Enterprise AI
Revenue increased 16% year-on-year to $237.4 million from $204.7 million, supported by growing adoption of its AI-powered products. Non-GAAP operating income rose 25% to $55.9 million, while the operating margin expanded to 23.6% from 21.9%.
Freshworks CEO Dennis Woodside said the company delivered its seventh consecutive quarter of beating revenue expectations and its eighth consecutive quarter of meeting the Rule of 40 benchmark. Expansion annual recurring revenue (ARR) grew 24% year-on-year, while Freddy AI Copilot was included in more than 71% of new enterprise deals during the quarter.
The company raised its full-year CY26 revenue guidance to $963.5 million–$966.5 million and increased its non-GAAP operating income forecast to $222 million–$228 million. However, net dollar retention declined to 104% from 106% a year earlier, indicating softer expansion spending by existing customers.
The Bigger Picture
Freshworks’ results reflect the growing role of AI in SaaS business models, as software companies seek to improve profitability, increase product adoption and streamline operations. The performance follows Freshworks’ announcement of plans to reduce its global workforce by approximately 500 employees as part of an AI-led organisational restructuring.
CXO TechBOT Perspective
Freshworks’ return to profitability highlights how AI adoption and operating discipline can support SaaS growth. Strong uptake of Freddy AI Copilot and improved margins point to the commercial potential of AI-powered enterprise software, although declining customer retention metrics remain an area to monitor.
