Freshworks Q1 2025: Contradictions Unveiled on AI Integration, Product Pricing, and Economic Resilience

AI integration and headcount reduction, AI product pricing and growth contribution, economic environment and impact on sales are the key contradictions discussed in Freshworks' latest 2025Q1 earnings call.



Revenue Growth and Profitability:
- Freshworks reported revenue of $196.3 million for Q1 2025, growing 19% year-over-year, with a non-GAAP operating margin of 24%.
- The growth was driven by strong demand for its AI-powered products, particularly in employee experience and customer experience solutions.

AI Adoption and Integration:
- The company's AI solutions, especially Freddy Copilot and AI Agent, saw significant adoption, with more than 1,500 AI Agent customers and over 2,700 Copilot customers.
- The integration of AI capabilities is driving productivity improvements and contributing to revenue growth across customer support and IT service management.

Operational Efficiency and Margin Expansion:
- Freshworks expanded its non-GAAP operating margin by more than 10 percentage points compared to the previous year, achieving an adjusted free cash flow margin of 28%.
- Operational efficiency improvements, driven by AI and strategic cost management, contributed to margin expansion.

Customer Acquisition and Retention:
- The company added over 1,000 net new customers in Q1, with a net dollar retention rate of 105% on a constant currency basis.
- This growth was supported by successful upselling and expansion within existing customer relationships, particularly in the enterprise segment.