Freshworks shares rise nearly 10% on earnings beat and strong outlook

Shares in Freshworks Inc. were up nearly 10% in late trading today after the customer service and support software firm impressed with earnings and revenue beats in its fiscal first quarter and gave better-than-expected outlooks for its fiscal second quarter and full year.

For the quarter that ended on March 31, Freshworks reported adjusted earnings per share of 18 cents, up from 10 cents per share in the first quarter of 2024, on revenue of $196.3 million, up 19% year-over-year. Both figures were beats, coming in ahead of the 13 cents per share and revenue of $192.08 million expected by analysts.

Freshworks’ strong figures were driven by customer growth, with the company seeing the number of customers spending more than $5,000 in annual recurring revenue growing 13% year-over-year to 23,275. The company’s customers are also sticking around, with Freshworks reporting a net dollar retention rate of 105% in the quarter, up from 103% in the previous quarter.

New Freshworks customers in the quarter included All3Media Ltd., Broad River Retail LLC, Freudenberg & Co. Kommanditgesellschaft, The Christie NHS Foundation Trust and Veracode Inc.

Business highlights in the quarter included Freshworks launching a revamped global partner program that is aimed at enhancing collaboration with resellers and service delivery partners. The new program includes flexible monetization models, such as one-time commissions and recurring revenue opportunities, along with expanded support services like regional sales assistance, marketing development funds and technical enablement resources.

Additionally, Freshworks announced a strategic partnership with Unisys Corp. in February to transform IT service management for mid-market and enterprise companies. The collaboration enhances service delivery and customer experience by leveraging Unisys’ expertise in IT solutions alongside Freshworks’ suite of products.

“Freshworks had another fantastic quarter, outperforming our previously provided financial estimates in Q1 with revenue growing 19% year-over-year to $196.3 million, operating cash flow margin of 30% and adjusted free cash flow margin of 28%,” said Dennis Woodside, chief executive officer and president of Freshworks, in the company’s earnings release. “We continue to outperform because businesses are choosing Freshworks for our uncomplicated customer and employee service solutions.”

Looking ahead, for its fiscal second quarter, Freshworks expects adjusted earnings per share of 10 cents to 12 cents on revenue of $197.3 million to $200.3 million. For the full year, the company expects 56 cents to 58 cents per share on revenue of $815.3 million to $824.3 million.

Both the second-quarter and full-year outlooks were ahead of the $191.9 million and $813.3 million expected by analysts, helping drive up Freshworks’ share price in after-hours trading.

Photo: Freshworks