Prepared remarks
Greetings, and welcome to the Similarweb First Quarter Fiscal Year 2026 Earnings Call. 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, 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 five years since our IPO and running Similarweb as a public CEO. This is also my 19th year of service since I started 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’s 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 initiated 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 result and have 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 at the top end of the guidance range. We delivered 10 quarters of positive normalized free cash flow. Our net revenue retention has stabilized, and we expect 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 commercial opportunities is very strong, growing and providing confidence for the remainder of the year and beyond. AI-related revenues continue to expand and adoption of our AI solution is growing. First quarter performance provides 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 solutions 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 deals as well as on multiple deals for our unique digital data and 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 solutions and expand distribution at scale. First, we are powering LLMs and AI agents. We are seeing strong traction in licensing our data directly to leading LLM companies for both pre- and post-training use cases. 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 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 unlocks 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 partnerships with leading LLM and agent platforms such as Manus and through MCP integration, we are embedding Similarweb directly into the AI ecosystem. We want to meet our users where they are and increasingly, research and decision-making is happening inside the new AI platforms. 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 Cloud Connector, providing seamless access to our data and tools. Claude and ChatGPT are two of the largest AI platforms in the market. And today, hundreds of our customers can plug in Similarweb data directly into them, building automation, powering agents and asking complex questions on the fly and receiving 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 users can access and also enable our customers to connect to Manus via an MCP to generate even more value by seamlessly combining our data and Manus tools and capabilities. This ecosystem partnership is unlocking new customers, expanding our TAM and positioning 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 provides. Our mission is to help companies win in the digital world, and we are gaining 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 fragmented 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 helps customers understand where demand is forming, how brands are winning and which actions can improve sales performance so that they can win in a highly competitive e-commerce market. Also during March, we launched Similarweb Ad Intelligence, leveraging the synergies with 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 is investing, what's bringing more traffic and who is gaining share across every channel and region and helping brands understand paid marketing ROI. The solution addresses the most severe pain points advertisers face today: knowing what competitors are spending and where, if ad spending is generating the desired 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 playbooks 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 OEMs with our own dedicated go-to-market, and we see significant opportunities ahead.
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 gross retention and reached a new two-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-serve customer accounts 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 customer 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 one-time 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.
Questions and answers
Our first question is from Arjun Bhatia with William Blair.
Or, congrats on the IPO milestone and the run as CEO. I know 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 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, but also continuing to progress the pipeline with the second deal and opening the pipeline with many other deals. So we're seeing very strong traction. We started the year with a dedicated team only focusing on LLM and OEM opportunities, and they really are executing very well. So we have very strong confidence for the year and for the second part of the year.
Okay. Perfect. And then you sounded quite bullish just on changes in customer behavior 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 of the last four quarters of NRR. And we're already seeing an improvement with our NRR and GRR in the past two quarters that is not fully seen yet in the reported number; the current customers want to buy more of our data. So we think and are bullish about the outlook.
Gross retention was the strongest in the last two 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 metric 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 go-to-market 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 at?
Yes. We track this metric closely. Overall, in the past three quarters, we're seeing a nice increase. Every quarter, it's getting better. And we're very happy with the quarter and also the new expansion performed remarkably well and hopefully will continue to show 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 it. We don't have a specific decision yet. It's tough to decide until we see how the year progresses, 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 this trend picking up, 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 gross retention and retention. We go to our existing customers and present them the opportunity to use our data for MCP connections, whether it's through Claude integration or OpenAI, and then suddenly, they're getting much more ROI from our data and many more users in the organization can leverage the ROI from our data. So right now, I would say it's driving more retention and usage-based consumption that's driving upsell. From an outside perspective, I think our new solution for GenAI visibility that helps them understand their presence and measure their visibility on generative platforms is driving the win rate more for 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. So first of all, we are introducing a new metric that we are going to share about the customers that are above $25,000, which means that this cohort is a cohort that only our go-to-market team can sell. Below $25,000, we have a no-touch or the self-serve motion. So we decided that this does not really resonate with our focus on enterprise. In terms of gross retention, we see very good traction, and you can see it also on the average account value that we shared in our presentation in terms of the $100,000 cohort. So you can see that those customers in the $100,000 cohort 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 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. 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 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 and give more context, but this is the overall trend in the industry as AI takes more place and more agent-to-agent interaction occurs. I think it makes sense to move to more consumption-based pricing; you can really charge per outcome. We're selling data at the bottom line and the more data we give the more usage customers have, the more ROI they get. For us, it's much better to price like that. So it's an overall trend, and we follow it, and we see good success. Over the next few quarters, this will become bigger and bigger. Maoz, if you want to add anything on top of that?
Yes. Maybe just to add, we don't price by seats even today. We made this transformation actually a while ago. The way we monetize is by data access, so you can buy different data that you want to use and then pay for 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 big potential with distribution channels, with AI chatbots and how users can use us within that environment, and it's definitely a consumption play. It's very evident also from our NRR improvement. We have the right infrastructure for 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 might some of those gaps be if they exist? Where do you see the most opportunity to kind of widen that moat in 2026? And what opportunities are you evaluating in the market?
I think all of the new solutions have great coverage. But as long as we continue to increase our data coverage, we will be able to monetize more, whether this is on our App Intelligence and adding more countries or the two new products I discussed earlier, like Retail Intelligence. We are covering 650 different retailers. The more we add retailers in different countries, the more customers we can sell to. From Ad Intelligence that we just launched, it's very exciting and it's mostly web advertising. Now we're adding new LLM advertising. ChatGPT announced that they are going to include ads in their free products and they are scaling it. I think we are one of the first companies in the world now to bring this data into the market. 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 growth decelerated quite a bit in the quarter. Would you say that's more a function of focusing more on growing with the existing accounts that you have? Or is there 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 customers and self-serve customers that come to the website and buy with credit cards. If they decide to pay yearly, they have been counted in this 6,000-plus number because this number that we're reporting since 2021 is yearly paying customers. Over the years, we started adding yearly self-serve customers, so it started increasing this number. But as we go and do marketing, we run a lot of A/B tests to see if we want to charge the self-serve on monthly or yearly, you can offer the customer what is the default. And then it changes those numbers. Every time we do an A/B test around that, it changes those numbers. So we realize it's not a good indication. It's not going to help you understand the performance of the business. It's just better for us to focus on the enterprise sales motion customers. So we're going to start reporting the $25,000-and-above cohort.
Okay. Got it. And then also just wanted to ask on the search process for a new CEO. Specifically, are you guys looking internally for a potential new CEO? Or would this be an external hire? Any more details around the process you could give?
Yes. So it will be an external search. Now that we announced this to the Street, we can start the search. We have a top executive search firm starting work today, and we will report to the Street as we make progress.
Our next question is from Tyler Radke with Citi.
So just a couple of quick ones. On customers above $100,000, I saw the net adds kind of stabilize from 4Q. Wanted your thoughts on what it will take and what sort of products will help reaccelerate this net add number through the rest of the year. And then a quick follow-up on MCP and consumption-based revenue. Early days, but any details on the margin structure there for those revenue streams compared to some of your core seat-based revenue would be great.
Yes. I would start with the second question about margin. I think the margins are the same or even better in the consumption model because there's less UI overhead. Historically, when customers used to buy data from us via API, first, they became more sticky and retention was better. Also they're much more profitable because it's more integrated into the workflow. You need fewer customer success people to support those customers, they become stickier and there's no heavy UI maintenance on top of that. So I think margins will be better. Regarding the $100,000 cohort, this year we have good momentum there. The team is focusing on getting bigger accounts bigger, like growing penetration in our top accounts because in those giant customers, we are barely penetrated as we should be. So we focused on increasing those. We are seeing more and more new six-figure landings. We had a very strong quarter of landing many six-figure deals, 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 four key takeaways. The first quarter was a solid start to the year and came in 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 improvements 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.