Freshworks Q1 revenue up19%; net loss narrows sharply

Nasdaq-listed software-as-a-service (SaaS) company Freshworks on Tuesday reported a 19% year-on-year increase in revenue to $196.3 million for the quarter ended March 31, 2025, up from $165.1 million a year earlier.

The San Mateo (California), and Chennai-headquartered company significantly narrowed its net loss to $1.3 million from $23.3 million in the same period last year, buoyed by higher operating efficiency and increased customer adoption.

“Freshworks had another fantastic quarter. We outperformed all our financial metrics for growth and profitability in Q1. We continue to see that our uncomplicated customer and employee service solutions are winning against outdated legacy software vendors," Dennis Woodside, the company's CEO and president, said during the earnings call. "Companies are choosing our AI-powered solutions to remove complexity, improve efficiency and unlock growth.”

The company posted a non-GAAP income from operations of $46.4 million, more than double the $21.8 million reported in Q1 2024. Net cash provided by operating activities also rose to $58 million, from $40.6 million a year ago.

Freshworks said the number of customers contributing more than $5,000 in annual recurring revenue (ARR) rose 13% year-on-year to 23,275 during the quarter, while its net dollar retention rate, a key metric that measures revenue retention from existing customers, improved to 105%, from 103% in Q4 2024, though slightly down from 106% in Q1 last year.

Also, total operating expenses for the quarter rose 3% to $176.8 million, from $171.4 million last year, though it managed to reduce its sales and marketing expenses by around 6% during the period.

Freshworks currently works with more than 73,000 customers in over 120 countries across multiple verticals, including ecommerce, logistics, financial services, auto and manufacturing.

During the quarter, the company onboarded over 1,000 net customers, including All3Media, Broad River Retail, Freudenberg Group, The Christie NHS Foundation Trust, and Veracode. It also launched a new global partner programme aimed at expanding its reseller offerings and service delivery network.

Founded in Chennai in 2010, Freshworks initially targeted small and medium businesses (SMBs). However, in recent quarters, the company has increasingly focused on mid-market and enterprise customers to offset macroeconomic softness in its traditional SMB base. According to the company, more than 60% of its total annual recurring revenue (ARR) now comes from these segments.

Woodside outlined three strategic imperatives for Freshworks: investing in its employee experience (EX) business; delivering AI capabilities across its products and platforms to drive productivity gains for customers; and accelerating growth in its customer experience solutions.

For the second quarter of 2025, Freshworks expects revenue to be in the range of $197.3 million to $200.3 million, representing 13% to 15% year-on-year growth. For the full year, it projects revenue to range between $815.3 million and $824.3 million.

Freshworks’ AI capabilities, including the Freddy Copilot assistant, are also expected to continue driving adoption and monetisation across its customer and employee experience products.