Freshworks delivers strong Q4, aims to infuse midmarket with AI
Freshworks reported better-than-expected fourth quarter earnings and raised its outlook.
The software vendor, which is focused on employee and customer experience applications, is reporting as SaaS companies have taken a hit of late over AI concerns.
Freshworks, which recently acquired FireHydrant to expand its market, reported fourth quarter earnings of $39.7 million, or 67 cents a share, on revenue of $222.7 million, up 14% from a year ago. A benefit on income taxes boosted earnings. Non-GAAP earnings were 14 cents a share.
Wall Street was expecting Freshworks to report non-GAAP earnings of 11 cents a share on revenue of $218.76 million.
CEO Dennis Woodside said the company was seeing strong momentum due to "products that tackle complex service problems in an uncomplicated way."
By the numbers:
- For 2025, Freshworks reported earnings of $178 million, or 63 cents a share, on revenue of $838.8 million, up 16% from a year ago.
- Enterprise service management (ESM) and Device42 both surpassed $40 million in annual recurring revenue in the fourth quarter.
- Freshworks Freddy AI topped $25 million in ARR in the fourth quarter.
As for the outlook, Freshworks projected first quarter non-GAAP earnings of 10 cents a share to 12 cents a share on revenue of $222 million to $225 million, up 13% to 15%.
For 2026, Freshworks projected non-GAAP earnings of 55 cents a share to 57 cents a share on revenue of $952 million to $960 million, up 13.5% to 14.5%.
I caught up with Woodside to talk about the quarter and SaaS developments of late. Key points:
Moving upmarket. Woodside said Freshworks is winning midmarket share from ServiceNow and Atlassian moving from legacy IT Service Management.
Woodside said Freshworks' sweet spot is a 5,000 employee, global, midsized enterprise that "finds ServiceNow too heavy and costly to run."
The integration of FireHydrant will bring deeper IT operations management tools to entice larger enterprises. Freshworks acquires FireHydrant, eyes AI-native IT operations management
AI driving growth. "We crossed 8,000 customers that are paying for AI," said Woodside. "We have AI agents for both EX and CX that are handling 60% to 70% of inbound question."
Death of SaaS talk. Woodside said he sees no evidence that customers are looking to build their own ITSM offerings on top of LLMs or going direct. "Freshworks is the first point of access to AI capabilities for core customers," said Woodside.
He also argued that Freshworks can gain share as enterprises more closely evaluate their software vendors. "We’re not the incumbent with a lot to lose. We are the attacker who's actually gaining share," he said.
About Larry Dignan: Dignan was most recently Celonis Media’s Editor-in-Chief, where he sat at the intersection of media and marketing. He is the former Editor-in-Chief of ZDNet and has covered the technology industry and transformation trends for more than two decades, publishing articles in CNET, Knowledge@Wharton, Wall Street Week, Interactive Week, The New York Times, and Financial Planning. He is also an Adjunct Professor at Temple University and a member of the Advisory Board for The Fox Business School's Institute of Business and Information Technology. Constellation Insights does the following: Cover the buy side and sell side of enterprise tech with news, analysis, profiles, interviews, and event coverage of vendors, as well as Constellation Research's community and…...
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