NEW YORK, July 8, 2026 – Shares of Freshworks Inc. (FRSH) slipped 2% on Wednesday, closing at $10.17, as the software company announced it will report its second-quarter financial results after the market closes on Tuesday, August 4. The stock traded in a range between $10.01 and $10.34 during the session, reflecting investor caution ahead of the upcoming earnings event.
The company plans to host a webcast at 5 p.m. ET on the same day to discuss the results. Freshworks has been under the spotlight as it navigates a strategic shift toward artificial intelligence while simultaneously implementing cost-cutting measures, including a workforce reduction announced in May.
Market Context and Sector Performance
The broader software sector faced headwinds on Wednesday, with the iShares Expanded Tech-Software Sector ETF declining 1.6%. In contrast, the Nasdaq Composite managed a slight gain of 0.2%, as large-cap technology stocks showed relative strength. Freshworks' performance mirrored the weakness seen among its key competitors, including Salesforce Inc. (CRM), which fell 1.8%, ServiceNow Inc. (NOW), down 2.7%, and HubSpot Inc. (HUBS), which dropped 3.6%.
Freshworks competes directly with these industry giants in the customer service and employee experience software markets, making its upcoming quarterly report a critical test of its ability to gain traction against larger rivals.
Q2 Outlook and Key Metrics
For the second quarter, Freshworks previously guided revenue in the range of $232 million to $235 million. The company also projected non-GAAP operating income between $41 million and $43 million, with non-GAAP earnings per share of 13 cents. These non-GAAP figures exclude certain standard costs, such as stock-based compensation and amortization of intangible assets.
Investors will be scrutinizing the company's ability to convert interest in its service software and AI capabilities into sustained growth. The key question is whether Freshworks can boost software sales to existing customers while simultaneously reducing operational costs.
Q1 Performance and Strategic Updates
Freshworks' first-quarter results provided some encouragement for bulls but left the broader debate unresolved. Revenue increased 16% year-over-year to $228.6 million. The company highlighted that it signed its two largest deals ever during the quarter, including its first contract exceeding $1 million in annual recurring revenue (ARR), a key metric for subscription-based software companies.
CEO Dennis Woodside cited "strong momentum" during the Q1 earnings call, pointing to demand for the company's Employee Experience platform, which handles internal service tasks such as IT support. He also noted sales of the AI Copilot product and emphasized net dollar retention, a metric that tracks how much existing customers increase or decrease their spending year-over-year.
Cost-Cutting and AI Integration
The narrative took a more challenging turn in May when Freshworks announced it would lay off 11% of its workforce, approximately 500 employees. Woodside explained to Reuters that the decision was driven by AI's transformative impact on the software industry. "Over half of our code is written by AI," he said, adding that cost savings from automation and a streamlined sales structure would be reinvested into the Employee Experience platform.
This move underscores the dual pressure on Freshworks: leveraging AI to enhance its products while managing expenses in a competitive landscape where AI could drive down software prices.
Analyst Sentiment and Risk Factors
Wall Street analysts remain divided on Freshworks' prospects. According to data tracked by The Wall Street Journal, the stock has seven buy ratings and eight hold ratings, with price targets ranging from $8 to $16. The median target stands at $11, suggesting limited upside from current levels.
The primary risk is that AI could compress software pricing faster than Freshworks can reduce costs or secure larger enterprise customers. If the August 4 report reveals weaker-than-expected revenue, margins, or spending trends, it could reignite growth concerns and push the stock lower. The lower-end analyst targets already imply potential for further declines if the company falls short of expectations.
Investors will be closely watching Freshworks' progress in converting its AI investments into tangible revenue growth and margin improvement, as the company seeks to prove it can thrive in an increasingly AI-driven software market.
