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Income Taxes
 12 Months Ended
Dec. 31, 2025
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The amendment improves income tax disclosure requirements by requiring public entities, on an annual basis, to provide disclosure of defined categories in the income tax reconciliation, as well as disclosure of income taxes paid, disaggregated by jurisdiction. This guidance is effective for annual reporting periods in fiscal years beginning after December 14, 2024. As of December 31, 2025, the Company has adopted ASU 2023-09 prospectively and has enhanced its income tax disclosures included herein, to comply with the requirements. The adoption did not have an impact on the Company's financial statements.
(Loss) income before income taxes consists of the following:
Year Ended December 31,
202520242023
United States$(18,127)$17,039 $(3,568)
Foreign8,025 3,363 8,214 
(Loss) income before income taxes$(10,102)$20,402 $4,646 

The Company is subject to income taxes in U.S. federal, state, and foreign jurisdictions. The provision for income taxes in the accompanying consolidated financial statements is comprised of the following:
Year Ended December 31,
202520242023
Current taxes:
Federal
$6,861 $9,477 $836 
Foreign
1,777 2,043 1,784 
State
1,127 2,521 775 
Total current taxes9,765 14,041 3,395 
Deferred taxes:
Federal
(44)(871)227 
Foreign
(376)(222)74 
State
50 79 — 
Total deferred taxes(370)(1,014)301 
Provision for income taxes$9,395 $13,027 $3,696 
The following table is a reconciliation of the U.S. federal statutory rate of 21% to the Company’s effective rate for the year ended December 31, 2025 in accordance with the guidance in ASU No. 2023-09:
Year Ended December 31,
2025
$%
(Loss) income before income taxes
$(10,102)
U.S. federal taxes at statutory rate(2,122)21.0 %
State and local income tax, net of federal income tax effect845 (8.4)%
Foreign tax effects
Semrush Development SL
Statutory tax rate difference175 (1.7)%
Nontaxable or nondeductible items160 (1.6)%
Change in valuation allowance(128)1.3 %
Provision to return(317)3.1 %
Semrush GmbH
Statutory tax rate difference122 (1.2)%
Nontaxable or nondeductible items(2)— %
Change in valuation allowance(22)0.2 %
Other items12 (0.1)%
Brand 24 SA
Statutory tax rate difference(166)1.6 %
Nontaxable or nondeductible items18 (0.2)%
Provision to return47 (0.5)%
Other items(100)1.0 %
Other foreign jurisdictions(137)1.4 %
Effect of cross border transactions
FDII(1,039)10.3 %
Branch income (loss)176 (1.7)%
Foreign withholding tax3 — %
Enactment of new tax laws17 (0.2)%
Nontaxable or nondeductible items1,287 (12.7)%
Stock compensation2,854 (28.3)%
Limitation on executive compensation4,620 (45.7)%
Changes in valuation allowance1,734 (17.2)%
Other items1,358 (13.4)%
Total tax$9,395 (93.0)%
The Company is required to disclose the states that make up greater than 50% of the state tax line item in the effective tax rate table, starting with the largest states first until the Company reaches greater than 50%. For the year ended December 31, 2025, these states were CA, FL, MA, and NY.
The following table is a reconciliation of the US federal statutory rate of 21% to the Company's effective rate for the years ended December 31, 2024 and 2023 in accordance with the guidance prior to the adoption of ASU 2023-09:
Year Ended December 31,
20242023
U.S. federal taxes at statutory rate21.0 %21.0 %
State taxes, net of federal benefit6.7 26.4 
Foreign income tax rate differential(1.7)10.1 
Impact of disposition of foreign subsidiaries— — 
Non-deductible expenses0.0 0.0 
Foreign derived intangible income deduction (11.7)(12.4)
Non-deductible executive compensation4.4 26.3 
Permanent differences2.7 7.0 
Deferred statutory rate changes0.0 (0.7)
Stock compensation8.0 3.5 
Foreign research and development incentive(1.7)(7.7)
Tax attribute expiration4.3 37.4 
Change in valuation allowance29.4 (28.7)
Other, net2.1 (2.6)
Effective tax rate63.5 %79.6 %
The Company’s effective tax rate for the year ended December 31, 2025 differs from the U.S. statutory rate primarily due to non-deductible executive compensation, non-deductible stock compensation, non-deductible transaction-related costs, the jurisdictional mix of earnings, and state income taxes, partially offset by the change in the valuation allowance maintained against its net deferred tax assets. The Company’s effective tax rate for the years ended December 31, 2024 and December 31, 2023 differs from the U.S. statutory rate primarily due to the jurisdictional mix of earnings and the valuation allowance maintained against its net deferred tax assets.
Income taxes paid, net of refunds received, consisted of the following:
Year Ended December 31,
2025
Federal$8,841 
State and local2,516 
Foreign
Netherlands1,488 
Spain1,010 
Other889 
Total$14,744 
Deferred tax assets and liabilities reflect the net tax effects of net operating loss carryovers and the temporary differences between the assets and liabilities carrying value for financial reporting and the amounts used for income tax purposes. The Company’s significant deferred tax assets (liabilities) components are as follows:
As of December 31,
20252024
Deferred tax assets:
Net operating loss carryforwards
$6,940 $9,152 
Capitalized research and development expenditures
23,282 21,684 
Accruals and reserves
2,359 3,109 
Stock-based compensation
2,958 2,918 
Intangibles
1,046 560 
Depreciation
150 122 
Capital loss carryforwards
1,846 1,837 
Finance lease
2,920 2,881 
Other deferred tax asset carryforward
372 331 
Gross deferred tax assets41,873 42,594 
Valuation allowance
(32,483)(33,037)
Total deferred tax assets9,390 9,557 
Deferred tax liabilities:
Depreciation
(386)(483)
Intangibles
(3,048)(3,159)
Deferred commissions
(4,426)(3,070)
Operating lease right-of-use assets
(2,606)(2,602)
Other
(399)(1,864)
Total deferred tax liabilities(10,865)(11,178)
Net deferred tax liabilities$(1,475)$(1,621)
The Company’s valuation allowance decreased by $554, primarily as a result of our current year operating results, the expensing of domestic capitalized research and development expenses under the One Big Beautiful Bill Act and an increase in the deferral of certain stock-based compensation expenses against which a valuation allowance is maintained during the year ended December 31, 2025. In assessing the ability to realize the Company’s net deferred tax assets, management considers various factors including taxable income in carryback years, future reversals of existing taxable temporary differences, tax planning strategies, and future taxable income projections to determine whether it is more likely than not that some portion or all of the net deferred tax assets will not be realized. Based on the negative evidence, the Company has determined that the uncertainty regarding realizing its deferred tax assets is sufficient to warrant the need for a full valuation allowance against its worldwide net deferred tax assets.
As of December 31, 2025, the Company had a U.S. capital loss carryforward of $8,066 that expires in 2027. As of December 31, 2025, the Company had U.S. state net operating loss carryforwards of $12,590, substantially all of which expire at various dates through 2044. As of December 31, 2025, the Company had net operating loss carryforwards of $6,015 in other foreign jurisdictions that expire at various dates through 2029.
At December 31, 2025, 2024, and 2023, the Company had no recorded liabilities for uncertain tax positions. In addition, at December 31, 2025, 2024, and 2023, the Company had no accrued interest or penalties related to uncertain tax positions. The Company’s accounting policy is to recognize interest and penalties related to uncertain tax positions in income tax expense.
The Company files income tax returns in the U.S. federal tax jurisdiction, various state, and various foreign jurisdictions. The Company is currently open to examination under the statute of limitations by the Internal Revenue Service and material state jurisdictions for the tax years ended 2022 through 2024. Additionally, certain non-U.S. jurisdictions are no longer subject to income tax examinations by authorities for tax years before 2019.
The Company has not provided U.S. deferred income taxes or foreign withholding taxes on unremitted earnings of foreign subsidiaries of approximately $423, as such amounts are considered to be indefinitely reinvested in these jurisdictions. The accumulated earnings in the foreign subsidiaries are primarily utilized to fund working capital requirements as its subsidiaries continue to expand their operations and to fund future foreign acquisitions. The amount of any unrecognized deferred tax liability related to undistributed foreign earnings is immaterial.