Freshworks Q2 revenue rises 18% to $205 million, net loss narrows
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Nasdaq-listed software-as-a-service (SaaS) company Freshworks reported an 18% year-on-year increase in revenue to $204.7 million for the quarter ended June 30, up from $174.1 million a year earlier.The San Mateo- and Chennai-headquartered company also narrowed its net loss to $1.7 million, compared to $20.1 million in the same period last year. The improvement came as the company reduced operating expenses and saw increased adoption of its AI-powered solutions among mid-market and enterprise customers.Buoyed by improved quarterly financials, Freshworks has raised its revenue guidance for the third quarter of FY25. It now expects revenue to be in the range of $207 million to $210 million, reflecting 11% to 12% year-on-year growth. For the full year, the company has projected revenue between $822.9 million and $828.9 million.'Freshworks delivered another strong quarter, exceeding our previously provided financial estimates in Q2,' said Dennis Woodside , chief executive officer and president of Freshworks. 'We believe our strong momentum through the first half of the year reflects that businesses are increasingly turning to Freshworks to reduce complexity. They want AI-powered employee and customer service solutions that are fast to implement, easy to use, and built to deliver results.'Woodside said the company's growth strategy is anchored around three key drivers of investing in employee experience, delivering AI capabilities across its product suite to accelerate adoption, and expanding its customer experience offerings.Freshworks said over 60% of its total annual recurring revenue (ARR) now comes from mid-market and enterprise customers. It defines mid-market as organizations with 251 to 5,000 employees, and enterprises as those with more than 5,000 employees.Non-GAAP income from operations rose to $44.8 million, up from $13.1 million in Q2 FY24. Net cash provided by operating activities also grew to $58.6 million, compared to $36.3 million a year ago.Total operating expenses fell 4% year-on-year to $182.1 million, from $189.7 million, driven by reductions in sales and marketing, as well as research and development expenses.Addressing the potential impact of US tariffs on its business on an earnings call, Woodside said Freshworks continues to see robust demand, supported by a highly diversified customer base. He added that no single industry dominates its portfolio, and the company has limited exposure to sectors particularly affected by tariffs.Freshworks' AI tools, including its Freddy Copilot assistant, are expected to further drive adoption and monetisation across its product lines. During the quarter, the company launched the next generation of its Freddy Agentic AI platform, which includes Freddy AI Agent Studio, a no-code platform designed to help businesses deploy autonomous AI agents to scale customer support.The company noted its Freddy Copilot and Freddy Agent products have already crossed $20 million in combined ARR.The number of customers contributing more than $5,000 in annual recurring revenue (ARR) rose 10% year-on-year to 23,975 during the quarter, while Freshwork's net dollar retention rate, a metric that measures revenue retention from existing customers, remained steady at 106%, similar to Q2 2024.It currently serves more than 74,000 customers across over 120 countries in industries including ecommerce, logistics, financial services, automotive, manufacturing, entertainment, and hospitality.Founded in Chennai in 2010, Freshworks initially targeted small and medium businesses (SMBs). However, it has increasingly shifted focus to mid-market and enterprise clients to counter macroeconomic softness in its traditional SMB base.In May 2024, the company underwent a major internal restructuring, with founder Girish Mathrubootham moving into the role of executive chairman and Dennis Woodside stepping in as CEO.
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