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Freshworks (FRSH) Q2 FY26 earnings call: guidance and Q&A

Earnings call· Jun 2026 (Q2 FY26)· Information Technology· Aug 4, 2026

Source: earnings call transcript

Executive summary

Freshworks Q2 FY26 — Strong EX Growth and Early GAAP Profitability

Freshworks delivered a strong quarter, driven by robust growth in its Employee Experience (EX) business and early GAAP profitability. The company is successfully executing its strategy to focus on agile enterprises and mid-market customers, leveraging AI and a broadening platform. While the Customer Experience (CX) business is managed for steady-state growth, the company remains confident in its EX momentum and ability to fund future investments in AI and sales capacity.

Highlights

5

  • Revenue of $237.4 million, up 16% year-over-year, exceeding estimates.

  • Non-GAAP operating margin of 24%, achieving Rule of 40 for 8 consecutive quarters.

  • Achieved positive GAAP net income of $3.2 million ($0.01 GAAP EPS) ahead of schedule.

  • EX ARR grew 24% constant currency to $567 million, representing 59% of total ARR.

  • Customers contributing over $100,000 in ARR grew 26% constant currency, now 40% of total ARR.

Concerns

3

  • CX ARR grew only 4% constant currency to $400 million, reflecting low single-digit growth expectations for FY26.

  • Net dollar retention was 104% as reported (105% constant currency), which is stable but not accelerating despite AI attach rates.

  • FX headwinds of $0.5 million for Q3 and $2 million for FY26 impacting revenue estimates.

Guidance & targets

CategoryTargetConfidence
Revenue
$244.5 million to $245.5 million
high materiality
High
Non-GAAP income from operations
$59 million to $61 million
medium materiality
High
Non-GAAP net income per share
$0.18
high materiality
High
Revenue
$963.5 million to $966.5 million
high materiality
High
Non-GAAP income from operations
$222 million to $228 million
medium materiality
High
Non-GAAP income per share
$0.66 to $0.68
high materiality
High
Adjusted free cash flow
$265 million
high materiality
High
Adjusted free cash flow margin
27.5%
high materiality
High
Adjusted free cash flow per share
$0.94
high materiality
High
EX ARR
exceed $600 million
high materiality
High
CX ARR growth
low single digits
medium materiality
High
Calculated billings growth
approximately 13% as reported and 14% on a constant currency basis
medium materiality
High
Billings growth
in line with revenue growth
medium materiality
High
Non-GAAP net income tax rate
24%
low materiality
High
Total ARR
$1.4 billion
high materiality
High

Segment performance

SegmentRevenueYoYQoQMargin
Employee Experience (EX)
EX continues to be the primary growth engine, driven by platform breadth (ESM, ITAM, ITOM) and large deal traction. Strongest new logo quarter for ITAM yet, with new cloud customers. ESM is a major long-term growth vector.
ARR: $567 millionARR Growth (as reported): 23%ARR Growth (constant currency): 24%Percentage of Total ARR: 59%ESM ARR Growth: 67% year-over-yearITAM attachment rate (large new EX lands): 1/3Customers paying for AI Copilot: 22% of installed baseNet Dollar Retention (constant currency, excluding legacy Device42): >111%
————
Customer Experience (CX)
CX business is managed for steady-state growth and profitability, with a focus on efficiency. The Freshdesk Omni platform is demonstrating strong market fit for mid-market ICPs and delivering measurable value.
ARR: $400 millionARR Growth (as reported): 3%ARR Growth (constant currency): 4%Freshdesk customers migrated to new platform: >90%AI agent sessions and conversations (Freshdesk Omni): up 60% quarter-over-quarter, fivefold year-over-yearFirst Contact Resolution (Freshdesk Omni): up to 97%Agent Productivity (Freshdesk Omni): 60% higherCSAT (Freshdesk Omni): 95%
————

Orderbook & backlog

Calculated Billings $245.8 million Q2 FY26 end

up 15% year-over-year as reported; up 16% constant currency

Product announcements

ProductTypeDetails
Freddy AI Agent Studiolaunch
MCP Gatewaylaunch
Advanced ITAM Cloudlaunch

Deals & partnerships

Global cybersecurity leader Consolidation of alerting and incident management onto FireHydrant. 6-figure expansion deal

A global cybersecurity leader chose to consolidate their alerting and incident management onto FireHydrant, marking its first 6-figure expansion deal since joining Freshworks and one of the top 3 largest deals of the quarter.

Seagate Displaced a legacy provider after 14 years for Freshservice.

Global leader in hard drives with 30,000 employees, replaced a legacy provider after 14 years with Freshservice, going live in 3 months.

American Oncology Network Implemented Freshservice for IT, business teams, and Freddy AI Copilot.

Nationwide cancer care network supporting over 140 clinic locations, implemented Freshservice for IT, business teams, and Freddy AI Copilot in under 30 days.

iQor Replaced a legacy on-premise system with Freshservice and Freddy AI for modernization and automation.

A global BPO with more than 40,000 employees, replaced a legacy on-premise system with Freshservice and Freddy AI to modernize and automate operations.

Fleet Claims Using Email AI to resolve tickets without agent involvement.

A U.K.-based motor fleet accident management company, using Freshworks' Email AI to resolve approximately 10% of their tickets without agent involvement.

DriveTime New Freshservice ITAM cloud customer.

New Freshservice ITAM cloud customer.

Radio France New Freshservice ITAM cloud customer.

New Freshservice ITAM cloud customer.

Risks & headwinds

Foreign exchange rate fluctuations Q3 FY26 and Full Year 2026

$0.5 million headwind for Q3 FY26 revenue; $2 million headwind for Full Year 2026 revenue

Mitigation:Included in revenue estimates; estimates based on FX rates as of August 1, 2026.

Low growth in CX business Full Year 2026

CX ARR grew 4% constant currency in Q2 FY26; expected to grow in low single digits for FY26.

Mitigation:Deliberate operating plan to run CX with focus on profitability and steady-state growth; consolidated CX organization in India for better efficiency and focus; Freshdesk Omni platform demonstrating strong market fit.

Impact of legacy Device42 customers on Net Dollar Retention Q2 FY26

Net dollar retention was 104% as reported (105% constant currency), but 106% constant currency excluding legacy Device42 customers.

Mitigation:No purposeful migration of on-prem Device42 customers; new Advanced ITAM Cloud product available to existing base and new customers.

What to watch in Q3 FY26

EX ARR Growth Trajectory

next quarter (Q3 FY26) and exiting 2026
Current 24% constant currency (Q2 FY26)
Target mid-20s growth

Why it matters

EX is the primary growth engine, and sustaining mid-20s growth is key to overall company performance and achieving the $600M ARR target.

Looking ahead, we continue to expect EX ARR to grow in the mid-20s and to exceed $600 million exiting 2026.

Find out whether FRSH delivers this. Inve re-checks your case every morning.

Q&A highlights

How does Freshworks maintain product simplicity and ease of implementation as it integrates more complex offerings, avoiding weakening its differentiation?

Dennis Woodside emphasized the focus on usability, design, and UX. He cited Device42's cloud version appearing as a seamless tab within Freshservice with unified design language and data integration. This approach will be applied to FireHydrant, ensuring ease of use despite expanded capabilities.

“That's 1 of the key areas that our engineering and product teams really, really focus on, it's how to -- how we maintain that usability, easy to use, fast time to value, intuitiveness of the product that got us to where we are as we continue to expand the capability of the platform.”

asked by Lucas Morison · answered by Dennis Woodside

2 min read 5 chapters

Detailed narrative

EX Business Momentum and Platform Expansion

Freshworks' EX business continues to be the primary growth engine, with EX ARR growing 24% constant currency to $567 million, now representing 59% of total ARR. This growth is fueled by large customer wins displacing incumbents, such as Seagate (30,000 employees) and American Oncology Network (140 clinic locations), which chose Freshservice for its agility and speed to value. The expansion of the EX platform to include ESM, ITAM, and ITOM is broadening the growth base, with ESM growing 67% YoY and ITAM attached in over one-third of large new EX deals.

AI Monetization and Productivity Gains

AI is a significant tailwind, with over 7,000 customers paying for an AI SKU and Copilot attach rates exceeding 70% on larger deals. Eligible EX customers paying for Copilot increased to 22% of the installed base. Freddy AI is delivering substantial productivity gains, with agents handling 50% more tickets and AI agent deflection rates averaging 50%, reaching up to 80% for mature deployments. The company launched Freddy AI Agent Studio and MCP Gateway, with hundreds of customers in early access.

CX Business Refocus and Platform Migration

The CX business, with $400 million ARR (up 4% constant currency), is now managed for steady-state growth and profitability. Over 90% of Freshdesk customers have migrated to the new Freshdesk Omni platform, which is delivering efficiency gains like 97% first contact resolution and 95% CSAT. The CX organization has been consolidated in India to enhance efficiency and focus on higher-end SMB and mid-market customers, aiming to improve retention rates.

Financial Discipline and GAAP Profitability

Freshworks achieved positive GAAP net income of $3.2 million ($0.01 GAAP EPS) in Q2, ahead of its year-end 2026 goal. The non-GAAP operating margin was 24%, marking the eighth consecutive quarter of achieving the Rule of 40. The company is committed to capital efficiency, deploying over $200 million year-to-date in its stock repurchase program, reducing shares outstanding by 7%.

Strategic Investments and Leadership

The company continues to prioritize investments in EX sales capacity and AI R&D, funded by its operating leverage. Ryan Manning was welcomed as Chief Product and Technology Officer, bringing deep product and engineering leadership from BMC Helix, Coupa, and ServiceNow, further strengthening the platform's strategic direction. The company's partner program is also maturing, with partner-influenced business at approximately 40%, contributing to higher retention and expansion rates.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.