Freshworks Inc. 10-Q Summary: Q1 2026
Business Context and Reporting Period
This report covers the quarterly period ended March 31, 2026. Freshworks Inc. provides people-first AI service software for employee and customer experiences. In January 2026, the company completed the acquisition of FireHydrant, Inc., an incident management software provider, for $88.7 million. The company operates as a single segment and is classified as a large accelerated filer.
Key Financial Metrics
| Metric | Q1 2026 | Q1 2025 |
|---|---|---|
| Revenue | $228.6 million | $196.3 million |
| Gross Profit | $193.9 million | $166.4 million |
| Gross Margin | 85% | 85% |
| Operating Loss | $(8.1) million | $(10.4) million |
| Net Loss | $(4.8) million | $(1.3) million |
| Operating Cash Flow | $62.4 million | $58.0 million |
| Free Cash Flow | $55.8 million | $53.9 million |
| Cash & Marketable Securities | $779.2 million | N/A |
| Debt | None reported | None reported |
Note: Cash and marketable securities combined total $779.2 million ($548.2M cash + $231.1M securities) as of March 31, 2026.
Material Changes vs. Prior Period
- Revenue Growth: Revenue increased 16% year-over-year, driven by $18.2 million from new customers and $14.2 million from existing customers.
- Operating Expenses: Total operating expenses rose 14% to $202.0 million. Sales and marketing expenses increased 26% due to higher headcount and sponsorship costs. Research and development increased 23% due to compensation adjustments and software licensing.
- General & Administrative (G&A): G&A expenses decreased 14% to $40.4 million, primarily due to a $10.5 million reduction in stock-based compensation following the departure of the former Executive Chairman in late 2025.
- Interest Income: Interest and other income dropped 89% to $1.4 million, largely due to lower interest rates and reduced balances in marketable securities used for share repurchases.
- Foreign Exchange: The company recorded a $7.1 million foreign exchange loss, primarily due to unfavorable movements in the Indian rupee against the U.S. dollar.
Guidance, Outlook, and Risks
- Restructuring Plan: In May 2026 (subsequent event), the company committed to a restructuring plan targeting an 11% headcount reduction. This is expected to result in $7 million to $9 million in charges in Q2 2026, primarily for separation payments.
- Share Repurchases: A new $400 million share repurchase program was approved in February 2026. The company repurchased 5.7 million shares for $45.4 million in Q1 2026, with $354.6 million remaining available.
- Non-GAAP Performance: Non-GAAP net income was $32.2 million, compared to $55.9 million in Q1 2025. Non-GAAP income from operations was $41.0 million.
- Risks: Key risks include macroeconomic uncertainties (inflation, geopolitical issues), foreign currency volatility, and reliance on third-party cloud infrastructure (Amazon Web Services). The company also faces ongoing litigation regarding its IPO, though a summary judgment was granted in its favor in April 2025 (currently under appeal).
Investor Verification Checklist
- Verify the impact of the announced 11% headcount reduction on Q2 2026 operating expenses and cash flow.
- Monitor the integration progress and revenue contribution of the FireHydrant acquisition.
- Assess the sustainability of the 106% net dollar retention rate amidst macroeconomic pressures.
- Review the status of the appealed securities class action lawsuit regarding the IPO.
- Track the utilization of the remaining $354.6 million share repurchase authorization.