Freshworks cuts 500 jobs; Q1 revenue hits $228 million

Software-as-a-service company Freshworks on Wednesday said it will lay off 11% of its global workforce, affecting nearly 500 employees, as it ramps up the use of artificial intelligence across its business.

The Nasdaq-listed company also reported a 16% year-on-year increase in revenue for the January-March quarter to $228.6 million, beating analyst estimates of $223.24 million.

It said it expects a one-time restructuring cost of $8 million, which will be accounted for in the April-June period.


Chief executive Dennis Woodside said Freshworks does not plan further layoffs but will focus on maintaining a leaner team. “We will be very thoughtful about any additional headcount…or backfilling existing roles, and about how we stay fast and nimble while taking advantage of AI,” he told ET.

This marks the Chennai- and San Mateo, California-based enterprise software company’s first major workforce reduction since 2024, when it cut around 13% of its staff, or about 660 employees globally, as part of efforts to streamline operations.

Freshworks posted an operating loss of $8.1 million for the first quarter of 2026, down from a $10.4-million loss a year earlier. The company had briefly turned profitable in the fourth quarter of 2025, posting an operating profit of $39.7 million under US GAAP (generally accepted accounting principles), helped by a one-time tax gain as well as a one-off accounting of reversal of stock-based compensation expense following the departure of founder Girish Mathrubootham as executive chairman.

The AI imperative

Woodside said AI has been an accelerant for Freshworks and is reshaping how software is built. “You no longer need massive product requirement documents. You can quickly create interactive prototypes in tools like Figma or Lovable, show them directly to customers, iterate rapidly and then move those into code generation workflows,” he said.

Woodside said engineers can now “simply get more done than before,” but added that companies will need a different type of engineers—those comfortable working with AI-native workflows.

On broader adoption, Woodside said he expects larger software companies to become leaner and more efficient, while smaller ones scale without significantly increasing headcount.

AI has reset expectations across the SaaS sector, pushing investors to question pricing power, product defensibility and long-term margins for non-AI-native companies. This has led to valuation compression across the sector, with market capitalisations of several traditional SaaS companies declining despite a steady operating performance.

“There’s market noise, and then there’s what customers are actually doing. For us, that reality is clear… We’re continuing to win larger customers across both customer experience and employee experience,” Woodside said. “AI is an accelerant in most new deals. In more than 60% of our large deals, it’s a paid component from day one and is also driving expansion.”

The CEO said customers are not buying purely for AI. “They need a system to manage interactions across employees, along with full visibility into their software and hardware estate. For IT leaders, that’s critical for security and audit purposes.”

Stock still languishing

Freshworks’ share price fell from a high of $16.14 in May 2025 to a low of $6.79 in February. On Tuesday, the stock closed at $9.19 on the Nasdaq, up 2.34% from the previous session.