Freshworks Inc. (NASDAQ: FRSH) saw its shares close 1.96% higher at $9.37 on Wednesday, driven by a surge in trading volume that reached 34.65 million shares—roughly three times its 65-day average. The spike came just ahead of the annual Russell index reconstitution, which is set to finalize after U.S. markets close on June 26.
The volume represented approximately 17% of Freshworks' public float of 202.59 million shares, and was about 1.5 times the company's short interest of 22.67 million shares as of May 29. While the activity was enough to shift positions, traders noted that it did not create a significant price gap. After hours, the stock eased to $9.21.
Freshworks outperformed the broader small-cap market on the day: the iShares Russell 2000 ETF (IWM) rose 0.41% to $296.69 late in the session. FTSE Russell confirmed that the 2026 reconstitution will lock in after Friday's close, with new indexes beginning trading on Monday, June 29. Catherine Yoshimoto, director of product management at FTSE Russell, noted that the rebalance typically falls on one of the highest volume days of the year.
T. Rowe Price estimated that as of June 30, 2025, approximately $12.2 trillion in assets were benchmarked to Russell U.S. indexes, and the 2026 rebalance is expected to bring significant shifts in small-cap growth and other index weights.
Despite the recent uptick, Freshworks shares remain deeply negative for the year, down 23.5% year-to-date, and have fallen 35.9% over the past twelve months. Wednesday's close of $9.37 was well below the 52-week high of $15.47.
The company's operating outlook offers a mixed picture. First-quarter revenue grew 16% year-over-year to $228.6 million, while non-GAAP operating income reached $41.0 million. However, the non-GAAP operating margin contracted to 17.9% from 23.6% in the prior year. CEO Dennis Woodside highlighted the company's "sixth straight quarter of exceeding expectations," pointing to strong demand for its Employee Experience platform. Customers with annual recurring revenue above $100,000 rose 29% to 1,646, and net dollar retention remained steady at 106%.
Freshworks is pressing forward with cost reductions. In a May 5 filing, the company announced plans to lay off approximately 500 employees—about 11% of its workforce—and expects to incur $7 million to $9 million in restructuring charges in the second quarter. The bulk of the plan is anticipated to be completed by June 30.
For the current quarter, Freshworks forecasts revenue between $232 million and $235 million, with full-year 2026 revenue projected at $958 million to $964 million. Traders are closely watching whether the stock's price at Friday's Russell close will remain within Wednesday's trading range of $9.12 to $9.71.
