but often requires technical expertise to express value. AI Studio changed that with an AI-powered interface, user can ask a business question in plain language and in all languages and [indiscernible] receive actionable insights what used to take time and specialized skill can now happen quickly and easily.

This is a major step in the [indiscernible] access to our data across teams and workflows. AI Studio expand the number of users who can average similar web, increases engagement enables faster and more seamless insight generation and unlock new monetization opportunities. The early feedback both from better customers and since launch has been amazing. We see AI Studio as a core part of our product strategy, an important driver of future growth. I encourage you to watch the demo video after the call via the link on the slide to see it in action.

Let me close by reflecting back on 2025 and how it's set up for 2026 on Slide 11. 2026 was a pivotal year, we made real progress, as I said, AI revenue grew 3x and now represent 11% of Q4 revenue. That is a meaningful traction and globalization that AI is already contributing to the business. We also strengthened our durability of the model. $100,000 customer grew 12% and [ 60% ] of ARR is now multiyear, up from 49% a year ago. They give us better visibility and enforce the depth of our enterprise relationship.

At the same time, we acknowledge that 2025 was not within challenge. Overall, NRR stabilized at 98%, and we are not satisfied with that level. Well, NRR our $100,000 customers was at 103%, we know we can execute better across the border base. We have taken action while sharpening our go-to-market strategy, upgrading talent, refining processes and building scalable playbook to drive cross-sell and expansion. We see a clear opportunity to convert onetime AI evaluation deals into recurring revenues and to accelerate the adoption of our newer solution across the installed base.

That's why we have a strong conviction in 2026. We are well positioned to capture long-term AI spend. Our AI First portfolio is scaling, ecosystem [indiscernible] are expanding, and we are targeting high-growth segments like LLM companies, large big tech players and OEM with our own dedicated go-to-market team and focus.

With Ran joining as a CFO, will also strengthen our financial discipline and public market execution. So 2025 at this stage, 2026 is of our disciplined execution and acceleration.

With that, I will hand it over to Ran.

Thanks all. It's a pleasure to be here with you. I'll provide highlights of our financial performance and guidance for the first quarter and the full year of 2026.

But before I do, let me first provide a short overview of my background, why I joined Similarweb and what are my priorities as our CFO. I'm on Slide 13. I'm very excited to join Similarweb at this junction in our journey. Or and the team have built a digital data powerhouse. And as we have discussed today, this unique asset is point to take advantage of emerging opportunities in the AI generative era.

Similarweb is my first role as a tech company CFO over 2 decades. Previously, our CFO of 2 U.S. listed tech companies and most recently joined Foncia, a B2B self-intelligence Unicorn. I look forward to leveraging my experience and financial discipline to help execute our clear strategy to accelerate revenue growth to the next level, while doubling down on our commitment to expand profitability and deliver durable free cash flow.

This is what I am committed to doing all while ensuring will remain disciplined capital allocators. I look forward to meeting you over the coming weeks and months.

Turning to Slide 14 in our quarterly results. We generated $72.8 million of revenue, an 11% increase relative to the fourth quarter of 2024. Revenue was lower than expected due to delayed closing of 2 major LLM related agreements that were anticipated in the fourth quarter, as some noted, we remain in active discussions.

Non-GAAP operating profit for the quarter was $3.4 million, reflecting a 5% margin compared to $2.6 million and a 4% margin in 2024. This was within our guidance range, thanks to disciplined cost control.

Turning to the full year financials on Slide 15. I will not review each metric but will hit that despite lower revenue. Operating profit came in ahead of our expectations at the beginning of the year due to our sustained focus on disciplined execution. 2025 was our second consecutive year of positive non-GAAP operating profit and free cash flow. We are committed to generating profitable growth going forward. Good cash generation is a strong balance sheet are critical for a business in any stage of the cycle and become even more important in periods of volatility.

On Slide 16, you can see that we ended the year with $72 million of cash and cash equivalents and no debt. We also have an available line of credit of $75 million. After 9 consecutive quarters of positive free cash flow. The business has a solid core and the financial flexibility to weather market headwinds, while same focus on our long-term goals to maximize shareholder value.

Our capital allocation priorities over the coming years will be: First, we continue to invest in R&D at around 20% of revenues to improve our digital data and deepen our competitive moat; second, is to invest in M&A only when it meets our rigorous financial return criteria and embed our strategic goals to improve our data asset and product portfolio.

Over the last 2 years, we completed several bolt-on acquisitions, including [indiscernible] matters, which boosted our app intelligence capabilities and ad metrics, which enhance as intelligence. The current packet volatility is enriching the M&A pipeline. We remain committed to a strong balance sheet that provides us through financial and operational flexibility.

Turning to our outlook for 2026 on Slide 17. For the full year 2026, we expect total revenue in the range of $305 million to $315 million, representing 10% year-over-year growth at the midpoint of the range. In Q1 2026, we expect total revenue in the range of $72 million to $74 million, representing 9% year-on-year growth at the base point.

On the full year, we expect our non-GAAP operating profit to be between $16 million and $19 million. Non-GAAP operating profit for the first quarter of 2026 is expected to be in the range of $0.5 million to $2.5 million. And I provide guidance for the first time at Similarweb, we are taking a deliberately prudent approach. We are resuming pockets of end market weakness persists, and we are grounding the initial outlook in the high visibility of our core business drivers, while we are encouraged by the strong demand in the pipeline for larger AI deals.

After delivering the second year of [indiscernible] revenue growth, non-GAAP operating profit and positive free cash flow, we remain committed to building a more durable franchise in Similarweb.

With that, Or and I ready to answer your questions. Following Q&A, Or will share some closing remarks. Operator, please open the line for questions.

[Operator Instructions] Our first question is from Raimo Lenschow with Barclays.

I had like 2 questions. And Ran, welcome to the team and all the best. One for Or, if you think about the large LLM contracts that you're signing there, but then you also look at the large customer NRR actually just came down a little bit. It's just -- do you need to think about that as an additional or somewhat as a replacement that people that said people using more LLMs going forward, that means they need to use less of their own, and that kind of impacts the NRR numbers then? Or are they not correlated? Could you speak to that dynamic going on there? And then I have one follow-up for Ran.

Yes. I think there's no correlation between the core business when we sell our regular software when brands buying the web intelligent app intelligence to drive growth traffic online versus our motion of selling data for LLM use case. That is -- it's a different use case specifically to train LLM to be smarter, better about the world. So it's a different -- I don't think it's come on each other.

Yes. Okay. Perfect. Okay. Makes sense. And then the one for you, one, like, obviously, with these larger contracts come through, it kind of as a CFO and as a new CFO, it's kind of difficult to guide them and how do you think about your guidance philosophy in terms of going forward, kind of if those big deals on the pipeline, is it worth maybe taking them out and they become like upside when it come through? Like how do you think about that dynamic?

Thanks for the question. First of all, I'm really happy to be on this call. So when we look on the guidance, we took a reasonable approach and this is one of the reason we widened the range. In prior years, the range we guided to the Street was around $3 million and now the cost of that LLM deals and the big deals, we widened the range to $10 million just because we know -- we see these fills in the pipeline but the timing of them to land is not that clear.

As we say in the prepared remarks, this is one of the main reasons we lost Q4. So when I look on it, some of it with percentage is baked already into the guidelines. But when we're going to lend them, of course, this will -- we'll see how we adjust the guidance going forward.

Our next question is from Arjun Bhatia with William Blair.

Yes. Perfect. Or can we maybe just go back to the first question. I understand the 2 demand kind of drivers between LLMs and the core business are not correlated. But I think if I exclude the -- your AI revenue, it seems like the core business is slowing quite a bit. And so I'm curious if you could just help us understand what's happening there, excluding your AI revenue. Is the core NRR obviously is down. What are the challenges there going forward? And how do you sort of remediate that to get that core business back to stronger growth?

Yes. Thank you, Arjun, for the question. First of all, I think this quarter numbers, you can see that the core business is not falling, it's still growing because you basically saw an example of a quarter when the big data deals didn't came, they slipped for another quarter and you still see a growth in the revenue.

So we do see growth in the core business even without the data for LLM, but the data for LLM are very big bills and there are significant thing that in the regular business, we're selling a deal between $20,000, $30,000 at land and the expansion can be $50,000 to $60,000. Those data for LLM is significant. It's 7 figures still sometimes and then they behave very, very different and hard to predict and forecast as you can understand.

And so I think -- I hope this will give you some visibility. I know maybe Maoz, our Chief Strategy Officer maybe you have anything on that topic as well on your mind?

Yes, happy to help. And thanks for the question. We think Gerard and Rennes in very good traction. So we have 60% of the book of business, which the majority of it is still on non-AI under multiyear. So we're seeing good durability of the core local business. We need to work on the expansion [indiscernible] in order to increase NRR.

We are now in the -- we are very optimistic about NNR going forward. We feel that some of the LLM onetime deals push have affected the NRR. But going forward, we are working hard to improve it, mostly focusing on the expansion. We have a great product portfolio from app intelligence, which is a very first coin order for us ad intelligence, the [indiscernible] intelligence that we are launching, and we're seeing good success with our clients. So overall, the core business of us is still growing, and we are very good in [indiscernible] run rates are solid, multiyear is their great client feedback, and we are laser focused on expanding it and [indiscernible] NRR.

Okay. I understood. And then one for Ran. Can you -- just going back to the guidance range, I appreciate, and I think it's helpful that at least it's a wider range given some of the uncertainty around end customers and how lumpy it can be.

But can you just touch on what you're expecting? What would have to materialize to hit the high end of the range versus the low end? Like what are the different scenarios that are contemplated in that wider guidance range?

Thanks for the question. So I think we need to land the big LLM deals. So probably this is what can drive the difference between the low end and the high end of the range. And because those deals are really big, 7 figures, Or also mentioned, and we see them in the pipeline, and we see also the engagement with the customers.

I was actually when I joined, and I'm here talking with the people and see the pipeline. I really encourage by the pipeline and by the fact that we are delivering with these deals to the larger LLM. But again, I think it's mainly in terms of timing when they will end and what will be eventually the size of them. I think this is why the range is in the $10 million range.

Our next question is from Ken Wang with Oppenheimer & Company.

I just wanted to check as far as the miss in the quarter, was that $4 million fully from the large AI LLM deals? And then how much of that is baked into the 1Q guide?

Yes. So first of all, thank you for the question. So yes, the majority of the mix is because of those 2 deals that were very, very big and been in the pipeline for a long time. And we start in the hope to get them to the finish line. And looking now in the Q1 guidance, we're taking more cautious steps. And we said it's very hard to forecast them.

One deal will probably come later in the year. And the other one was splitted into more small amounts and one of them dedicated. So we are confident that some of that will come in Q1, I think. I hope this will answer the question.

Got it. And so then when I think about the growth rate assuming some of it is in Q1 that kind of perhaps put your core business or your organic growth at high single digits. Is that the right way to think about it until you guys get the go-to-market motions and the product sorted out for '26?

These big deals are taking a lot from our go-to-market as well, I think that even with -- when you have Salesforce salespeople and some of them know that there is those opportunity of very big deals A lot of efforts are going into those directions. So it's part of the organic growth and taking attention or other stuff for their big opportunity.

What we did this year in order to be more disciplined around it, we built a dedicated team to go and be focused only on those opportunities to have a better forecast and execution and also try to leverage even more upside as we have only single-digit customer right now in this LLM auction, but there is probably much more customers who can approach and onboard. So I hope this dedicated team will give us better forecast and execution on that.

Okay. Fantastic.

Our next question is from Scott Berg with Needham & Company.

Lucas Mecca on for Scott Berg. First, you guys made some strong sales investments heading into fiscal 2025. We understand some sales cycles that be ungated but in general, I guess, could you guys just talk about the productivity kind of throughout the year of the new investments? And then what type of additional sales investments does your fiscal 2026 guidance imply?

Yes. First of all, thank you for the question, and I think it's a good question.

So we were not very happy with the performance and the investment we did, we were hoping to get better yield from the investment that we did in the beginning of the year to try to accelerate growth. And we did see the yield of the sales getting better every quarter. But the good news that we will not need to do any investment going into this year.

We took some steps to optimize the go-to-market motion. And once we saw that we're not getting the outcome we were looking for and reduce layers of management and remove some low performance and starting the year with a fully ramping, I would know more investment needed in order to drive the results we're looking into this year.

Got it. That's helpful. And then just one other question here, kind of surrounding the net revenue retention compression. -- would you say is that primarily driven by lapping the larger AI contracts from late 2024? Or just any other kind of underlying changes in gross retention or expansion trends that we should be thinking about?

Yes, I think it's an excellent question. And the answer is yes, you're right. Because some of those big deals lapped into this year is impacting, of course, the NRR. But also if you think about last year and all these new data for LLM that is including sometimes onetime deals. They have not been reflected in the NRR because there was a onetime and NRR is on the carrying revenue.

And this is why it looked like the NRR of the big accounts are dropping. But in reality, we had much more revenue because of the onetime last year. So we expect the NRR metrics to get better going forward. And also as more of those onetime trials data for LLM are maturing to ARR, of course, contribute and get better results over time.

Our next question is from Patrick Walravens with Citizens Bank.

Great. This is Kincaid on for Patrick. Or I just wanted to know if you could give us a little breakdown of that 11% of revenue coming from AI solutions. What are the components that drive that as well as -- I understand that 2 of these LLM deals slipped from this quarter. Can you give us any info on how many did close this quarter?

Yes. So the data for LLM deals, there was, I think, one, I need to look or two last quarter that was not as big as the one we expected that did close, that's much more smaller with new players. But overall, the AI revenue is a bucket that includes you offering, not only the data for LLM, you have the Gen AI model that we sell to brands that including their we have a chatbot partnership at the one in Manus that it's the revenue setting up the partnership and then there is like a usage-based component on top of that.

So there's fewer channels inside this 11%, it's not only the data for LLMs. It's a few streams that are kind of new for us that are starting in the past 12 years because of the AI revolution. And we see those offerings and as tailwinds going into this year.

Our next question is from Luke Horton with Northland Securities.

Just wanted to touch on some of the what you guys called commercial execution shortfalls. I guess, could you be a little bit more specific of this -- was this around the hiring ramp or pricing in the sales cycle or I guess, what kind of changes have you made to the go-to-market organization to improve these win rates and pipeline conversion in 2026?

So in 2025, we increased our sellers all across the board, trying to accelerate the revenue growth. And there was a lot of noise adding a lot of people in short time and took a lot of long time to ramp them up. And we didn't see the yield we were hoping also on the enterprise side and the land and the expansion. So we had to optimize it and we get over the year. And I think as I said before, we -- going into this year, we have the right talent in place. I don't know, maybe, Maoz anything that you have to say around that as well.

I think the key for us is that doubling down on growth opportunities. Or mentioned the team and the go-to-market investments we are making around AI, LLMs OEM, where we see a lot of growth potential. So we're doubling down really finding the go-to-market strategies. We are seeing increase in yield overall, but we're also aware of the market dynamics and uncertainty in the market. So we think we are well set for '26. We're confident in our ability to keep our guidance throughout the year. With same strong pipeline. We are optimistic about the pipeline, some large meaningful deals. We have the onetime we need to convert into the current deals and we are on it. So overall, we think we're in a good position.

Got it. And then lastly, just want to go back to the AI Studio as this is a pretty significant product for you guys. But I guess, could you give some clarity around the monetization of this if this is sort of seat-based or consumption-based or like premium tier pricing? Just any sort of information around that would be great.

Moaz as you're in charge of pricing, you can take it.

Yes. We're actually super excited about the AI studio. Reason being is that we see this product as a mean to get to many more users within the organization. It can help us cross the chasm and making the data insight much more available. So we are super bullish about this, and we're seeing great demand and initial traction.

In terms of monetization, so at this point, we are baking some of it within the [indiscernible], but the model is twofold, it's data access and then data consumption, which means that potentially you need to have access to the specific data you want to add queries on. It could be a country, it could be a data set, but we align it to the customer needs.

The second is the consumption. So we give some level of consumption within the package and then the clients can grow. We think it's a very strategic role for us, again, because we see us getting to many more users. With that, in terms of our AI strategy, worth mentioning also the Manus partnership, which we are extremely, extremely optimistic about.

You see this is a huge opportunity for us to get to on typical users of Similarweb and monetize it. We're seeing a potential huge distribution into a local [indiscernible] time for us. And so between the AI studio, which is a mean to grow within our client base to the Manus example with unlocking distribution for noncore users. We are very happy that we are able to monetize and get to many more users. I hope it will help you understand.

I would add on top of that, some of our big enterprise customers, they have unlimited users package. So we've never been about fee-based approach within about most of data access and consumption. And we hope that, for example, this AI studio in those enterprises that really have big amount of users, we can increase adoption because as we said, you can talk to the studio in any language.

So you move the language barrier. You don't need to be expert on our platform and where every one of the dataset is signed. And -- so everybody can easily go ask business pain business question and get immediately the data then based on consumption. So it's very similar to concept pace for business outcome. So you have a question and you get the take for that. So we hope this will drive a good adoption and expense to this year.

Awesome. That was super helpful.

[Operator Instructions] Our next question is from Adam Hotchkiss with Goldman Sachs.

Ran nice to meet you in this forum. I wanted to just dig in on the sales cycle comments or what is it specifically about the sales cycles that have maybe been elongated to the extent you can share? I guess I'm just trying to understand what I think needs to be done from your side to get those over the finish line.

Yes. I think that there are some learned that we try to add many sales people in one time. So just taking the disruption of the managers and then start increasing the sales cycle. We're trying to build an outbound motion for enterprise that was very long since [indiscernible] much longer than what we used to.

We are very inbound based business every year, we get more than 100 million people visiting our website and hundreds of thousands of people who register to try our solution every month, but it's a big volume. This is usually what's feeding the salespeople. And they used to a specific cell cycle and once we try to do more [indiscernible] enterprise, it was tougher and does not fit with the model that we used to.

So -- and during the year, we shift our thing more to land and expand and decided to back off of this outdoor enterprise approach because most of the enterprises already been familiar or using as in the past. And this is much more efficient and much more profitable for us to lend through the inbound and then the expansion, the enterprise expansion player on the current book of business. So all of those together is kind of a little bit changed the sales cycle during last year, all those testing that we were trying to do acceleration. So it's a little bit hurt the sale cycle, and hurting the sales yield in a few quarters. But as we change and adopted, it's got better and better by the end of the year.

Okay. Great. And then I just want to touch on the I guess, the broader competitive landscape and customer budget landscape. I think there's a lot been made of the GEO/AIO market. And it feels like there's a lot of funding going into that space. It feels like incumbents are spending there. Is that where you're seeing most of customer retention in budgets go, given what's happening on the LLS M side? And I guess, number one, is that true? And number two, how do you feel you're positioned in that space?

Yes. I think it's a great question and that we help and maybe also Maoz some thoughts driving strategy, but the GEO/AEO still there's no straight name for this market. Is a new market and of course, it's a red [indiscernible] there's a lot of small players there. I'm happy to say that we launched a really amazing offering in that space that is doing well. We've already been recognized by G2 it's one of the companies like Foster for software that met the market as a leader [indiscernible] the enterprise.

It's a new motion. Some of the budgets go -- a lot of attention go there, for sure. I don't know if this market is big. I think it's still small and developing. I think what's more interesting is that basically a lot of attention go there because a lot of brands are losing traffic now because search is declining. So everybody is trying to understand what's going on. If it's going on to ChatGPT, if I need to invest there. But in reality, there's much bigger movement happening. Search is declining. So brands trying to close this gap by investing more on paid channels, then the paid goes up and then they need to bring some of the traffic that went to the ChatGPT.

And I think that in this environment, you need a much more holistic solution to help you manage all channels. okay? Because one channel is going down, the AI chatbot a new channel going up and then you have the ad spend that is going out of control. And you need to control all of them as the CMO or the head of digital running a business is trying to win back your traffic.

And I think Similarweb is the only solution right now that can give you full visibility and optimization and insights across all channels. And I think with that, our Gen AI offering is great. It's really good. But I will say that you more than only Gen AI solution, you need the ad intelligence solution, you need to [indiscernible] solution and in the benchmarking and competitive solution in all of them together, this is what Similarweb is offering.

And I know Maozs maybe have any interesting [indiscernible] to say here.

Yes. I'm fully aligned, and that's what we're hearing from the market. And I think the critical part in is we have the right to win. We are helping leaders to navigate between web and Gen AI, every CMO -- if on a CEO discussion reset e-commerce whatever business model. Everyone has this question, what should they be doing -- how should they be balancing between the traditional kind of web and the new Gen AI. So this is where we come in. So this is one thing that we are unique from any other player in this market, and we think we're going to win.

Second, we are a data company. We have a meaningful data mode. Also when it comes to Gen AI visibility, and we are monetizing if we are selling it directly for our dedicated product, and it's picking up super nicely. And second, we are also feeding ecosystem. We also have an OEM play here, and we are bullish about this as well, and it's working very nicely for us. Last we have the clients. So we have the CMOs. We have [indiscernible] digital marketing, they stick with us. It seems like GEO/AEO is more than the traditional SCO. It gets more interest because these are spending much more of their time within these engines.

And they are coming to us -- and honestly, there had of market education and for leadership we are playing in this game, and we are very optimistic on our ability to become a very meaningful player. And the G2 recent completion is just kind of another one that shows that we are in the right direction.

This does conclude our question-and-answer session. I would like to turn the conference back over to Or for closing remarks.

Before we conclude, I would like to highlight 4 key takeaways on Slide 19. First, 2025 was a build year with our data mode and position the company for the AI area. Second, we delivered solid growth. AI revenue grew 3x year-over-year multiyear ARR increased and we extend our track record of profitability and free cash flow. Third, our leadership in digital data become even more valuable as AI adoption accelerates. And fourth, 2026 is about disciplined execution and scaling what we build, and we have strong belief in the opportunity ahead. AI is a meaningful tailwind for data companies like us and as I like to say, we are just getting started.

Thank you, everyone, on the call for your continued support. We look forward to speaking to you again over the coming weeks.

Thank you. This does conclude our conference. You may disconnect at this time, and thank you for your participation.

Good morning, ladies and gentlemen, and welcome to the Similarweb Q3 Fiscal 2025 Earnings Call. [Operator Instructions] Please note that this event is being recorded.

I will now hand you over to Rami Myerson. Please go ahead.

Thank you, operator. Welcome, everyone, to our third quarter 2025 earnings conference call. Joining me today are our CEO and Co-Founder, Or Offer and our Chief Business Officer. [ Maslovskiy ]. Yesterday, after market close, we released our results for the third quarter and published a discussion of our results and a letter to shareholders, as well as an investor presentation with a strategic overview of the business on our Investor Relations website at ir.similarweb.com.

Certain statements made on the call today constitute forward-looking statements, which reflect management's best judgment based on the currently available information, -- these statements involve risks and uncertainties that may cause actual results to differ from our expectations. Please refer to our earnings release and our most recent annual report filed them for 20-F for more information on the risk factors that could cause actual results to differ from our forward-looking statements.

Additionally, certain non-GAAP financial measures will be discussed on the call today. Reconciliations to the most directly comparable GAAP financial measures are available in the earnings release and the earnings presentation. We will begin with a highlight of the quarter. And then I will provide an overview of the financials. Then we will open up the call to questions from sell-side analysts.

With that, I'll turn the call over to Or. Or, please go ahead.

Thank you, Rami, and welcome, everyone, joining the call today. I'm so that proud of the third quarter financial results that we reported today. Revenue increased by 11% year-over-year to $72 million, in line with our expectation. Our customer base grew 15% year-over-year to more than 6,000 ARR customers at quarter end. We reported an 8 quarter of positive free cash flow, and we are reiterating guidance for 2025 revenues and raising our profit guidance for the year. .

Customer interest in our Gen AI data and solution is amazing, and revenues from our Gen AI data and new solutions continue to expand and are one of our fastest-growing revenue streams. We remain focused on fee impact opportunities where Similarweb is highly positioned to lead. The first one is the Gen AI intelligence. Our GenAI Intelligence suite has been well received by our customer. In October, we launched a Web Intelligence 4.0 that integrate our GenAI capabilities into our web intelligence solution, providing an even more comprehensive view of the digital world.

ARR from Gen AI Intelligent products is growing rapidly and to more than $1 million since the launch in April, a great milestone for this product. The second one is our data selling for LLM. We are supplying our unique and fresh digital data to companies that are building their own LLM and generative AI application. And the third one is our AI agent. We continue to roll out AI agent to help our customers maximize the value and automate their workflow, enabling them to extract insight from our data in the shortest time possible.

Utilization of our AI agent continue to grow. For example, 27% of our sales intelligent customers use our AI Meeting caps and our new AI Outage agents, with adoption and utilization is growing quarter-over-quarter. In September, we launched our new Similarweb MCP server that can deliver trusted digital market intelligent data directly into AI agent. These new products empower our customers with a tool to integrate our digital data insight at scale via LLM and automation tools, including load, copilot, open AI agent builder and more. The MCP is a exciting milestone in our deployment of data-driven AI products and services.

I'm super proud of the strong adoption of the Similarweb app intelligence that we launch in melts. At the end of Q3, more than 580 of our customers were using our app intelligence and ARR has increased rapidly to above $10 million. Similarweb digital app data today cover over 4 million iOS and unaided apps across 58 countries, providing our clients with comprehensive coverage have data that includes ranking, download usage, engagement, retention and audience demographics.

The investment in go-to-market that we started in the fourth quarter of 2024 is ramping as planned, and we are starting to see good results. At the end of Q3, we had 30% more sellers than in the third quarter last year, and we are seeing encouraging improvement in yield. I'm super proud that we continue to operate efficiently and reported our eighth quarter of positive free cash flow in Q3, generating $43 million of free cash flow in the past 8 quarters.

We remain focused on delivering profitable growth over time as well as achieving our long-term profit and free cash flow targets. I'm super excited that [ Ran Warren ], our new CFO, will join in December. Ron has over 20 years of finance experience and a proven track record of driving growth, efficiency and strategic transformation. He has worked as the CFO at 3 companies, 2 U.S. traded public companies and recently in a SaaS enterprise data company.

I would like to thank Jason Schwartz for 10 years of service at Similarweb and wish him good luck and success. And as I like to say, we are just getting started. Thank you, everyone, for the call and for your continued support. And with that, I will turn the call back to Rami.

Thanks, all. I'll provide highlights of our financial performance, and then we'll open the call up to questions. We generated $71.8 million of revenue in Q3, an 11% increase relative to Q3 2024. Revenue growth was driven by the 15% growth in overall customers as well as increased revenues from some of the new products we launched in 2025, including App Intelligence and Gen AI intelligence. The quarterly growth rate reflects a strong Q3 '24 comparison and the early recognition of LLM evaluation revenues in Q2, which we had originally expected in Q3, as we discussed with you last quarter.

We are proud that 58% of our ARR is contracted under multiyear contracts, up from 45% last year. We believe this demonstrates the durability of our revenues and the importance of our data to our customers. We generated $3 million of normalized free cash flow in the quarter a 4% free cash flow margin and an eighth consecutive quarter of positive free cash flow. We plan to continue to generate positive free cash flow on a quarterly basis going forward.

Our remaining performance obligations, or RPO, totaled $268 million at the end of Q3, up 26% year-over-year. We expect to recognize 68% of total RPO as revenue over the next 12 months. In Q3, overall NRI was 98% across all customers and 105% for customers with over $100,000 per ARR. The decline in NRR reflects a strong expansion activity in 2024, particularly from large contracts booked during the second and third quarter of last year. We are very encouraged by the improving trends in GRR that increase sequentially in Q3 and was our highest in 2 years.

Moving to guidance for the year. We are reiterating our revenue guidance for full year of 2025 and expect total revenue in the range of $285 million to $288 million, representing 15% year-over-year growth at the midpoint of the range. We are raising our non-GAAP operating profit guidance to between $8.5 million and $9.5 million, an increase from our previous expectation and significantly higher than the guidance we provided at the beginning of the year. This is due to our focus on disciplined execution.

With that, Or, [indiscernible] and myself are ready to answer your questions.

[Operator Instructions] Our first question comes from Surinder Thind of Jefferies.

Or, could you maybe just talk about your gross revenue retention. It looks like things are trending in the right direction, but NRR would suggest even given the tough comps that maybe the upsell process has been a little bit more challenging. Any color there would be appreciated.

Yes, of course. And thank you for the question. I'm talking about the [indiscernible]. And so the NRR we report is the average of the 4 last quarter of the past 12 months. In the past 12 months a lot of the expansion we're doing is mostly like big part of the big expansion were those engagement on the data for LLMs and the way this work is usually start as a onetime test that is significant. And then down the road, it's converting into ARR business.

So because a lot of the expansion comes from those in the past 12 months, and you don't see it in the NRR because the only reflect in ARR deals. So I hope that there's a lot of those pipelines of big deals we have for selling data for LLM will convert into ARR deals going forward. this trend will change and go down the road.

That's helpful. And then maybe I guess since you mentioned kind of the LLM and the training data partnerships and the pipeline, can you maybe talk about how that's evolving at this point in the past, you've announced a number of kind of fees upfront data purchases that aren't in your ARR. So should we be expecting conversion? Is this something where the clients maybe take 6 months to evaluate whether they want to enter into a longer-term relationship? Or how should we think about what's coming down the pipeline here?

Yes. It's excellent question. So indeed, the answer is yes. It's a long process of cell when you usually provide a big chunk of historical data that those companies are trying to use and analyze and prove that it will improve their accuracy of the model. So those process usually take a long time, and there's many different data sets. Similarweb is a leading digital company of the world. We have so many different data sets that there are so many assumptions and so many things we see how it's improving. So there's many tests going, and there's different companies.

So yes, I feel very confident that a majority of those engagements will convert to ARR deals going forward because we have already have a few of them that are already in ARR with long-term commitments. So we see the impact and driving on other players. So we're very confident that we can drive this impact on all the other players.

Our next question comes from Raimo Lenschow of Barclays.

Perfect. I had 2 questions as well. So first of all, great to see the App intelligent customer count grow and ARR reaching almost 10 million there. Can you help us understand where these customers are coming from? Are they cross-sell or net new? Like can you speak to that, please? And then I have 1 follow-up. .

Yes, of course, we're very excited about the new product that we launch into the market. So not only the app intelligence that is like super successful or also a Gen AI offering that just passed the $1 million like in super fast time. So regarding the customer, I think the majority of the customer is cross-sell. You think that we have more than 60 customers that we engage in buying our digital data to increase their market share all across the digital world. So that intelligence is like spot on for them, like they all usually have website and app. So it's an easy sell. They love us. They track for us. So -- we see a very big success. The more we're increasing the coverage of countries we provide and the metrics, it should be very successful. So we're very happy. We're seeing good success that the product that we innovate and build and launch are adopting by our customers. .

Yes. Okay. Perfect. And then if you look at the -- to the last question, you talked a little bit about the in the quarter as well. But the -- if I look at the sequential add this quarter, it was kind of more on the lower side of what we've seen historically. Can you speak a little bit to were there other factors? Or was it just what you mentioned to the first question?

Yes, I think that we think that the execution was good. So I know it's very hard to land exactly where you planned, but we felt that execution was good. We feel good for the year. So some of the deals are big. So it's how to forecast them. But overall, I think that like we're really able to land spot on what we -- maybe, Rami, if you have anything to think about that. .

Yes, just to add to that, as you remember, we had some contracts that came in earlier than expected, some of those evaluation contracts in Q2. And so the phasing isn't linear. And so we booked revenues in Q2 earlier than Q3. If we would have booked those revenues in Q3, then the sequential improvement would have been more gradual.

The next question comes from Ken Wong of Oppenheimer & Co.

This 1 might build on the response you just gave, Rami, -- but just wanted to get thoughts on kind of why the ARPU declined slightly even with the focus on upmarket customers, how are we thinking about the trend on ARPU going forward?

I think that ARPU is impacted by the number of customers that we added and tear the larger customers. On the ARR, we added some mainly the large end, some onetime customers wouldn't add -- we saw an increase in revenues, whereas a lot of the customers are crossing the trends are coming through below average. But we expect this to fluctuate over time. What most as is the increase in customer count because that ultimately means that we have a big range of customers that we can then sell and upsell to and move them from a single product into multiyear products, which move them from single geographies to multi geographies, as we mentioned in the shareholder letter, we have customers that have increased 6x over time or 10x over time.

And so once they're in the power line, then we can work on them and land and expand and implement the playbook. So quarterly fluctuation or decline or increase there is very, very small and does it really have a big impact on the way we think about the business.

Okay. Okay. Perfect. And then a broader theme, we just wanted to kind of pick your brain on with SEO traffic coming down. I know you guys have some AI tools that are helping customers kind of focus on other channels. But any impact you're seeing in terms of demand for web intelligence and some of your core products with some customers maybe deemphasizing web traffic?

So I think we see a little bit I think that a lot of those digital companies that have websites and now getting less traffic from a CEO now they need to close those gaps from other channels and then they come to us. We are a leading digital company gives visibility to the market. So they want to understand how they position if the decrease these is worse or better than the competition and what action we need to do to drive more traffic. So for us, those market changes and dynamic on increasing the need and the demand for the solutions we provide. .

Yes, I think was just said that First, we are following and seeing what the users are and we are making sure that we are able to track and have a compelling offer and we are investing a lot in the GEO AEO offer and it's also important to mention that we launched web intelligence 4.0, a new pricing schema, about month or month half ago, and we're seeing initial good signs of monetization of our core products. we are optimistic about it and think that our monetization strategy will make sure that we keep growing our core offerings.

Ken, does that conclude your questions? Our next question comes from Arjun Bhatia of William Blair & Company.

I'm Will Miller on for Arjun Bhatia. So curious to hear more about the sales rep ramp that were added a few quarters ago now that we're through the third quarter and into the fourth quarter. In the past, you mentioned you were looking forward to the newer sales resources, closing more deals in the back half of the year. Is that playing out? .

So we're seeing an improvement in the go-to-market quarter-over-quarter. And I think last quarter, we said that we have a record high of salespeople closing deals and I think even this quarter, we saw even higher numbers of people -- of salespeople that participate in generating revenues. And of course, as a CEO, you always want better and bigger. So we're always optimizing that the go-to-market will be much more stronger and better.

Our next question comes from Tyler Radke of Citi.

So just going back to the results and the guidance, I mean I think we're used to similar web, probably vast majority of your quarters as a public company. beating the midpoint, if not the entire guidance range and raising at least on revenue. So I just wanted to make sure I understood the dynamics. Certainly, I can appreciate the quarter revenue that sort of got accelerated last quarter. But just relative to your guide, was it simply deal timing, linearity of the quarter when these deals closed? Are you building in more conservatism just given the CFO transition? Just help us understand sort of the lack of a beat and raise on revenue. .

We think that overall, I think, of course, everything you said is part of that. But I think that also when we started the year, we were -- and even now, we're very focused on optimizing the margin, the EBITDA margin, and this is where we felt that we can drive good impact. And this is, as you can see, we're doing a very nice bit and raise on that, running a very efficient and disciplined execution. And so I think this is where we put our focus.

Okay. And then on the margin side, you talked about a pretty healthy growth in the number of sales reps that you had this quarter, but sort of what's driving that incremental raise? Like where are you taking costs out? Is it more sort of not hiring as many sales and marketing people? Is it more R&D and GA, maybe you're seeing some AI efficiencies in the business. Would love to just hear specifically what's driving the lower cost here for the full year?

I think it's a combination of we decided to become better and that metrics and become more disciplined around it. And of course, you have the AI tailwind that has helped increase productivity. So you can run a very tight engineering. We're not growing the R&D resource and of course, around the go-to-market as you go and you optimize the start at the beginning of the year, hiring and many people to execute and the 1 that were not performing, you let go. So basically, you keep with the best ones. -- and they are becoming more productive. And I think this was the majority of the cost saving we look into now. .

Our next question comes from Patrick Walravens of Citizens Bank.

Great. This is [indiscernible] on for Pat. Congrats on the quarter. So I was just curious if you could highlight any customer conversations that you've had around the GenAI products? And what's really driving uptake with the seeing a lot of the level 4.

Yes, I think it's very interesting. It's kind of the Gen AI optimization product that we sell, it's a new channel for all of our customers. It's a channel that up and rising this year. And there's many questions about getting visibility and understand how to be successful. It's a very interesting dynamic because maybe it's not driving a lot of traffic, but I think a lot of the answers coming on the chatbot are kind of defining the customer perceptions on brands and the purchase of the decision-making. .

So it's very important to them to understand how many consumers asking about their brand. what are the answer, what is the sentiment? So as you work with the customers and basically building and developing the products that you need in order to be more successful in this new channel that arise.

Ken, this is Rami, if I can just jump on and -- we've had some meetings with the leadership that are coming back from meetings with a range of customers around the U.S. and around the world. I think there's general excitement in the business about the opportunities. C-suite are very, very keen to understand how GenAI is impacting the business on the one hand. On the other hand, all the leading LLMs are very, very keen to understand how the data we provide them can help them improve their modeling.

So I think that when we combine those 2 parts of the market, on the 1 hand, the interest we're getting from all the model generators and creative and from the corporate -- the business is being impacted and disrupted by AI. It really gives us a lot of access very excited about the opportunities we have from that part of the market.

The next question comes from Luke Horton of Northland Securities. .

Just wanted to talk a little bit about the customer side. And kind of are you seeing any mix shift between enterprise versus mid-market customers, especially with kind of the new use cases and product launches that you guys have made over the past year.

Not really. I think the mix between SMB and enterprise stayed the same. We didn't observe any change in that.

Okay. Fair enough. And then just kind of piggybacking off of that into the competitive landscape here. Just have you seen an uptick in competition here, especially with I mean, a couple of other companies out there kind of doing similar cadence of new product launches and trying to capture this Gen AI demand. Just curious your thoughts on the overall competitive landscape.

Yes, [indiscernible] here. Thank you for the question. We -- there is a lot of interest and a lot of demand for G&A products. but we are confident that we can be a dominant player in this space. We have a unique data sets that enable us to be the best solution in this field. We have great client relationships, and we get a lot of demand on. It's a very horizontal play, many of our clients across brands, agencies, upsells, they all care about GenAI visibility. So we are not too concerned. We are focusing. We are building a great product. We have great data sets on this landscape. We are really allowing brands to understand visibility within about market growth in multiple education. It's not really about this competitor or that competitor at this point?

Okay. Fair enough. And then just last 1 here. Apologies if this 1 has already kind of been asked and answered. But just looking at the implied revenue guidance for 4Q -- it's sort of a wider band here. Just wondering if that's kind of more so due to uncertainty around the timing of some of these larger deals flowing through or just kind of the puts and takes on the implied 4Q revenue guide?

Yes. It's basically because we have a very strong pipeline and a very big deal, so we want to keep it in that range to understand we're very confident we lend on the range, and we want to see hard material lines.

[Operator Instructions] Our next question comes from Adam Hacks of Goldman Sachs.

And I just wanted to ask on your RPO metric that was strong for a second consecutive quarter here. Maybe just comment a little bit on contract duration and how we should think about the interplay of revenue growth versus that higher RPO growth rate?

Yes. Thank you, Adam, for the questions. Indeed, we're seeing a good success with a multiyear commitment. We see more and more of our customers loving our products and monetize it, getting a great ROI and from that and willing to engage with us for a multiyear. And as they report that we now have 58% of the revenue is closed for multiyears that we're very, very proud with that metric. And it's a very strong indication of the value of the data we give to our customers. So with that success and every quarter, we're getting better and more customers engage with us. It's also helping to get that RPO. .

Great. That's really helpful. And then just on sales and marketing, I appreciate the comments on the ramping of sales employees. I did notice that sales and marketing expense did come in a little light of expectations this quarter and sequentially, which I think was potentially part of the profit outperformance. I know -- or we had talked about you taking a real-time approach to sales rep productivity and trying to understand that relative to margin performance, particularly when you gave the guide earlier this year. So maybe comment on if there are any changes in what you're seeing there? And if anything, flowed through the sales and marketing number in Q3 that we should be aware of?

Yes. So the ramp-up of the salespeople is on track as you try to scale go-to-market organization. What we did in Q1, we over hired in a lot of those areas that to make sure that we can ramp the people and then we can have the options to double down on the ones that are successful and can show indication that they can be successful selling our solution. So the process is a little bit over higher. You see who is successful on be part of our culture. And then as you go through, you start optimizing and that go the 1 that are less successful than -- as you're doing that, you your S&M is getting better and you were able to start getting more yield for -- from the salespeople. So I think this is what you're seeing in the numbers. .

Our next question comes from Patrick Walravens of Citizens.

Great. Can I ask 2 follow-ups. First of all, what kind of big deals do you have in the pipeline with Brazil? What the very big deals are obviously not the company, but just like if you can characterize it? And then secondly, how should we think about next year?

So I will try to answer what I heard because I think the line was not super clear. I think the first question was around the big deal. -- that we have that, as we've said over the past few quarters, we're seeing big success on selling data for LLM companies, companies that are trying to create the best LLMs for this new AI world. And we're seeing that our digital data is a critical element in building training those LLMs and ones were able to engage and show the value of our data after those long process of evaluation, we're getting a very good engagement that is very sticky and very long term and we're becoming a critical part of building and developing those LLMs, this is around the big deal.

And the second question that I heard a thing about next year, we're going to give guidance to next year and the next quarter. So that's.

Ladies and gentlemen. Thank you, sir. Ladies and gentlemen, with no further questions in the question queue. We have reached the end of the question-and-answer session. I will hand back over to Or for closing comments.

I would like to thank you all for joining the call and especially our shareholders for their support. We look forward for speaking to you again over the coming weeks. Thank you all. .

Thank you very much, sir. Ladies and gentlemen, that concludes this evening. Thank you for attending, and you may now disconnect your lines.