Freshworks strong Q2 highlights power of focus

Freshworks delivered better-than-expected second quarter results, turned its first profit under generally accepted accounting principles and continued to move upstream to larger enterprises.

The company's focus on employee experience and execution appears to be paying off. Freshworks reported second quarter earnings of $3.2 million, or a penny a share, on revenue of $237.4 million, up 16% from a year ago. Non-GAAP earnings in the second quarter were 17 cents a share.

Wall Street was looking for non-GAAP second quarter earnings of 13 cents a share on revenue of $233.6 million.

Freshworks CEO Dennis Woodside said the GAAP profitability milestone was "months ahead of plan" and the company "built a platform for the mid-market and agile enterprise that we believe no one else can match, and we're demonstrating you can grow fast, stay disciplined, and be profitable all at the same time."

“Our expectation is that we’re going to remain GAAP profitable,” said Woodside in an interview. “We’re just going to keep rolling.”

• Constellation ShortList™ Digital Customer Service and Support
• Freshworks acquires FireHydrant, eyes AI-native IT operations management

The second quarter results include the acquisition of FireHydrant. Freshworks platform integrates AI services (Freddy AI, Copilot, agentic AI) with a unified platform that manages IT services, assets and business operations across IT, HR, and finance. The company competes with ServiceNow, BMC Helix, Zendesk, ManageEngine and Atlassian's Jira Service Management to name a few.

The number of customers contributing more than $100,000 in annual recurring revenue was 1,746, up 25% from a year ago. The number of customers with more than $50,000 in ARR was up 18% from a year ago. Woodside said Freshworks is leaning into “agile enterprises” with 10,000 to 20,000 employees that are looking for more flexible systems. In that market, no single competitor has more than 20% market share.

As for the outlook, Freshworks projected third quarter revenue of $244.5 million to $245.5 million, up about 14% from a year ago. Non-GAAP earnings will be about 18 cents a share. For 2026, Freshworks projected non-GAAP earnings between 66 cents a share and 68 cents a share on revenue of $963.5 million to $966.5 million.

At its Refresh conference, Freshworks outlined its AI agent studio in Freshservice. The additions include:

• Orchestration of autonomous service with Freddy AI Agent Studio, which enables enterprises to start with pre-built agents or create custom ones.
• Model Context Protocol Gateway and tools to measure and optimize autonomous service and track ROI.

The company also announced that Ryan Manning will join the company on August 10th as its Chief Product and Technology Officer. Manning is an alum of ServiceNow and BMC Helix.

Moving upstream

Woodside said Freshworks in the second quarter had 40% of its revenue deriving from larger enterprises. The company’s focus on employee experience (EX) has been paying off. “We had our enterprise service management business… exceeded 50 million in the quarter. That's growing just under 70 percent year over year, 67 percent,” said Woodside.

Freshworks is also seeing adoption of its AI services and features pick up among larger midmarket companies such as New Balance and Seagate.

“Our attach rate for AI is continuing to go up. So, 71% of our new business, our new customers took an AI product,” said Woodside.

Woodside said that Freshworks’ AI is moving from passive to proactive use cases with continual updates to Freddy Copilot and AI Agent Studio. He added that customers are expanding their usage of AI tools on the Freshworks platform.

Internally, Woodside said Freshworks is using multiple models and small language models are valuable for certain tasks. “It’s not like there’s one giant model. It’s a lot of discrete experiences and as you get better, the results show up for the customer and they are willing to take more AI,” said Woodside, who noted internal gains in billing, product development and sales from AI use cases.

The big picture

At its financial analyst meeting at its Refresh conference, the company said it is focused on expanding its employee experience efforts with a goal to reach about $1 billion in ARR by 2028.

In addition, Freshworks is focusing 80% of its resources on employee experience and AI.

The company is transitioning from a seat-based model to a fully hybrid model with AI monetization by 2028.

Here’s a look Freshworks’ targets for 2028.

• Rule of 50 company.
• 70% to 75% of ARR from employee experience.
• Gross margins of 85% to 86%.