Business software provider Freshworks (NASDAQ:FRSH) reported Q2 CY2026 results topping the market’s revenue expectations, with sales up 16% year on year to $237.4 million. The company expects next quarter’s revenue to be around $245 million, close to analysts’ estimates. Its non-GAAP profit of $0.17 per share was 30.4% above analysts’ consensus estimates.
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Freshworks (FRSH) Q2 CY2026 Highlights:
- Revenue: $237.4 million vs analyst estimates of $233.6 million (16% year-on-year growth, 1.6% beat)
- Adjusted EPS: $0.17 vs analyst estimates of $0.13 (30.4% beat)
- Adjusted Operating Income: $55.93 million vs analyst estimates of $42.13 million (23.6% margin, 32.7% beat)
- The company slightly lifted its revenue guidance for the full year to $965 million at the midpoint from $961 million
- Management raised its full-year Adjusted EPS guidance to $0.67 at the midpoint, a 8.1% increase
- Operating Margin: 2.6%, up from -4.2% in the same quarter last year
- Customers: 25,356 customers paying more than $5,000 annually
- Net Revenue Retention Rate: 104%, down from 106% in the previous quarter
- Annual Recurring Revenue: $990.2 million (18.8% year-on-year growth, beat)
- Billings: $245.8 million at quarter end, up 15.2% year on year
- Market Capitalization: $3.33 billion
StockStory’s Take
Freshworks’ Q2 results topped Wall Street’s revenue and non-GAAP profit expectations, fueled by continued momentum in its employee experience (EX) platform and robust adoption of AI-powered solutions. Management highlighted large enterprise wins and strong growth in cross-selling advanced IT asset management and incident response modules. CEO Dennis Woodside credited this performance to the company’s ability to displace legacy providers, with customers like Seagate and American Oncology Network transitioning quickly to Freshworks’ unified service operations platform. Woodside noted, “Speed to value is what Freshworks delivers,” as large customers increasingly seek integrated, easy-to-use solutions.
Looking ahead, Freshworks’ updated full-year outlook is underpinned by optimism around continued EX growth, expanding AI monetization, and broader platform adoption. Management stressed that investments in AI research and development and expanded sales capacity remain top priorities, with CFO Tyler Sloat emphasizing, “Our first use is continued investment in EX sales capacity and AI R&D.” The company expects its new AI Agent Studio and enhanced IT asset management capabilities to drive further upsell opportunities, while ongoing migration to cloud-native offerings and focused go-to-market execution are projected to sustain mid-20s percentage growth in the EX business segment.
Key Insights from Management’s Remarks
Management identified rising enterprise customer adoption, AI product attach rates, and expansion of the EX platform as the main drivers behind Q2’s performance.
- Enterprise customer momentum: Freshworks reported a 25% year-over-year increase in customers contributing over $100,000 in annual recurring revenue (ARR), signaling successful upmarket penetration and larger deal sizes in its employee experience (EX) portfolio.
- AI monetization progress: Over 7,000 customers now pay for at least one AI product, with the Copilot attach rate exceeding 70% on large deals. The company’s AI solutions, such as Freddy AI Copilot, are credited with boosting agent productivity by 50% and driving measurable efficiency gains for clients.
- Expanded EX platform capabilities: The launch of Advanced IT Asset Management (ITAM) in the cloud has enabled Freshworks to broaden its customer base, especially among organizations that previously would not have adopted on-premises solutions. ITAM was included in over a third of new large EX deals.
- Cross-sell and upsell traction: Enterprise Service Management (ESM) grew 67% year-over-year, and FireHydrant, acquired a little over two years ago, delivered its first six-figure expansion deal. These offerings are expanding Freshworks’ reach beyond IT into other internal business functions like HR and facilities.
- CX platform rationalization: Over 90% of Freshdesk customers have migrated to the new Omni platform, leading to higher agent productivity and improved customer satisfaction scores. The company consolidated its customer experience (CX) organization in India to drive focus on retention and mid-market expansion.
Drivers of Future Performance
Freshworks’ outlook for the next quarter and full year is guided by sustained EX growth, continued AI integration, and platform expansion, alongside disciplined investment in sales and R&D.
- EX market expansion: Management projects continued mid-20s percentage growth in the EX segment, driven by increasing adoption from mid-market and agile enterprise customers, as well as deeper penetration of ITAM and ESM products across existing accounts.
- AI adoption and monetization: The company expects AI to be a persistent tailwind, with new offerings like AI Agent Studio and session-based pricing models anticipated to boost upsell activity and support higher average deal values. Management believes broader AI usage will also enhance customer retention and expansion rates.
- Operational discipline and focus: Investments will remain concentrated on EX sales capacity and AI R&D, while the CX business is managed for steady-state growth and profitability. Freshworks cites pipeline maturity and larger partner-driven deals as additional enablers of future performance.
Catalysts in Upcoming Quarters
In the coming quarters, key areas to watch include (1) further adoption and monetization of AI Agent Studio and other advanced AI modules, (2) sustained growth and cross-sell momentum in the EX business as ITAM and ESM products penetrate more accounts, and (3) the impact of Freshdesk Omni migration and CX organizational changes on customer retention and profitability. Execution in these areas will be central to Freshworks’ ability to maintain its current growth trajectory.
Freshworks currently trades at $11.94, in line with $12.04 just before the earnings. Is there an opportunity in the stock? Find out in our full research report (it’s free).
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