Loading...
01/11 16:03
Loading...
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call highlights solid financial metrics, including 14% YoY revenue growth and a 27% free cash flow margin, indicating operational discipline. The Q&A reveals positive sentiment towards AI and EX product growth, with strategic investments for future expansion. Despite no buyback expansion, the focus on M&A and reinvestment is seen positively. While management was vague on some specifics, the overall tone and strategic direction suggest a positive market reaction, especially given the company's market cap.
Q3 Revenue $215.1 million, a 15% year-over-year increase. This growth was driven by strong performance across growth and profitability metrics, including a $1 million onetime contribution from the on-premise Device42 business.
Non-GAAP Operating Margin 21%, which is 5 points above the estimate. This reflects effective cost management and top-line momentum.
Free Cash Flow Margin 27%, an over 5 percentage point improvement year-over-year. This was driven by operational discipline and strong collections.
Employee Experience (EX) ARR Over $480 million, representing 24% year-over-year growth on an as-reported basis and 23% on a constant currency basis. Growth was driven by expansion outside IT, upmarket growth, and IT asset management with Device42.
Enterprise Service Management (ESM) ARR Exceeded $35 million, doubling its annual recurring revenue in the past year. Growth was driven by adoption in non-IT functions and automation of workflows.
Customer Experience (CX) ARR Over $390 million, representing 8% year-over-year growth on an as-reported basis and 7% on a constant currency basis. Growth was driven by deeper product adoption and customer sentiment favoring Freshdesk's ease of use.
Freddy AI ARR Doubled year-over-year. Freddy Copilot's ARR grew 160% year-over-year and was included in over 60% of new customer deals over $30,000.
Net Dollar Retention 105% on an as-reported basis and 104% on a constant currency basis. Device42 represented a small drag of 60 basis points.
Calculated Billings $224 million, representing 14% year-over-year growth on both an as-reported and constant currency basis. Growth was supported by partner-led implementations in over half of ARR deals greater than $50,000.
Adjusted Free Cash Flow $57.2 million, resulting in a 27% margin. This reflects operational discipline and strong collections.
AI-driven applications: Freshworks has over 50 AI-driven applications in use, directly monetizing these products and driving incremental growth. Freddy AI's ARR has doubled year-over-year, and its AI Copilot's ARR grew 160% year-over-year.
Freddy AI Agent: Usage expanded more than sixfold in the past 7 months, with 650,000 sessions per month since launch. Freddy AI Agent deflected more than 50% of tickets for CX and EX customers.
Freshservice for Business Teams: Annual recurring revenue doubled in the past year, exceeding $35 million in Q3. Expanded access as an independent product for non-IT functions.
Expansion into departments outside IT: Employee Experience achieved over $480 million in ARR, growing 24% year-over-year. Freshservice for Business Teams is now available as a stand-alone product for HR, finance, facilities, and legal.
Upmarket growth: ARR from customers spending more than $100,000 grew 25% year-over-year. Freshworks is displacing legacy players with its ease of use and lower total cost of ownership.
Vertical expansion: Doubled law firm customer count to over 1,000 and expanded in sports, with notable customers like the Los Angeles Dodgers and McLaren Formula 1 team.
Operational efficiency: HOLT CAT improved efficiency by handling nearly 10,000 tickets in 6 months, reducing average ticket resolution time to under 5 hours.
Partner ecosystem: Partners led implementations for over half of ARR deals greater than $50,000, showcasing a robust partner network.
AI as a growth driver: Freddy AI is positioned as a $100 million stand-alone revenue stream over the next 3 years, with AI deeply embedded in customer workflows.
Customer Experience (CX) refocus: Freshdesk, Freshchat, and Freddy AI products consolidated into a unified workspace to improve customer support efficiency.
Macroeconomic Environment: Uncertainties in the macroeconomic environment and market volatility could adversely impact the company's financial performance and strategic objectives.
Growth Sustainability: Challenges in sustaining growth and reaching long-term revenue goals, particularly in a competitive market.
Innovation and Customer Demand: Risks associated with the ability to innovate and meet customer demand, which are critical for maintaining market position.
Cost Control and Efficiency: Potential difficulties in controlling costs and improving operating efficiency, which could impact profitability.
Regulatory Compliance: The need to ensure security, privacy, and compliance in AI-driven solutions, which could pose risks if not adequately managed.
Customer Retention: Net dollar retention rate of 105% indicates some challenges in retaining and expanding existing customer accounts.
Device42 Integration: Device42's retention rate is a small drag on overall net dollar retention, indicating challenges in scaling this business segment.
Currency Fluctuations: Revenue and growth projections are sensitive to foreign exchange rate fluctuations, which could impact financial outcomes.
Strategic Investments: Planned reinvestments in Q4 to expand pipeline and customer acquisition could have a modest impact on operating margins.
Revenue Expectations: For Q4 2025, revenue is expected to be in the range of $217 million to $220 million, representing 12% to 13% year-over-year growth. For the full year 2025, revenue is projected to be between $833.1 million and $836.1 million, growing approximately 16% year-over-year.
Operating Margin Projections: Non-GAAP operating income for Q4 2025 is expected to be between $30.6 million and $32.6 million. For the full year 2025, non-GAAP operating income is projected to be between $167 million and $169 million.
Net Income Per Share: For Q4 2025, non-GAAP net income per share is expected to range from $0.10 to $0.12. For the full year 2025, it is projected to be between $0.62 and $0.64.
Long-Term Revenue Growth: For the full year 2026, revenue growth is expected to be 13% to 14%, with GAAP profitability anticipated by the end of the year.
AI Revenue Growth: AI is projected to become a $100 million stand-alone revenue stream over the next three years, driven by Freddy AI and related solutions.
Employee Experience (EX) Growth: EX business is expected to continue its growth trajectory, with ITSM, ESM, advanced ITAM, and AI each potentially becoming $100 million ARR businesses.
Customer Experience (CX) Growth: CX business is projected to grow further, supported by AI-driven efficiency and new product innovations like a unified workspace for customer support teams.
Strategic Investments: A onetime increase in spending during Q4 2025 is planned to expand the pipeline and drive customer acquisition, with a modest impact on operating margins.
Share Repurchase Program: Freshworks successfully completed its inaugural $400 million share repurchase program after buying back an additional 12 million shares in Q3 at an average price of $13.28 per share. In total, the company repurchased approximately 27.9 million shares at an average price of $14.35. Freshworks continues to manage and offset share count dilution by net settling vested equity amounts. During Q3, approximately $15 million was used for this purpose, and for the full year, the company expects to use approximately $58 million to net settle vested equity amounts.
The earnings call highlights solid financial metrics, including 14% YoY revenue growth and a 27% free cash flow margin, indicating operational discipline. The Q&A reveals positive sentiment towards AI and EX product growth, with strategic investments for future expansion. Despite no buyback expansion, the focus on M&A and reinvestment is seen positively. While management was vague on some specifics, the overall tone and strategic direction suggest a positive market reaction, especially given the company's market cap.
The earnings call summary and Q&A indicate positive financial performance with strong customer growth, AI adoption, and increased revenue guidance. The company is expanding partnerships and has raised its full-year revenue expectations. Despite some uncertainties in product-specific revenue impacts and pricing models, the overall sentiment is positive due to strong growth metrics and optimistic guidance. Given the market cap, this is likely to result in a stock price increase in the 2% to 8% range over the next two weeks.
The earnings call highlights strong financial performance with a 19% YoY revenue growth, improved operating margin, and significant free cash flow increase. The share repurchase program and customer growth are positive indicators. Although there are concerns about competitive pressures and regulatory issues, the Q&A shows confidence in AI-driven efficiencies and a strong pipeline. The market cap suggests a moderate reaction, leading to a positive outlook for the stock price over the next two weeks.
All transcripts are sourced directly from the official live webcast or the company’s official investor relations website. We use the exact words spoken during the call with no paraphrasing of the core discussion.
Full verbatim transcripts are typically published within 4–12 hours after the call ends. Same-day availability is guaranteed for all S&P 500 and most mid-cap companies.
No material content is ever changed or summarized in the “Full Transcript” section. We only correct obvious spoken typos (e.g., “um”, “ah”, repeated 10 times”, or clear misspoken ticker symbols) and add speaker names/titles for readability. Every substantive sentence remains 100% as spoken.
When audio quality is poor or multiple speakers talk over each other, we mark the section instead of guessing. This ensures complete accuracy rather than introducing potential errors.
They are generated by a specialized financial-language model trained exclusively on 15+ years of earnings transcripts. The model extracts financial figures, guidance, and tone with 97%+ accuracy and is regularly validated against human analysts. The full raw transcript always remains available for verification.
