Summary
Freshworks closed fiscal 2025 with a strong fourth quarter. Revenue for the quarter ended December 31, 2025 reached $222.7 million, up 14.5% from $194.6 million in the fourth quarter of 2024. Full year revenue was $838.8 million, up 16.4% from $720.4 million. Gross profit for the quarter was $190.6 million, up 15.4%, and full year gross profit was $712.7 million, up 17.4%. Gross margin for the quarter was 85.6%, up 0.7 percentage points from 84.9% a year earlier.
GAAP operating income for the quarter was $39.7 million, a swing to a profit from an operating loss of $23.8 million in the prior year quarter. The quarter's operating margin was 17.8%, compared with negative 12.2%. For the full year, operating income was $13.2 million against a loss of $138.6 million, and the operating margin was 1.6% versus negative 19.2%.
Net income for the quarter was $191.4 million, a swing to a profit from a net loss of $21.9 million a year earlier. Full year net income was $183.7 million versus a net loss of $95.4 million. Full year diluted EPS was $0.63 against negative $0.32. Two items shape much of the reported profit. The company released a $151.7 million valuation allowance on U.S. deferred tax assets, and it recorded roughly $41 million of reversal of stock-based compensation expense tied to the departure of its Executive Chairman. Non-GAAP income from operations was $41.6 million, an 18.7% margin, down from $40.3 million and 20.7% in the prior year quarter. Non-GAAP diluted net income per share was $0.14, flat with $0.14 a year earlier.
Cash generation improved. Operating cash flow for the quarter was $62.3 million, up 50.7% from $41.4 million, and full year operating cash flow was $242.4 million, up 50.9% from $160.6 million. Adjusted free cash flow, a separate measure, was $56.2 million for the quarter versus $41.7 million, and $223.1 million for the year versus $153.3 million. Capital expenditures fell to $2.2 million in the quarter, down 56.0% from $5.1 million, and to $5.7 million for the year, down 37.9% from $9.2 million. Deferred revenue stood at $388.5 million, up 18.7%, and remaining performance obligations were $644.4 million, up 22.7%.
Customer metrics held up. The number of customers contributing more than $5,000 in ARR was 24,762, an increase of 10% year over year. Net dollar retention rate was 108%, compared with 105% in the third quarter of 2025 and 103% in the fourth quarter of 2024. On a constant currency basis, net dollar retention was 104%, compared with 104% in the third quarter of 2025 and 105% in the fourth quarter of 2024. The employee experience business crossed half a billion dollars in annual recurring revenue. Enterprise service management and Device42 each surpassed $40 million in ARR, and Freddy AI surpassed $25 million.
Guidance points to slower growth. For the first quarter of 2026, Freshworks expects revenue growth of 13% to 15% and non-GAAP income from operations of $33.0 million to $35.0 million. For the full year 2026, the company guides to revenue growth of 13.5% to 14.5% and non-GAAP income from operations of $181.0 million to $189.0 million. Non-GAAP net income per share is guided to $0.10 to $0.12 for the first quarter and $0.55 to $0.57 for the full year. Both full year ranges sit below the 16% revenue growth the company just reported for fiscal 2025.
Risks remain. Management cites macroeconomic uncertainty, inflationary pressures, volatility in global markets and geopolitical developments as factors that could affect business spending. Foreign currency is a real exposure, with roughly 28% of revenue tied to the euro and British pound in 2025. The company also flags its history of net losses and its ability to achieve or sustain profitability. Freshworks closed the acquisition of FireHydrant, an AI-powered incident management provider, in January 2026, after the quarter ended, and will account for it as a business combination.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q4 FY2025 | Q3 FY2025 | QoQ | Q4 FY2024 | YoY |
|---|---|---|---|---|---|
| Revenue | $222.7M | $215.1M | +3.5% | $194.6M | +14.5% |
| Gross profit | $190.6M | $182.2M | +4.6% | $165.1M | +15.4% |
| Gross margin | 85.6% | 84.7% | +0.9 pp | 84.9% | +0.7 pp |
| Research & development | $41.8M | $41.5M | +0.8% | $41.0M | +1.9% |
| Sales & marketing | $109.4M | $101.0M | +8.3% | $90.7M | +20.6% |
| General & administrative | -$329.0K | $47.1M | -100.7% | $47.5M | -100.7% |
| Total operating expenses | $150.8M | $189.6M | -20.5% | $188.9M | -20.2% |
| Operating income (loss) | $39.7M | -$7.5M | +632.8% | -$23.8M | +267.0% |
| Operating margin | 17.8% | -3.5% | +21.3 pp | -12.2% | +30.1 pp |
| Net income (loss) | $191.4M | -$4.7M | +4190.7% | -$21.9M | +974.2% |
| Net margin | 86.0% | -2.2% | +88.1 pp | -11.3% | +97.2 pp |
| Diluted EPS | $0.65 | -$0.02 | +$0.67 | -$0.32 | +$0.97 |
| Net retention rate | 108.0% | 105.0% | +3.0 pp | 103.0% | +5.0 pp |
Risks
Freshworks generated FY2025 net income of $183.7M and operating income of $13.2M, swinging from FY2024 net loss of $95.4M and operating loss of $138.6M, but had an accumulated deficit of $3.6B as of Dec 31, 2025. The filing says expected investments may cause future losses and it cannot assure sustained profitability; FY2025 net income included a $151.7M U.S. valuation allowance release.
Larger customers are a growing part of the business; the typical sales cycle is approximately 130 to 150 days for mid-market and enterprise customers versus 30 days for SMB customers, with greater upfront sales costs, discount requests, and less predictability. Customers contributing more than $50,000 in ARR grew 23% to 3,760 and represented 54% of total ARR as of Dec 31, 2025.
The EX and CX market is highly competitive and increasingly AI-driven; competitors may use superior AI models, datasets, or greater R&D investment to reduce competitiveness or render offerings obsolete. Freshworks deploys Freddy AI Agent, Freddy AI Copilot, and Freddy AI Insights, so failure to integrate or utilize AI effectively could hurt market share.
Use of generative and agentic AI exposes Freshworks to evolving laws such as the EU AI Act, ongoing copyright litigation over AI training data, accuracy, bias, privacy, and data provenance risks. Compliance could increase costs, require business practice changes, and lead to regulatory investigations or lawsuits.
Amazon Web Services provides the vast majority of cloud computing infrastructure under a long-term agreement; any significant disruption, access limitation, unfavorable pricing change, or termination would harm operations. Transitioning to another cloud provider would require significant time and expense.
FY2025 revenue rose 16.4% year over year to $838.8M, but the MD&A and risk factors note the growth rate may continue to decline as the business matures; prior year growth was 21%.
The filing cites inflationary pressures, high interest rates, supply chain disruptions, labor market volatility, geopolitical tensions, and recession risks that have in the past reduced business spending and may continue to cause delayed sales cycles, lower renewal rates, shorter contract terms, and pricing pressure. MD&A notes 28% of FY2025 revenue had euro and British pound exposure.
The subscription model depends on renewals and expansion; net dollar retention rate was 108% as of Dec 31, 2025, up from 103%, but monthly subscriptions represented 13% of ARR and SMB churn has been higher. A decline in retention or failure to add users would harm future revenue.
Competition for executive, software engineering, product management, AI/ML, and sales personnel is intense; the filing notes no key person insurance and risks from senior management changes. MD&A attributes G&A reduction partly to $47.6M lower stock-based compensation following the former Executive Chairman's resignation and lower headcount after the November 2024 restructuring.
Freshworks relies on unpaid search traffic and traditional SEO, but AI-powered search and zero-click results are reducing click-throughs; traffic from LLM-based platforms is small but growing. If visibility declines, customer acquisition costs may increase and require more paid marketing.
MD&A states foreign currency exchange rate fluctuations negatively impacted revenue growth historically and about 28% of FY2025 revenue had euro and British pound exposure. Volatility in those currencies could harm results and forecasting.
Freshworks completed the FireHydrant acquisition in January 2026 and previously acquired D42 Parent in June 2024; integration may divert management, disrupt operations, require revenue recognition changes, and expose it to additional liabilities. Purchase price allocation for FireHydrant was not yet completed.
SaaS KPIs
All quarters →Net Dollar Retention Rate
Non-GAAP Operating Margin
Number of Customers Contributing More Than $5,000 in ARR
Adjusted Free Cash Flow
Adjusted Free Cash Flow Margin
Operating Cash Flow Margin
Paying Customers
Summary, forecast, risks and KPIs are extracted from Freshworks Inc.'s SEC filings for Q4 FY2025 (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 2, 2026.