Freshworks Turns Profitable in Q2 CY26, Revenue Climbs 16% YoY to $237.4 Million
Nasdaq-listed SaaS firm Freshworks, founded in Chennai and now headquartered in California, has reported a genuinely strong second quarter for CY26, with revenue rising 16% year-on-year to $237.4 million, up from $204.7 million a year earlier, while achieving its first quarterly GAAP profitability of the year.
Here's what makes this milestone significant. The company posted a GAAP net profit of $3.2 million in Q2 CY26, a sharp turnaround from a net loss of $1.7 million in the same quarter last year, and this came sequentially too, swinging from a Q1 CY26 GAAP net loss of $4.8 million. Operating income stood at $6.1 million against an operating loss of $8.7 million a year earlier, while non-GAAP operating income grew to $55.9 million, translating into a healthy 23.6% operating margin, up from 21.9% in the year-ago quarter. Freshworks has now delivered what's called a "Rule of 40" performance, balancing growth and profitability, for eight straight quarters.
The AI story is central to this turnaround. CEO Dennis Woodside said the company's Freddy AI Copilot is now attached to over 71% of new deals, and the Employee Experience segment's annual recurring revenue grew 24% on a constant currency basis to $567 million, now representing 59% of Freshworks' total ARR. The company also grew its base of larger customers, with 1,746 accounts contributing over $100,000 in ARR, up 26% on a constant currency basis, and net dollar retention stood at 104%.
The cost side tells an interesting story too. Sales and marketing costs rose nearly 12% to $106.5 million, and R&D spending increased to $43.8 million, while general and administrative expenses actually declined to $37.9 million from $47 million a year earlier. The company also incurred $7 million in restructuring charges tied to a May 2026 plan, which it says is now substantially complete with no additional material charges expected.
The market clearly liked what it saw. Buoyed by this performance, Freshworks raised its full-year CY26 revenue guidance to a range of $963.5 million to $966.5 million, up from its earlier forecast, while also lifting its non-GAAP operating income guidance to $222-228 million from $207-215 million.
From a Chennai startup to a Nasdaq-listed, AI-powered, and now genuinely profitable enterprise software company, Freshworks' Q2 numbers show discipline finally catching up with growth.
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— Sandeep Raiza