Synopsis
Freshworks announced significant job cuts, reducing its workforce by 11% or approximately 500 employees. This move comes as the business software company navigates industry-wide disruptions driven by rapid advancements in artificial intelligence. The company cited AI's role in product development and automation of routine tasks as key factors.Listen to this article in summarized format
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The Nasdaq-listed firm also reported a 16% year-on-year increase in revenue for the January-March quarter to $228.6 million, ahead of analyst estimates of $223.24 million.
The latest layoffs mark Freshworks’ 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.
The Chennai-and San Mateo, California-based enterprise software company reported a GAAP operating loss of $8.1 million in Q1 2026, narrowing from a loss of $10.4 million a year earlier. It had briefly turned profitable in Q4 2025, posting a GAAP operating profit of $39.7 million, before slipping back into a loss this quarter.
The company said it expects to incur a one-time restructuring cost of $8 million, which will be accounted for in the April-June period.
Speaking to ET, CEO Dennis Woodside said the company 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 said.
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 added.
He said engineers can now “simply get more done than before,” but added that companies will need a different type of engineer—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 firms 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 firms declining despite 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.”
He added that 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.”
Freshworks’ share price has fallen from a high of $16.14 to a low of $6.79. On May 5, the stock closed at $9.19 on Nasdaq, up 2.34% from the previous session. The company, which listed in 2021 at a $10 billion valuation, now has a market capitalisation of about $2.6 billion – nearly 80% below its peak.
