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Freshworks (FRSH)
NASDAQ:FRSH
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Freshworks (FRSH) AI Stock Analysis

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FRSH

Freshworks

(NASDAQ:FRSH)

Rating:67Neutral
Price Target:
$14.50
▲(11.45% Upside)
Freshworks' strong financial performance and positive earnings call insights are offset by technical weaknesses and valuation challenges. The company is on a growth trajectory with improving margins, but persistent net losses and bearish technical indicators weigh on the overall score.
Positive Factors
Financial Performance
Freshworks reported very good 2Q results with Billings above expectations and its CX segment accelerating its ARR growth rate more than expected.
Market Potential
AI-related revenues surpassed the $20mm ARR level signifying a large expansion opportunity.
Product Innovation
Freshworks showcased its latest product innovations and strategic vision, highlighting the debut of the next generation of its Freddy Agentic AI platform.
Negative Factors
Economic Environment
Recession risks and inflationary pressures both in the U.S. and abroad could negatively impact Freshworks results.
Profitability Constraints
The sales improvements have Fresh leaning into new investments which limit the profitability outperformance from flowing into the full-year guidance.

Freshworks (FRSH) vs. SPDR S&P 500 ETF (SPY)

Freshworks Business Overview & Revenue Model

Company DescriptionFreshworks Inc. (FRSH) is a global software company that provides innovative customer engagement solutions to businesses of all sizes. The company is headquartered in San Mateo, California, and operates in the enterprise software sector. Freshworks offers a suite of software products designed to improve customer engagement, including Freshdesk, Freshservice, Freshsales, and several other tools that simplify customer support, IT service management, CRM, and sales management.
How the Company Makes MoneyFreshworks generates revenue primarily through a subscription-based model for its cloud-based software solutions. The company's key revenue streams include subscription fees from its diverse product offerings, which cater to customer support, IT service management, sales, and marketing automation. Freshworks' products are typically offered as Software-as-a-Service (SaaS), with customers paying recurring fees for access to the platform. The company leverages a freemium model, where basic features are available for free, and advanced features are offered through paid tiers. Additionally, Freshworks benefits from strategic partnerships and integrations with other technology providers, enhancing its value proposition and expanding its customer base. The company also invests in expanding its global presence, targeting small and medium-sized businesses as well as larger enterprises, which contributes to its earnings growth.

Freshworks Earnings Call Summary

Earnings Call Date:Jul 29, 2025
(Q2-2025)
|
% Change Since: |
Next Earnings Date:Nov 04, 2025
Earnings Call Sentiment Positive
The earnings call revealed strong revenue growth, increased operating margins, and significant cash flow improvements, driven by successful AI product adoption and global partnerships. However, challenges remain with net dollar retention and increased spending forecasts for the second half of the year.
Q2-2025 Updates
Positive Updates
Strong Revenue Growth
Freshworks grew Q2 revenue by 18% year-over-year to $204.7 million.
Increased Operating Margin
Non-GAAP operating margin expanded to 22% in Q2, reflecting strong revenue performance and disciplined expense management.
Record Adjusted Free Cash Flow
Adjusted free cash flow increased 65% year-over-year to $54.3 million, resulting in a margin of 27%.
AI Product Growth
ARR from AI copilot and agent products crossed $20 million in Q2, with over 5,000 customers paying for these SKUs, up from previous quarters.
Expansion in EX and CX
Employee Experience (EX) ARR grew to over $450 million, representing 24% growth year-over-year. Customer Experience (CX) ARR grew to over $380 million, with 11% growth year-over-year.
Successful Global Partner Program
Partners impacted over 1/3 of ARR in Q2, with over 130 new partners added to the ecosystem this year.
Negative Updates
Pressure on Net Dollar Retention
Net dollar retention came in at 106% on an as-reported basis and 104% on a constant currency basis, impacted by churn in the Device42 partner business.
Conservative Q3 Guidance
Revenue growth guidance for Q3 2025 is 11% to 12% year-over-year, showing a deceleration from Q2.
Increased Spending Expected
Spending is expected to increase in the second half of the year due to personnel and brand-related expenses, potentially impacting operating margins.
Company Guidance
During the Freshworks Second Quarter 2025 Earnings Conference Call, the company provided robust guidance, highlighting significant growth and profitability metrics. Freshworks reported a Q2 revenue increase of 18% year-over-year, reaching $204.7 million, and expanded its non-GAAP operating margin to 22%. The adjusted free cash flow margin was strong at 27%. The company ended the quarter with over 74,600 customers and emphasized three key growth drivers: Employee Experience (EX) with a 24% year-over-year ARR growth to over $450 million, Customer Experience (CX) with a $380 million ARR, and AI capabilities. AI-related products have generated over $20 million in ARR, doubling from the previous year. Looking forward, Freshworks expects Q3 2025 revenue to grow by 11% to 12% year-over-year, with a revenue range of $207 million to $210 million, and anticipates full-year 2025 revenue growth of 14% to 15%. The company plans to continue investing in growth opportunities while maintaining operational efficiency.

Freshworks Financial Statement Overview

Summary
Freshworks shows strong revenue growth and cash flow management, with a robust equity position. However, persistent net losses and negative profit margins remain challenges.
Income Statement
70
Positive
Freshworks has demonstrated consistent revenue growth with a TTM revenue of $782.1M, marking a 8.56% increase from the previous year and a 23.61% increase from 2023. Gross Profit Margin remains strong at 84.62% TTM, although persistent losses keep net profit margins negative. EBIT and EBITDA margins continue to improve, reflecting progress towards profitability.
Balance Sheet
75
Positive
Freshworks maintains a robust equity position with a Debt-to-Equity ratio of 0.03 TTM, indicative of low leverage. The Equity Ratio stands at 66.48%, showing a strong capital structure. However, the company has yet to achieve positive ROE due to consistent net losses.
Cash Flow
80
Positive
The company has shown a solid improvement in cash flow generation, with a significant increase in free cash flow by 27.10% TTM. Operating cash flow has increased significantly, resulting in a favorable Operating Cash Flow to Net Income ratio of -3.65, indicating strong cash generation relative to accounting losses.
BreakdownTTMDec 2024Dec 2023Dec 2022Dec 2021Dec 2020
Income Statement
Total Revenue782.10M720.42M596.43M498.00M371.02M249.66M
Gross Profit661.81M607.09M493.06M402.23M292.99M197.17M
EBITDA-65.70M-109.53M-158.03M-225.06M-191.49M-44.94M
Net Income-54.90M-95.37M-137.44M-232.13M-192.00M-57.29M
Balance Sheet
Total Assets1.48B1.61B1.46B1.38B1.48B367.42M
Cash, Cash Equivalents and Short-Term Investments926.20M1.07B1.19B1.15B1.32B238.12M
Total Debt26.82M38.29M29.49M34.95M0.000.00
Total Liabilities496.18M473.96M384.51M328.40M244.77M3.06B
Stockholders Equity984.64M1.14B1.07B1.05B1.24B-2.70B
Cash Flow
Free Cash Flow192.46M151.47M77.84M-14.77M2.34M21.77M
Operating Cash Flow200.25M160.65M86.18M-2.52M11.46M32.53M
Investing Cash Flow262.69M38.80M158.50M-284.83M-420.30M-11.43M
Financing Cash Flow-287.23M-67.26M-60.62M-156.35M1.06B-1.91M

Freshworks Technical Analysis

Technical Analysis Sentiment
Negative
Last Price13.01
Price Trends
50DMA
13.80
Negative
100DMA
14.22
Negative
200DMA
15.22
Negative
Market Momentum
MACD
-0.16
Negative
RSI
41.83
Neutral
STOCH
16.27
Positive
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For FRSH, the sentiment is Negative. The current price of 13.01 is below the 20-day moving average (MA) of 13.16, below the 50-day MA of 13.80, and below the 200-day MA of 15.22, indicating a bearish trend. The MACD of -0.16 indicates Negative momentum. The RSI at 41.83 is Neutral, neither overbought nor oversold. The STOCH value of 16.27 is Positive, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for FRSH.

Freshworks Risk Analysis

Freshworks disclosed 65 risk factors in its most recent earnings report. Freshworks reported the most risks in the "Finance & Corporate" category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks

Freshworks Peers Comparison

Overall Rating
UnderperformOutperform
Sector (61)
Financial Indicators
Name
Overall Rating
Market Cap
P/E Ratio
ROE
Dividend Yield
Revenue Growth
EPS Growth
69
Neutral
$4.75B482.280.59%13.36%
67
Neutral
$3.79B-5.23%19.78%47.51%
65
Neutral
$4.26B99.24%19.02%27.64%
61
Neutral
$35.51B8.11-11.05%1.89%8.55%-8.72%
53
Neutral
$4.02B-31.02%20.42%-9.39%
51
Neutral
$3.46B-80.55%9.74%22.36%
50
Neutral
$2.94B-76.08%28.35%24.57%
* Technology Sector Average
Performance Comparison
Ticker
Company Name
Price
Change
% Change
FRSH
Freshworks
12.84
1.49
13.13%
WK
Workiva
76.05
2.96
4.05%
BILL
Bill.com Holdings
51.54
-3.52
-6.39%
KC
Kingsoft Cloud Holdings
13.82
11.73
561.24%
ASAN
Asana
13.46
1.68
14.26%
GRND
Grindr
15.30
3.69
31.78%

Freshworks Corporate Events

Executive/Board ChangesShareholder Meetings
Freshworks Holds Virtual Annual Stockholders Meeting
Neutral
Jun 6, 2025

On June 5, 2025, Freshworks Inc. held its Annual Meeting of Stockholders virtually, where key proposals were voted upon. The stockholders elected Class I directors Johanna Flower, Randy Gottfried, and Barry Padgett to serve until the 2028 Annual Meeting. Additionally, Deloitte & Touche LLP was ratified as the independent registered public accounting firm for the fiscal year ending December 31, 2025.

Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.Date of analysis: Sep 03, 2025