Freshworks reported 16% YoY revenue growth in Q2 CY26, turned GAAP profitable, and raised its full-year guidance on the back of AI-led growth.
The results signal that Freshworks' AI-first strategy and recent organisational restructuring are beginning to translate into stronger profitability and enterprise adoption.
Revenue rose to $237.4 Mn, GAAP net profit stood at $3.2 Mn, and enterprise ARR customers continued to grow.
Nasdaq-listed SaaS major Freshworks
reported a net profit of $3.2 Mn in the second quarter ended June 30 (Q2 CY26) as against a net loss of $1.7 Mn in the corresponding quarter last year.
Sequentially, Freshworks swung to profit from a GAAP net loss of $4.8 Mn in Q1 CY26, as growing adoption of its AI products boosted its performance.
Revenue grew 16% to $237.4 Mn from $204.7 Mn a year earlier, while sequential revenue increased 3.8% from $228.6 Mn. On a constant currency basis, revenue rose 15% YoY.
Operating expenses remained largely flat YoY at $204.6 Mn but rose 1.3% sequentially from $202 Mn. While general and administrative expenses declined 11% YoY to $41.7 Mn, sales and marketing expenses increased 19% to $113 Mn.
Meanwhile, non-GAAP operating income rose 25% to $55.9 Mn from $44.8 Mn a year ago, with the non-GAAP operating margin expanding to 23.6% from 21.9%. Freshworks excludes one-time and non-cash items such as stock-based compensation, restructuring charges, and acquisition-related costs while calculating non-GAAP metrics.
Commenting on the performance, Freshworks CEO Dennis Woodside said the company delivered its seventh consecutive quarter of beating revenue expectations and its eighth straight quarter of meeting the Rule of 40 benchmark, a SaaS metric where a company’s revenue growth and profit margin together exceed 40%.
He added that expansion ARR grew 24% YoY, while Freddy AI Copilot was attached to more than 71% of new enterprise deals during the quarter.
On the customer front, the number of clients contributing more than $100,000 in ARR increased 25% YoY to 1,746, while customers generating over $50,000 in ARR rose 18% to 4,091. However, net dollar retention declined to 104% from 106% in both the year-ago quarter and the preceding quarter, indicating softer expansion spending from existing customers.
Similar to the previous quarter, North America accounted for 47% of Freshworks’ revenue, followed by Europe, the Middle East and Africa (EMEA) at 39%. The Asia-Pacific region contributed 11%, while the rest of the world accounted for the remaining 3%.
Buoyed by the quarterly performance, Freshworks raised its full-year CY26 revenue guidance to $963.5 Mn-$966.5 Mn from its earlier forecast of $958 Mn-$964 Mn.
It also increased its non-GAAP operating income guidance to $222 Mn-$228 Mn from $207 Mn-$215 Mn. For the third quarter, Freshworks expects revenue of $244.5 Mn-$245.5 Mn and non-GAAP operating income of $59 Mn-$61 Mn.
Founded in 2010 by Girish Mathrubootham and Shanmugam Krishnasamy, Freshworks offers a suite of cloud-based software to help companies manage customer engagement, sales, IT service management and marketing.
The earnings come a quarter after the company announced plans to lay off about 500 employees, or nearly 11% of its global workforce, as part of an AI-led reorganisation aimed at simplifying operations, reducing management layers, and reallocating investments towards its AI and employee experience businesses.
Source: Inc42 - Startups
