Similarweb Ltd. - IL0011751653

Customer Growth and Retention

Similarweb’s customer base expanded significantly in 2024, with a 17% YoY increase to over 5,500 ARR customers. The company secured 15 new seven-figure contracts in Q4, primarily from existing customers upgrading their investments. The overall Net Retention Rate (NRR) remained strong at 101%, indicating healthy customer retention and upselling opportunities. Management emphasized a strategic focus on long-term, multi-year contracts to ensure steady revenue streams and reduce reliance on short-term fluctuations.

Investments and Strategic Initiatives

The company continues to prioritize investments in research and development (R&D) and go-to-market strategies, allocating $20 million to capitalize on AI opportunities. While these investments may weigh on near-term profitability, they are expected to drive long-term growth and competitive differentiation. The integration of recent acquisitions and the development of new data sets for generative AI also contributed to the sequential decline in gross margin. Management remains confident that these investments will yield returns as the year progresses.

Partnerships and Market Expansion

Similarweb strengthened its position in the alternative data space through strategic partnerships with S&P Global and Bloomberg. The integration of Similarweb’s data into Bloomberg’s platform marks a significant milestone, with potential premium pricing for subscribers. This partnership underscores the company’s ability to expand its reach and solidify its position as a key player in the alternative data ecosystem. Despite challenges in Q4 execution, particularly in EMEA and Japan due to managerial changes and integration efforts, Q1 has shown improvement with the hiring of new leadership and stronger performance.

Valuation and Market Expectations

Similarweb’s valuation reflects investor optimism about its growth trajectory. With a price-to-sales (P/S) ratio of 3.0 and an enterprise value over EBITDA (EV/EBITDA) of 430.37, the market is pricing in significant future growth. The high EV/EBITDA ratio highlights the company’s growth-oriented strategy, despite current profitability challenges. The absence of a dividend yield (0.0%) aligns with the company’s focus on reinvesting earnings into growth initiatives, rather than returning capital to shareholders. The return on invested capital (ROIC) of -15.02% reflects the heavy investments currently underway, which management expects to turn positive as scale benefits materialize.

Conclusion

Similarweb’s Q4 performance and full-year results demonstrate strong execution in a competitive landscape. The company’s strategic investments in AI, partnerships, and customer expansion position it well for long-term growth, despite near-term challenges. Management’s confidence in achieving double-digit profitability by 2026 signals a clear vision for balancing growth and efficiency. As the company continues to navigate macroeconomic headwinds and integration challenges, its ability to execute its growth strategy will be key to meeting market expectations and driving sustained shareholder value.