Summary
Freshworks reported $237.4 million in total revenue for its fiscal 2026 second quarter, up 16% from $204.7 million in the same period a year earlier, or 15% after adjusting for constant currency. The headline was profitability. GAAP income from operations was $6.1 million, a 2.6% operating margin, compared with a loss of $8.7 million a year earlier. Net income reached $3.2 million, or $0.01 per diluted share, against a net loss of $1.7 million, or a loss of $0.01 per share, in the prior-year quarter. Gross margin held at 84.8%. Management called it the company's first quarter of GAAP profitability in 2026 and its eighth consecutive quarter meeting the Rule of 40.
The first half tells a similar story. Revenue for the six months ended June 30, 2026 rose 16.2% to $466.0 million. The year-to-date operating loss narrowed to $2.0 million from $19.1 million, and the net loss narrowed to $1.6 million from $3.0 million. Diluted earnings per share stayed flat at a loss of $0.01, and the operating margin for the six months improved to negative 0.4% from negative 4.8%. Operating cash flow was $58.5 million for the quarter, essentially flat year over year, and $120.9 million for the six months, up 3.7%. Capital expenditures rose to $5.0 million in the quarter, driven mainly by construction and improvements at major offices. On a non-GAAP basis, income from operations was $55.9 million, a 23.6% margin, adjusted free cash flow was $57.7 million, and diluted net income per share was $0.17.
Customer metrics kept moving in the right direction. The number of customers contributing more than $100,000 in ARR reached 1,746, up 25% year over year. Customers above the $50,000 threshold totaled 4,091, up 18%, and those above $5,000 reached 25,356, up 6%. Net dollar retention was 104%, down from 106% in both the first quarter of 2026 and the second quarter of 2025. Management pinned the decline on unfavorable foreign exchange rates; on a constant currency basis the rate was 105%. Deferred revenue was $400.5 million, up 18.1%, and remaining performance obligations were $680.6 million, up 19.6%. EX ARR grew 24%, and Freddy AI Copilot is now attached to more than 71% of new enterprise deals. The company added customers including Van Marcke, Hydrite Chemical, Simpar, Upland Software, Paddle and Open Health Communications, announced AI Agent Studio and an MCP Gateway for Freshservice, and named a Leader in the 2026 Gartner Magic Quadrant for IT Service Management Platforms.
Guidance points to steady growth. For the third quarter of 2026, management expects revenue of $244.5 million to $245.5 million, representing 14% year-over-year growth. Full-year 2026 revenue is guided to $963.5 million to $966.5 million, or 15% growth. Non-GAAP income from operations is forecast at $59.0 million to $61.0 million for the third quarter and $222.0 million to $228.0 million for the full year. Non-GAAP net income per share is guided to $0.18 for the third quarter and $0.66 to $0.68 for the full year. The company did not reconcile these non-GAAP estimates to GAAP, citing uncertainty around future expenses.
Several risks deserve attention. Management flagged macroeconomic uncertainty, inflationary pressures, market volatility and geopolitical developments as threats to business spending. Currency exposure is meaningful: roughly 29% of revenue was tied to the euro and British pound in the quarters ended June 30, 2026 and March 31, 2026, up from 27% a year earlier. Monthly subscriptions represented 12% of ARR, down from 13%. The company completed the FireHydrant acquisition in January 2026 and launched a restructuring plan in May 2026. It repurchased 24.0 million shares for $204.5 million during the first half, leaving $195.5 million available under a $400.0 million authorization. Cash, cash equivalents, restricted cash and marketable securities totaled $665.3 million at June 30, 2026, and the accumulated deficit stood at $3.6 billion.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q2 FY2026 | Q1 FY2026 | QoQ | Q2 FY2025 | YoY |
|---|---|---|---|---|---|
| Revenue | $237.4M | $228.6M | +3.8% | $204.7M | +16.0% |
| Gross profit | $201.3M | $193.9M | +3.8% | $173.5M | +16.0% |
| Gross margin | 84.8% | 84.8% | -0.0 pp | 84.8% | +0.0 pp |
| Research & development | $43.8M | $49.3M | -11.1% | $39.9M | +9.7% |
| Sales & marketing | $106.5M | $112.3M | -5.2% | $95.2M | +11.8% |
| General & administrative | $37.9M | $40.4M | -6.2% | $47.0M | -19.4% |
| Total operating expenses | $195.2M | $202.0M | -3.4% | $182.2M | +7.2% |
| Operating income (loss) | $6.1M | -$8.1M | +175.2% | -$8.7M | +170.0% |
| Operating margin | 2.5% | -3.5% | +6.1 pp | -4.2% | +6.8 pp |
| Net income (loss) | $3.2M | -$4.8M | +167.3% | -$1.7M | +286.3% |
| Net margin | 1.4% | -2.1% | +3.5 pp | -0.8% | +2.2 pp |
| Diluted EPS | $0.01 | -$0.02 | +$0.03 | -$0.01 | +$0.02 |
| Net retention rate | 104.0% | 106.0% | -2.0 pp | 106.0% | -2.0 pp |
Risks
MD&A states that current macroeconomic uncertainties, including inflationary pressures, significant volatility in global markets, and geopolitical developments, have impacted and may continue to impact business spending, and the company expects these pressures to persist for the foreseeable future. Because the model is primarily subscription-based, the effects may not be fully reflected in revenue until future periods.
Revenue exposure to the euro and British pound was approximately 29% in the quarters ended June 30, 2026 and March 31, 2026, up from 27% in the quarter ended June 30, 2025. Net dollar retention rate decreased to 104% as of June 30, 2026 from 106% as of June 30, 2025, primarily due to unfavorable fluctuations in foreign exchange rates, and the company recorded an $11.3 million unrealized foreign exchange loss in the six months ended June 30, 2026, mostly from unfavorable changes in the Indian rupee against the U.S. dollar.
Net dollar retention rate declined to 104% as of June 30, 2026 from 106% as of June 30, 2025, and the company expects it may fluctuate more in future periods due to macroeconomic conditions, foreign exchange volatility, and its ability to upsell and cross-sell. Monthly subscriptions represented 12% of ARR as of June 30, 2026, and net dollar retention for monthly contracts has generally been lower than the overall rate.
The company initiated a restructuring plan in May 2026 and recorded $7.0 million of restructuring charges in the second quarter of 2026, consisting of employee severance and termination benefits, with $5.6 million of restructuring costs paid during the three and six months ended June 30, 2026. Execution of the plan could disrupt operations and affect headcount-dependent functions such as research and development and sales.
Interest income decreased 38% to $13.3 million for the six months ended June 30, 2026, primarily due to lower balances in marketable securities as a result of the share repurchase program, under which 24.0 million shares were repurchased for $204.5 million in the six months ended June 30, 2026. Continued repurchases reduce interest-bearing asset balances and the associated non-operating income.
SaaS KPIs
All quarters →Net Dollar Retention Rate
Non-GAAP Operating Margin
Non-GAAP Gross Margin
Net Dollar Retention Rate (constant currency)
Adjusted Free Cash Flow
Adjusted Free Cash Flow Margin
Operating Cash Flow Margin
Monthly subscriptions as % of ARR
Summary, forecast, risks and KPIs are extracted from Freshworks Inc.'s SEC filings for Q2 FY2026 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 1, 2026.