Freshworks posts first full-year profit; stock hits all-time low

SaaS startup Freshworks on Wednesday reported a profit of $39.7 million in the October-December quarter compared with a loss of $23.8 million in the year-ago period, with growing adoption of its AI offerings resulting in margin improvement.

Despite the turnaround, the company’s stock took a beating following the results, falling to a new low of $8.66 on Wednesday and $7.30 on Thursday owing to concerns over AI threatening SaaS businesses. The company's market capitalisation currently is capped at $2.03 billion.

The company posted a revenue of $222.7 million, up from $194.6 million in the same period last year. For the full year of 2025, its total revenue was $838.8 million, a 16% increase over 2024.


In a post-earnings call, CEO Dennis Woodside told analysts, "For the first time in our company’s history, we achieved profitability for the full year and generated record free cash flow, a testament to our disciplined execution, product innovation, and operational excellence. I’m also happy that we remain on track for sustained growth and profitability exiting 2026’’.

He said the company’s AI agent and copilot products could each become a $100-million product in the next three years.

For the full year, its income from operations was $13.2 million, or a 1.6% Ebitda margin, a shift from the 19.2% operating loss reported in 2024. The company ended the year at an annual recurring revenue (ARR) of $907 million, up 18% year-on-year (YoY).

Freshworks ended the year with $843.7 million in cash, cash equivalents, and marketable securities. It revenue forecast for 2026 was between $952 million and $960 million. Its adjusted profit per share forecast for this year was between 55 and 57 cents as the company expects a higher tax rate.

The firm’s customer metrics saw moderate growth. The number of customers contributing more than $5,000 in ARR rose 10% on-year to 24,762. The net dollar retention rate, which measures the growth in spending by existing customers, was 108% for the quarter.

Operationally, Freshworks' Enterprise Service Management (ESM) and the recently acquired Device42 businesses both reached $40 million in ARR during the fourth quarter.

The SaaSocalypse

Freshwork’s poor show at the exchanges highlights a larger trend. That investors fear AI will cannibalise the number of paid seats at an IT or SaaS firm, striking at the very foundation of some of these companies.

On January 30, Anthropic released 11 open-source plugins for Claude Cowork, its AI workplace suite. Unlike conventional chatbots, these showed that AI could handle end-to-end workflows without any humans-in-the-loop. This sent the markets crashing.

About $285- $300 billion was wiped off US software stocks in a single day. Ripples were also felt in the Indian markets, with the Nifty IT index losing about Rs 2.5 lakh crore in just three days as investors grew apprehensive of the future of both SaaS and traditional IT services firms.

AI plans

With businesses increasingly using AI-driven software to manage IT services, automate workflows, and improve customer support, demand for companies such as Freshworks, ServiceNow, and ‌Salesforce is rising.

"AI is not just a feature in our products, it’s a standalone revenue line delivering measurable value to our customers, which ended 2025 with over $25 million in ARR and remains on a path to reach $100 million in ARR by 2028," Woodside told analysts.

During the quarter, Freshworks also completed the acquisition of FireHydrant, a tool designed to manage IT service disruptions, and updated its Freshservice and Freshdesk platforms with new AI-driven features.

In the customer experience (CX) segment, its flagship Freshdesk business ended the year with an ARR of $395 million, representing 9% YoY growth. To sustain this, the company launched the Freshdesk Command Center in December to unify workspaces and deliver AI tools more efficiently.

On concerns that AI could slash the number of paid software seats, Woodside said Freshworks is still growing its user count. "We're taking (market) share from much bigger incumbents, like ServiceNow, BMC, and Atlassian, and that's how we're growing our business," he said.

Freshworks, which listed in 2021 at a $10 billion valuation, is currently valued between $2.1 billion-$2.2 billion — nearly an 80% decline.

Also Read: Optimistic despite short term bumps: Freshworks CEO Dennis Woodside