Freshworks (NASDAQ:FRSH) reported third-quarter 2026 revenue of $245.4 million, up 14% year over year on both a reported and constant-currency basis, as the software company emphasized growth in its employee experience, or EX, business and continued profitability improvements.
Chief Executive Officer and President Dennis Woodside said the company met or exceeded its top- and bottom-line targets during the quarter. Non-GAAP operating income reached $73.2 million, representing a 30% margin, while GAAP net income was $18.3 million, or $0.07 per share. Non-GAAP earnings per share were $0.22.
Adjusted free cash flow totaled $73.9 million, also a 30% margin, and adjusted free cash flow per share increased 40% from the prior-year quarter. Woodside said Freshworks expects to exceed $0.94 in adjusted free cash flow per share for the full year, ahead of its stated 20% growth target.
EX business drives growth and upmarket push
Freshworks’ EX annual recurring revenue, which includes its IT service management and employee service offerings, ended the quarter at $588 million, rising 22% year over year in constant currency and accounting for 59% of total ARR.
The company continued to target larger organizations. Customers contributing more than $100,000 in ARR grew 26% in constant currency and represented approximately 41% of total ARR. New EX customer average revenue per account increased 35% year over year, and Freshworks closed its second seven-figure EX deal of 2026.
Woodside said customers are increasingly looking for a unified platform spanning IT, human resources, finance and other departments rather than individual point products. He said the company’s sales focus has shifted toward what Freshworks calls “agile enterprises,” including organizations seeking alternatives to larger incumbent vendors.
Multi-product adoption also increased. New EX deals containing multiple products rose more than 35% year over year, while associated ARR increased more than 50%. Two-thirds of the company’s top 50 new EX deals included IT asset management, or ITAM.
Freshworks launched its cloud-based Freshservice ITAM product in the second quarter and said it added more than 400 customers since launch. Tyler Sloat, chief operating officer and chief financial officer, said the cloud offering is leading to fewer purchases of Device42’s on-premise term-license product, which the company expects to continue as customers shift toward cloud deployments.
Acquisitions broaden IT operations offerings
In October, Freshworks acquired Torii and Robusta, adding capabilities related to software and AI-spend visibility as well as incident investigation and resolution. Woodside said the additions complement the company’s existing ITAM offering and FireHydrant IT operations management, or ITOM, product.
The company expects the two acquisitions to contribute between $8 million and $10 million of ARR by the end of the fourth quarter, with approximately $1.5 million in revenue expected during the quarter, Sloat said.
Freshworks said it expects FireHydrant to be fully integrated into the Freshservice platform around the end of the fourth quarter or beginning of 2027. The company views both ITAM and ITOM as expansion opportunities among its more than 20,000 Freshservice customers. Woodside said approximately 70% of those customers currently use only one EX product.
AI adoption and partner participation increase
The company cited artificial intelligence as a factor in customer adoption and expansion. Woodside said active Freddy Copilot agents doubled year over year during the third quarter. According to Freshworks, teams using Freddy Copilot handle 50% more tickets, while its Freddy AI Agent deflects an average of 50% of inquiries and as much as 80% in more mature deployments.
EX customers that purchase AI products have net dollar retention above 115%, Woodside said. Excluding legacy Device42 customers, total net dollar retention was 106% on a constant-currency basis, while EX net dollar retention exceeded 109%.
Partners were attached to 44% of EX bookings and 53% of new business during the quarter, while sourcing 35% of new deals. Woodside said partner involvement is becoming more important as Freshworks pursues larger and more complex enterprise deployments. He expects partners to cover about 75% of the company’s top 50 deals over time.
CX business remains profitable growth focus
Customer experience, or CX, ARR totaled $404 million, up 4% year over year. Freshworks said it has reorganized its go-to-market operations so that field and geography teams are dedicated to EX, while CX sales and support efforts are based in India.
Sloat said the changes are intended to make the CX business more efficient and profitable while allowing the company’s field organization to focus on EX. Freshdesk Omni win rates for new business were 15% higher than those for the legacy platform, according to the company.
Freshworks also reported more than $2.5 million in new ARR from CX AI Agent Studio during the third quarter. The number of customers purchasing session packs for that offering increased more than 50% sequentially.
Outlook raised for full year
For the fourth quarter, Freshworks forecast revenue of $253.5 million to $254.5 million, representing approximately 14% reported growth, and non-GAAP operating income of $68 million to $70 million. The company expects non-GAAP earnings per share of approximately $0.21.
For full-year 2026, Freshworks raised its outlook to revenue of $965 million to $966 million, growth of about 15% year over year. It expects non-GAAP operating income of $238 million to $240 million, non-GAAP earnings per share of approximately $0.71, and roughly $265 million in adjusted free cash flow.
The company ended the quarter with $697 million in cash and investments and no debt. During the third quarter, it repurchased about 2.7 million shares for $27 million. Year to date, Freshworks has spent approximately $232 million on repurchases and reduced shares outstanding by more than 7%.
About Freshworks (NASDAQ:FRSH)
Freshworks Inc (NASDAQ:FRSH) develops cloud-based customer and employee engagement software for businesses of various sizes. Its products are designed to help organizations manage customer support, IT service operations, sales activities, and marketing workflows through user-friendly, artificial intelligence-enabled applications.
The company’s product portfolio includes Freshdesk for customer service and support, Freshservice for IT and enterprise service management, Freshsales for customer relationship management, and Freshmarketer for marketing automation and customer engagement.
