Freshworks Lays Off 13% of Workforce Despite Strong Q3, Raises Annual Revenue Forecast

California-based Freshworks announced major restructuring drive, axing 13% of its global workforce — around 660 employees–with the aim of gaining efficiencies from that move. The company made such an announcement after a very robust quarter, which it said had helped raise annual revenue and profit estimates. Shares shot more than 15% in extended trading as investors get thumbs up for the growth strategy and AI-driven products at Freshworks.

Q3 Results and Updated Guidance Increase Shares

Freshworks reported a better-than-expected revenue growth in the third quarter, at $186.6 million, on analysts' consensus for $181.6 million in revenue. If other adjustments were not included, net of the nonoperating items, the company reported 11 cents profit per share, which investors had estimated to be 8 cents. Freshworks updated the annual revenue guide for the year from a $707 million to $713 million range to a $713.6 million to $716.6 million. The company also raised its annual adjusted profit per share into a range of 38 cents and 39 cents from the former 32 cents to 34 cents.

AI-Driven Products Drive Growth 

The main driver for Freshworks' aggressive financial performance is an increased demand for the company's AI-driven products as it helps business organizations smoothen their work processes. Its core products are its fresh service: an employee management and onboarding service based on the IT help-desk module, coupled with a customer support solution branded freshdesk. All of these applications demonstrate increasing demand for products that have efficiency-enhancing capacity built with AI. Among these, more than 68,000 businesses across the globe operate under Freshworks, with notable clients such as Databricks, American Express, Nucor, and Sony, among others. To stay ahead of giants like Salesforce and ServiceNow, Freshworks continues to grow its AI to strengthen its place in the market.

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Restructuring to Complete by Year-End

In the final quarter of the fiscal year, Freshworks will report restructuring expenses ranging from $11 million to $13 million. The company will let go of 13% of its workforce and will complete the layoffs by December 31 of the fiscal year.
The restructuring is also part of Freshworks's move to optimize resources as it continues to aim at delivering AI-driven solutions.
Outlook for the Fourth Quarter

Freshworks guided for fourth-quarter revenue of between $187.8 million and $190.8 million, near the midpoint of analysts' expectations. Its steady growth curve with a lot of emphasis on AI innovation only underscores the strength and resilience of the company in shifting market scenarios.