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    FRSH
    Earnings call· Jun 2026(Q2 FY26)

    Freshworks Q2 FY26 earnings call FRSH

    Aug 4, 2026 Source

    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

    15
    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

    2
    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%
    		————

    Operational metrics

    40
    Revenue
    $237.4 millionup 16% year-over-year as reported; up 15% constant currency
    Q2 FY26

    Exceeded the high end of estimates range.

    Professional services revenue
    approximately $3 millionslightly higher than prior quarters
    Q2 FY26
    Non-GAAP operating margin
    24%
    Q2 FY26

    Achieved Rule of 40 for 8 consecutive quarters.

    GAAP net income
    $3.2 million
    Q2 FY26

    Achieved ahead of previously given expectations.

    GAAP EPS
    $0.01
    Q2 FY26
    Non-GAAP EPS
    $0.17
    Q2 FY26
    EX ARR
    35%
    IPO (2021)

    Percentage of total ARR at the time of IPO.

    EX ARR growth
    5x
    5 years ago (from 2021)

    Growth from the beginning of 2021.

    Total Addressable Market (EX)
    $45 billiongrowing 13% a year
    current

    Market is large, fragmented, with no single player holding more than 20% share.

    Freshservice customers
    over 20,000
    Q2 FY26

    Globally.

    Customers paying for AI SKU
    over 7,000
    Q2 FY26
    Copilot attach rate
    exceeds 70%
    Q2 FY26
    Customers with ARR > $100,000
    25%year-over-year
    Q2 FY26

    Growth rate as reported. Reflects sustained upmarket shift.

    New EX seats from outside IT
    1/5
    Q2 FY26

    ESM continues to be a major long-term growth vector.

    Freddy AI Agent Studio customers
    over 1,000
    Q2 FY26

    Launched in May for EX, not yet priced.

    Agent productivity with Freddy AI Copilot
    50% more tickets
    Q2 FY26

    Agents handle 50% more tickets, meaning 50% more productive.

    Freddy AI Agent deflection rates
    50%
    Q2 FY26

    Customers are changing the economics of service operations.

    Copilot attach rate
    exceeded 70%
    Q2 FY26
    IT service delivery automated by AI
    35%
    Q2 FY26

    iQor, a global BPO with 40,000+ employees, replaced a legacy system with Freshservice and Freddy AI.

    Monthly ticket volume cut by AI
    39%
    Q2 FY26
    Email AI ticket resolution
    about 10%
    Q2 FY26

    Tickets resolved without any agent involvement.

    Non-GAAP gross margin
    86%consistent with prior quarters
    Q2 FY26
    Non-GAAP operating income
    $55.9 millionwell above estimates
    Q2 FY26

    Reflects continued top line leverage and partial impact of restructuring savings.

    Net dollar retention
    104%as reported
    Q2 FY26
    Net dollar retention
    106%constant currency
    Q2 FY26

    Exceeding expectations.

    Customers with ARR > $50,000
    18%year-over-year as reported
    Q2 FY26
    Calculated billings
    $245.8 milliongrowing 15% year-over-year as reported; 16% constant currency
    Q2 FY26
    Adjusted free cash flow margin
    approximately 24%
    Q2 FY26
    Adjusted free cash flow per share
    $0.21
    Q2 FY26
    Stock repurchase program
    over $200 million
    YTD
    Shares repurchased
    approximately 18.3 million shares
    Q2 FY26

    Utilized an additional $10 million to offset dilution through net cash settlement of equity.

    Fully diluted shares outstanding
    approximately 296 millionreduced by 8.3% since IPO (323 million shares)
    Q2 FY26 end

    At IPO in 2021, had approximately 323 million fully diluted shares outstanding.

    Basic shares outstanding
    approximately 263 million
    Q2 FY26 end
    Cash and investments balance
    $665 million
    Q2 FY26 end

    Provides ample financial capacity for repurchase program and future investments.

    FX headwind
    $0.5 millioncompared to initial estimates
    Q3 FY26

    Included in Q3 revenue guidance.

    FX headwind
    $2 millioncompared to initial estimates
    FY26

    Included in full year revenue guidance.

    Stock-based compensation as % of revenue
    16%down from 19% in Q1
    Q2 FY26

    Driven by completion of IPO grants and disciplined approach to new grants.

    Partner influence on business
    about 40%
    current

    Partner-influenced in some way, shape or form.

    Internal product development cycle time reduction
    about 30% faster
    Q2 FY26

    Due to AI integration in the product development lifecycle, now shipping on a 2-week cycle for AI products.

    Internal AI Email Agent ticket handling
    30%
    Q2 FY26

    Percentage of questions completely handled by AI when turned on.

    Industry KPIs

    9
    MetricValueDetails
    Revenue growth$237.4 millionUSD
    Arr net new arr$967 millionUSD
    Bookings billings$245.8 millionUSD
    Customer account countover 20,000customers
    Large deal new logo metrics25%%
    Multi product platform attach1/3
    Operating FCF margin rule of 4024%%
    Ai product adoption monetizationover 7,000customers
    Net revenue net dollar retention104%%

    Orderbook & backlog

    1
    Calculated Billings$245.8 millionQ2 FY26 end

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

    Product announcements

    3
    ProductTypeDetails
    Freddy AI Agent Studiolaunch
    MCP Gatewaylaunch
    Advanced ITAM Cloudlaunch

    Deals & partnerships

    7
    Global cybersecurity leaderConsolidation 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.

    SeagateDisplaced 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 NetworkImplemented 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.

    iQorReplaced 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 ClaimsUsing 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.

    DriveTimeNew Freshservice ITAM cloud customer.

    New Freshservice ITAM cloud customer.

    Radio FranceNew Freshservice ITAM cloud customer.

    New Freshservice ITAM cloud customer.

    Risks & headwinds

    3
    Foreign exchange rate fluctuationsQ3 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 businessFull 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 RetentionQ2 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

    5

    EX ARR Growth Trajectory

    next quarter (Q3 FY26) and exiting 2026
    Current24% constant currency (Q2 FY26)
    Targetmid-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.

    Q&A highlights

    8

    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 read5 chapters

    Detailed Narrative

    01

    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.

    02

    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.

    03

    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.

    04

    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%.

    05

    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.

    AI-generated summary of the company’s earnings call. Not investment advice.