Freshworks Inc. FRSH used its second-quarter 2026 earnings call to reinforce employee experience, or EX, as its main growth engine while outlining a path to monetize artificial intelligence.
FRSH’s non-GAAP earnings of 17 cents per share topped the Zacks Consensus Estimate of 13 cents. Revenues of $237.4 million also surpassed the consensus estimate of $233.5 million by 1.70%.
FRSH Leans on EX as Its Core Growth Engine
CEO and president Dennis Woodside said EX annual recurring revenues reached $567 million, rising 24% at constant currency and representing about 59% of total ARR.
Woodside said larger customers are replacing legacy platforms with Freshservice because of faster deployment and lower administrative complexity. Customers generating more than $100,000 in ARR grew 26% at constant currency and now account for roughly 40% of total ARR.
CFO and COO Tyler Sloat said Freshworks expects EX ARR growth in the mid-20% range and more than $600 million in EX ARR by the end of 2026.
Freshworks Builds an AI Monetization Path
CEO and President Dennis Woodside said more than 7,000 customers are paying for an AI product, while Freddy AI Copilot is attached to more than 71% of new enterprise deals.
Woodside said Freddy AI Agent Studio has drawn more than 1,000 early-access customers. Freshworks plans to introduce session-based pricing in the fall after expanding usage and functionality.
Eligible EX customers paying for Copilot rose to 22% of the installed base. Woodside said EX customers using AI have net dollar retention above the companywide rate, supporting AI as both a sales and expansion tool.
FRSH Broadens the EX Platform
CEO and president Dennis Woodside identified IT asset management, enterprise service management and incident operations as key extensions beyond core IT service management.
About one-third of large new EX wins include IT asset management, while enterprise service management ARR exceeded $50 million and grew 67% year over year. FireHydrant also produced its first six-figure expansion deal since the acquisition.
Responding to a Guggenheim Securities analyst, Woodside said penetration remains early across the customer base. CFO and COO Tyler Sloat added that a cloud version of advanced IT asset management opens cross-sell opportunities unavailable with the on-premises product alone.
Freshworks Raises Its 2026 Outlook
CFO and COO Tyler Sloat guided third-quarter revenues to $244.5 million to $245.5 million, indicating about 14% reported growth and 14% to 15% growth at constant currency.
For 2026, Freshworks raised its revenue estimate to $963.5 million to $966.5 million, or about 15% growth. The outlook includes a $2 million foreign-exchange headwind versus initial assumptions.
The company expects full-year non-GAAP operating income of $222 million to $228 million, non-GAAP earnings of 66 cents to 68 cents per share and adjusted free cash flow of about $265 million.
FRSH Addresses Growth Durability in Q&A
A UBS analyst asked about sustaining mid-20% EX growth after the constant-currency rate eased to 24% from 25% in the prior quarter.
CFO and COO Tyler Sloat described the change as normal quarterly variation and pointed to larger deals, stronger pipeline conversion and expansion products. CEO and President Dennis Woodside said pipeline generation improved from a year earlier and is maturing into the second half.
A Wolfe Research analyst pressed management on the implied acceleration in second-half EX net new ARR. Sloat cited product expansion and pipeline strength, while Woodside emphasized the revenue beat and higher full-year estimates despite currency pressure.
Freshworks Keeps Profitability and Capital in Focus
CFO and COO Tyler Sloat said Freshworks achieved positive GAAP net income ahead of schedule, with second-quarter GAAP net income of $3.2 million and a non-GAAP operating margin of 23.6%.
Freshworks repurchased about 18.3 million shares for $159 million during the quarter. Sloat said the company ended the period with $665 million in cash and investments and no debt, while prioritizing EX sales capacity and AI research and development.
FRSH Zacks Rank and Style Scores Signal Caution
FRSH carries a Zacks Rank #3 (Hold), placing it between the top-rated Zacks Rank #1 (Strong Buy) and #2 (Buy) stocks and the sell-ranked categories. You can see the complete list of today’s Zacks #1 Rank stocks here.
Its Value Score of D, Momentum Score of D and VGM Score of D are weak under the Style Score framework, while the Growth Score of C sits in the middle. The combination lacks the favorable A or B profile emphasized for top-ranked stocks. The Zacks Rank can change as analysts revise estimates after the latest results.
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Freshworks Inc. (FRSH): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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