Similarweb Ltd. 2026 Q2 Earnings Call

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, 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 what 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 deal, 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 three 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. Perhaps most importantly, we signed three very large multi-year enterprise contracts representing more than $60 million of accumulated contract value. 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 generate $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're remaining committed to expanding our margin and leveraging the operational efficiencies that come with our increased scale. 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've 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 improvement 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 three very large multi-year 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 a 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. 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.

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. Let me explain to you why this is different. Historically, acts were relatively rare for Similarweb. As recently as 2025, we were still seeing large seven-figure opportunities infrequently, a handful of times a year at most. That has changed. The number and size of opportunities we are 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 to 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 analyst 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 a recommendation for the business. That is powerful, but it is 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 cases 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 does not make our data less valuable. It makes our data much more valuable. Because the better the AI become at reasoning, the more valuable high-quality, comprehensive, and trusted data become. This is why I believe the opportunity for Similarweb goes far beyond simply selling data for LLM training. 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. 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 application. 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 increase 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.