FRSH — Freshworks Inc.

Freshworks Q1 2026 Earnings Call Summary

1. Key Financial Results and Metrics

• Total Revenue: $228.6 million, up 16% year-over-year (14% on a constant currency basis).
• EX ARR (Employee Experience): Over $540 million, growing 27% year-over-year (25% constant currency).
• CX ARR (Customer Experience): Over $395 million, up 6% year-over-year (4% constant currency).
• Non-GAAP Operating Margin: 18%, nearly 3 points above estimates.
• Free Cash Flow: $55.8 million, representing a 24% margin.
• Net Dollar Retention: 106% overall; 111% for EX business.
• Calculated Billings: $235 million, up 16% year-over-year.

2. Strategic Updates and Business Highlights

• Freshworks signed its two largest deals in history during Q1, including a 7-figure EX ARR deal.
• The company is focusing on expanding its EX business, which is seen as a primary growth opportunity.
• Integration of FireHydrant and the launch of Freshservice ITAM experience aimed at enhancing service operations.
• Freddy AI continues to gain traction, with customer growth exceeding 80% year-over-year.
• The company is restructuring to streamline operations, which includes a reduction of approximately 11% in workforce to enhance efficiency and focus on EX growth.

3. Forward Guidance and Outlook

• Q2 2026 Revenue Guidance: Expected to be between $232 million and $235 million, growing 13% to 15% year-over-year.
• Full Year 2026 Revenue Guidance: Anticipated to be between $958 million and $964 million, growing 14% to 15% year-over-year.
• Adjusted Free Cash Flow: Expected to be approximately $265 million for the full year, with a margin of 27.5%.

4. Bad News, Challenges, or Points of Concern

• The CX business is projected to grow in the low single digits for 2026, indicating potential challenges in that segment.
• The restructuring will incur one-time charges of approximately $8 million, primarily in Q2.
• There are ongoing headwinds from legacy Device42 customer churn, which could affect future performance metrics.

5. Notable Q&A Insights

• Management emphasized strong momentum in the EX business and the successful transition of larger customers from competitors.
• Pricing changes implemented were not expected to materially impact guidance; they are more aligned with standard CPI adjustments.
• The competitive landscape remains stable, with Freshworks successfully taking market share from larger players like ServiceNow and Atlassian.
• The company is optimistic about the integration of AI into its offerings, with no signs of "AI anxiety" affecting sales cycles.
• Future product enhancements and monetization strategies related to AI were discussed, indicating a focus on providing customers with flexibility in AI usage.

Overall, Freshworks reported a strong Q1 performance, with significant growth in its EX segment, while also addressing challenges in the CX area and restructuring efforts to enhance operational efficiency.