Freshworks Exceeds 2025 Guidance with 16% Revenue Growth, EX ARR Tops $500M

What happened

Freshworks reported strong fourth quarter and full-year 2025 results, surpassing the high end of its revenue and non-GAAP operating margin guidance. The company delivered 16% year-over-year revenue growth, with its EX business crossing the milestone of half a billion dollars in annual recurring revenue. This aligns with the DeepValue master report's assessment of Freshworks transitioning to a more profitable profile, marked by improving non-GAAP margins and rising free cash flow. However, the report critically highlights persistent concerns such as net dollar retention slipping to 103% and intense competition from larger players like Salesforce and ServiceNow in the AI feature race. Overall, these results reinforce the growth-efficiency narrative but do not fully mitigate the underlying risks to sustainable expansion and competitive moat.

Implication

The earnings beat supports the investment thesis of Freshworks evolving into a cash-generative SaaS company, potentially enhancing confidence in its $1 billion revenue ambition by 2026. With EX ARR exceeding $500 million, the upmarket strategy shows progress, which could improve customer retention and average revenue per user. However, the 16% growth rate, while solid, may be insufficient to offset valuation concerns if net dollar retention remains weak or deteriorates further. Critical analysis requires monitoring whether margin expansion and free cash flow growth are sustainable amid ongoing restructuring and macro headwinds. Ultimately, the stock's value proposition hinges on balancing these operational successes against persistent competitive threats and the need for clearer evidence of AI-led differentiation.

Thesis delta

The positive earnings report modestly strengthens the potential buy thesis by confirming key aspects of revenue growth and margin expansion. However, it does not materially alter the core risks of declining net dollar retention and intense competition, so the stance remains cautiously optimistic with a continued emphasis on monitoring retention metrics and AI competitiveness.