Freshworks Q1 2026 Earnings Call Summary

1Key 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.

2Strategic 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.

3Forward 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%.

4Bad 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.

5Notable 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.