The software company is betting big on artificial intelligence to reshape its business, even as it delivers a quarterly earnings beat that failed to impress Wall Street.
Freshworks reported first-quarter revenue of $228.6 million for its fiscal 2026, a 16% year-over-year increase that comfortably exceeded analyst estimates. Yet the headline numbers were overshadowed by a sweeping restructuring plan that will see approximately 11% of the global workforce—roughly 500 employees—shown the door.
CEO Dennis Woodside is steering the company toward an AI-first future, with machine-generated code now accounting for more than half of all programming output across the organization. The savings from the job cuts are being redirected into products like the Freddy AI Copilot, which saw customer adoption surge more than 80% in the first quarter alone.
Investors, however, took a dim view of the shake-up. The stock tumbled over 15% to €6.61 in one trading session, extending a bruising run that has wiped out more than a quarter of the company’s market value since the start of the year. The sell-off was more severe than the initial 8% drop reported on Wednesday, when shares changed hands at €7.19.
The restructuring comes with a price tag. Freshworks expects one-time charges of between $7 million and $9 million, with the bulk hitting the current second quarter. The company maintains a healthy balance sheet with roughly $780 million in cash and equivalents.
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On a non-GAAP basis, operating income reached $41 million, translating to an 18% margin. But under standard accounting rules, the picture was less flattering: Freshworks posted a GAAP operating loss of $8.1 million, largely due to stock-based compensation. The net loss widened to $4.8 million during the period.
Management is doubling down on the enterprise segment, where recurring revenue from employee experience software jumped 27%. The number of high-value customers climbed 29% to 1,646, and the company secured its first seven-figure single contract. Net dollar retention held steady at 106%, signaling that existing clients are spending more.
The board has authorized a fresh $400 million share buyback program, a signal of confidence in the company’s long-term prospects despite the near-term turbulence.
For the full year, Freshworks is targeting revenue between $958 million and $964 million, representing growth of up to 15%. The strategy hinges on deeper integration of AI tools to drive profitability, as the company navigates the delicate balance between cutting costs and investing in the technologies it believes will define its future.
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