the company announced it was axing 11% of its global workforce,<\/a> a move expected to result in a one-time charge of up to $9 million.<\/p>\nThe long-awaited move into profitability is not a one-off and is sustainable, insists Woodside:<\/p>\n
The market opportunity in EX is significant. The total addressable market we are pursuing spans ITSM (IT Service Management), ITAM (IT Asset Management), ITOM (IT Operations Management), and ESM (Enterprise Service Management) and is roughly $45 billion, growing 13% a year. We are focused on businesses with up to 20,000 employees, which represent about 60% of that overall total addressable market. It’s large, fragmented and no single player in this segment holds more than a 20% share. That leaves plenty of room for Freshworks to win.<\/p>\n
Other stats of note from the Q2 earnings data:<\/p>\n
Annual Recurring Revenue (ARR) grew 24% year-on-year, with EX accounting for 60%.<\/p>\n
The firm expects to report $600 million in ARR from Freshservice this year, rising to $1 billion in 2028.<\/p>\n
Freshservice has over 20,000 customers globally.<\/p>\n
Customers contributing more than $100,000 in ARR rose 25% year-on-year to 1,746, 40% of total ARR, while those contributing over $50,000 in ARR increased 18% to 4,091.<\/p>\n
Freddy AI Copilot was attached to more than 71% of new enterprise deals during Q2.<\/p>\n
Over 7,000 customers are paying for an AI SKU.<\/p>\n
One-third of large new deals include advanced ITAM (IT Asset Management).<\/p>\n
EX all the way\u00a0<\/p>\n
On the EX-first label, Woodside argues that the EX business is in \u201cthe strongest position in the company\u2019s history\u201d, and cited some end user exemplars to back up his comments about the firm, beginning with peripherals giant Seagate:<\/p>\n
After 14 years with a legacy provider, they struggled to extract value from AI, were unable to adapt workflows as the business evolves, and were paying for dedicated specialists just to manage the complex system. They evaluated the market, they chose Freshservice and were live in three months, that speed to value is what Freshworks delivers.<\/p>\n
Another example is American Oncology Network, a nationwide cancer care network supporting over 140 clinic locations. They implemented Freshservice for IT, Freshservice for business teams and Freddy AI Copilot in under 30 days. Today, their EX platform has expanded to seven business departments beyond IT, and it takes just 1 administrator less than two hours per week to manage the entire environment.\u00a0<\/p>\n
On the subject of AI and given the current debate\/outcry around value and ROI, Woodside is, inevitably, confident that his customers are seeing genuine benefits from their spend:<\/p>\n
The productivity gains our customers are experiencing with AI are substantial and real. Agents using Freddy AI Copilot handle 50% more tickets. That means they are 50% more productive. That’s huge for customers. Freddy AI Agent deflection rates averaged 50% and reach as high as 80% for mature deployments. With Freddy AI, customers are changing the economics of how they run service operations. And we are monetizing AI, Copilot attach rate for new deals above $30,000 exceeded 70%.<\/p>\n
He points to the example of iQor, a global BPO (Business Process Outsourcing) provider, as a use case:<\/p>\n
With more than 40,000 employees, iQor had a mandate to modernize and automate. They replaced a legacy on-premise system with Freshservice and Freddy AI, now they have an agentic AI solution that is fully automated 35% of their IT service delivery and cut monthly ticket volume by 39%.<\/p>\n
What about CX?\u00a0<\/p>\n
With the spotlight firmly on EX, CX got less attention on Woodside\u2019s post-earnings call with analysts. In terms of growth outlook, while EX is being talked about in terms of mid-20s percentages, CX is now seen as low to mid-single digit growth, with ARR currently running at four percent.<\/p>\n
But it still turns in $400 million ARR and it hasn\u2019t been forgotten, says Woodside:<\/p>\n
We’ve made a big investment in the CX product in moving to our new Freshdesk Omni. We have multiple products in the past. Now a customer can get onto one product and seamlessly upgrade from an e-mail-based ticketing experience to one involving chat and conversational and voice and one involving AI. That’s important for up-sell and for retention as well.<\/p>\n
My take<\/p>\n
AI monetization is taking shape, and our financial model is delivering solid results.\u00a0<\/p>\n
It\u2019s interesting to note Woodside\u2019s assertion here given the current \u2018tokenomics\u2019 furore going on across industries, and it\u2019s delivered with his customary confidence.\u00a0 That said, in his pitch to analysts, CFO Tyler Sloat characterized AI penetration and monetization as \u201cnascent\u201d.<\/p>\n
Another interesting argument from Woodside, when looked at in the context of a number of recent studies suggesting that AI decisions are being paused by many firms while they look for evidence of value, is that in fact something different is going on from Freshworks\u2019 perspective:<\/p>\n
AI actually is more of a motivator for people to think about their vendor and most of our business is coming from another vendor. It could be a small player, but often it’s a very large player. So they are faced with a decision often as to, \u2018OK, what are we going to do about AI,?\u2019. [If they\u2019re] going to migrate to the incumbent vendors platform, sometimes that requires an upgrade in plan. It certainly requires cost.<\/p>\n
So it often provokes a discussion as to, \u2018Well, maybe we should go to market and see what else is out there\u2019..they’re going out to market, they\u2019re calling Gartner, they’re calling their peers, and they’re hearing about us, and that’s how we’re getting in the mix. I think that that’s driving more of our business than anything else – customers are saying, \u2018We need to do something on AI\u2019, that’s leading to a discussion, \u2018Do we stick with the incumbent?\u2019, and that’s leading to us to get a shot at winning.\u00a0<\/p>\n
The move into the black has been a long, long time coming, so a moment to celebrate is on the cards for Woodside and his team. But in the febrile AI-obsessed markets of today, there’s no time to rest on any laurels. The challenge now is to make sure that the profit is indeed sustainable and not just a one-time thing.\u00a0<\/p>\n
We shall see.\u00a0<\/p>\n
Onwards!\u00a0<\/p>\n","protected":false},"excerpt":{"rendered":"Now firmly identifying as an EX-first (Employee Experience) company, Freshworks has turned in its first profitable quarter, a…\n","protected":false},"author":2,"featured_media":130083,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[6],"tags":[179,7493,521,7073,33467,8169,28515],"class_list":["post-130082","post","type-post","status-publish","format-standard","has-post-thumbnail","category-agentic-ai","tag-agentic-ai","tag-agentic-artificial-intelligence","tag-ai-adoption","tag-audio","tag-crm-and-customer-experience","tag-employee-experience","tag-it-service-management"],"_links":{"self":[{"href":"https:\/\/www.europesays.com\/ai\/wp-json\/wp\/v2\/posts\/130082","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/ai\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/ai\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/ai\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/ai\/wp-json\/wp\/v2\/comments?post=130082"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/ai\/wp-json\/wp\/v2\/posts\/130082\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/ai\/wp-json\/wp\/v2\/media\/130083"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/ai\/wp-json\/wp\/v2\/media?parent=130082"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/ai\/wp-json\/wp\/v2\/categories?post=130082"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/ai\/wp-json\/wp\/v2\/tags?post=130082"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}