Freshworks delivered fourth-quarter results that surpassed Wall Street’s revenue and profitability expectations, yet the market responded negatively. Management attributed performance to continued strength in the employee experience (EX) business, expansion into larger enterprise deals, and growing adoption of its AI-powered solutions. CEO Dennis Woodside emphasized, “We are witnessing a generational shift where midsize and larger enterprise organizations expect sophisticated software that can handle their complex needs and get fast time to value.” The customer experience (CX) segment stabilized, driven by product simplification and steady AI feature uptake, while broad-based upmarket momentum played a significant role in the company’s ability to consistently win larger deals.
Is now the time to buy FRSH? Find out in our full research report (it’s free for active Edge members).
Freshworks (FRSH) Q4 CY2025 Highlights:
- Revenue: $222.7 million vs analyst estimates of $218.7 million (14.5% year-on-year growth, 1.8% beat)
- Adjusted EPS: $0.14 vs analyst estimates of $0.11 (23.8% beat)
- Adjusted Operating Income: $41.62 million vs analyst estimates of $32.15 million (18.7% margin, 29.4% beat)
- Revenue Guidance for Q1 CY2026 is $223.5 million at the midpoint, above analyst estimates of $220.7 million
- Adjusted EPS guidance for the upcoming financial year 2026 is $0.56 at the midpoint, missing analyst estimates by 19%
- Operating Margin: 17.8%, up from -12.2% in the same quarter last year
- Customers: 24,762 customers paying more than $5,000 annually
- Net Revenue Retention Rate: 104%, down from 105% in the previous quarter
- Annual Recurring Revenue: $915.3 million (17.3% year-on-year growth, beat)
- Billings: $260.1 million at quarter end, up 16.9% year on year
- Market Capitalization: $2.04 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From Freshworks’s Q4 Earnings Call
- David Hynes (Canaccord Genuity) asked about headwinds in CX growth and the role of AI. CEO Dennis Woodside responded that CX growth was consistent with expectations, attributing modest growth to recent platform upgrades and a shift in focus to EX.
- Oscar Savedra (Morgan Stanley) inquired about Device42 attach rates and incremental contract value. COO Tyler Sloat explained that Device42 is key for upmarket moves, with a native cloud launch expected to open new customer segments.
- Alex Zukin (Wolfe Research) questioned the impact of Freddie AI on future growth and monetization of agentic solutions. Woodside explained that while AI penetration is early, increased usage-based pricing and expanded capabilities are expected to contribute to future ARR.
- Taylor McGinnis (UBS) asked about the rationale for accelerating revenue growth guidance and potential CX tailwinds. Sloat cited EX pipeline strength and larger deal sizes as drivers, while remaining conservative about any near-term uplift from the CX migration.
- Billy Fitzsimmons (Piper Sandler) focused on mid-market customer health and macro risks. Woodside clarified that mid-market demand remains resilient, with cost-conscious buyers increasingly favoring Freshworks over legacy solutions.
Catalysts in Upcoming Quarters
In the coming quarters, the StockStory team will be monitoring (1) the rollout and customer adoption of the cloud-native Device42 platform and Fire Hydrant integration, (2) the continued expansion of Freddie AI and its impact on average contract value and retention, and (3) the pace of migration to the Freshdesk Omni platform in the CX segment. Execution on upmarket deals and AI monetization will be focal points to assess the sustainability of revenue and margin trends.
Freshworks currently trades at $7.26, down from $8.73 just before the earnings. In the wake of this quarter, is it a buy or sell? The answer lies in our full research report (it’s free).
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