Freshworks Q1 2025 Earnings: Key Metrics to Drive FRSH's Growth Narrative

Freshworks (NASDAQ: FRSH) is set to report its first quarter 2025 earnings on April 29, marking a pivotal moment for investors to assess the company’s progress in navigating macroeconomic headwinds while capitalizing on its AI-driven growth initiatives. With the stock’s history of volatility around earnings releases—swinging from a -5.87% drop after Q2 2024 to a +28.5% surge post-Q3—the upcoming report could once again redefine FRSH’s trajectory. Here’s what to watch for.

Revenue Growth: Testing the 15% Threshold

Freshworks has guided Q1 revenue between $190 million and $193 million, implying 15-17% year-over-year growth. This range reflects cautious optimism amid lingering foreign exchange (FX) pressures, which shaved 1-2% off growth in prior quarters. Analysts will scrutinize whether the top line meets the midpoint of $191.5 million, a figure that would signal resilience in its core customer experience (CX) and employee experience (EX) segments.

The EX segment, which now accounts for over 50% of ARR, grew 35% YoY in 2024, while CX advanced just 7%. Investors should look for signs that EX’s momentum is offsetting CX’s slower growth. Management’s commentary on net dollar retention—a metric that dipped slightly in 2024—will also be critical, as it underscores the durability of its customer relationships.

AI Adoption: Freddy Copilot’s Pivotal Role

Freshworks’ AI product, Freddy Copilot, is a linchpin of its growth strategy. The company ended 2024 with over 2,200 customers using the tool, and a 50% attach rate for deals exceeding $30,000. A

successful quarter would show continued expansion in both customer count and revenue contribution from AI products.

The Q1 results should clarify whether Freddy is driving upsells or new enterprise contracts, as well as its impact on gross margins. Higher AI adoption could offset FX pressures and improve free cash flow, which Freshworks aims to reach $210 million for the full year.

Navigating FX and Margin Pressures

While FX headwinds have been a recurring theme, management has emphasized operational discipline to mitigate impacts. Non-GAAP operating margins expanded to 18% in Q4 2024, up from 16% a year earlier, suggesting cost controls are working. Investors should monitor whether the Q1 gross margin (historically around 72%) holds steady, as AI’s scalability could improve this metric.

Earnings Per Share: Testing Analyst Consensus

The EPS guidance of $0.12–$0.14 aligns with the consensus estimate of $0.13. However, given Freshworks’ history of volatility, even a small miss or beat could trigger swings. The company’s ability to convert revenue growth into free cash flow—projected at $210 million annually—is equally important, as it signals financial health in a capital-light SaaS model.

Conclusion: A Crossroads for FRSH’s Narrative

Freshworks’ Q1 results will hinge on two critical factors: whether its EX segment and AI initiatives can sustain growth amid FX headwinds, and if margin discipline continues to offset macroeconomic pressures. A beat on revenue and EPS, paired with strong AI adoption metrics (e.g., >2,500 Freddy customers), would likely propel the stock higher, potentially erasing its 12% YTD decline. Conversely, a miss on net retention or EX growth could reignite concerns about FRSH’s long-term scalability.

Investors should also watch management’s commentary on 2025 full-year guidance. If the $809–821 million revenue target is reaffirmed, it would validate the company’s path to low double-digit growth. With a forward P/E (non-GAAP) of ~30x and a market cap of $3.2 billion, FRSH’s valuation hinges on executing its AI-driven growth story. The April 29 report will be the first test of that narrative in 2025.

In short, this quarter’s results could cement FRSH’s position as a leader in the AI-powered SaaS space—or expose lingering execution risks. For now, the stakes are high, and the data will speak.