Freshworks crosses $1 billion ARR milestone, reports Q3 net profit of $18 million

Software-as-a-Service firm Freshworks announced on Tuesday that it has reached $1 billion in annual recurring revenue (ARR) as of October, achieving the milestone ahead of its initial year-end 2026 target. The Nasdaq-listed company follows a calendar year accounting system.

For the third quarter ended September 2026, Freshworks reported a GAAP net profit of $18 million, recovering from a net loss of $4.6 million during the same period in the previous year. Revenue for the quarter stood at $245 million, compared to $215 million previously, marking a constant currency growth of 14 per cent which aligned with the company's estimates.

During an investor call following the financial results, CEO Dennis Woodside and CFO & COO Tyler Sloat outlined the performance of the company's primary business verticals. The Employee Experience (EX) vertical emerged as the primary growth engine, seeing a 22 per cent constant currency growth in ARR to reach $588 million. Meanwhile, Customer Experience (CX) ARR stood at $404 million, representing a 4 per cent increase on a constant currency basis. Leadership noted expectations for EX ARR to exceed $625 million by the end of 2026.

Freshworks maintained its full-year 2026 guidance, projecting 14 to 15 per cent constant currency growth, and anticipates the same growth rate for the fourth quarter ending December 2026.

The company also detailed recent M&A activity, having acquired Torii and Robusta during the quarter to integrate into its EX offerings. Management stated they expect to generate between $8 million and $10 million in ARR from these two acquisitions by the end of the December quarter.

In terms of operational efficiency, Freshworks reported a GAAP operating margin of 11.5 per cent, improving from -3.5 per cent in the third quarter of 2025. Leadership attributed this margin improvement partly to go-to-market restructuring earlier in the year, particularly within the CX vertical.

The company's customer metrics showed growth across higher-value tiers. Freshworks recorded 1,821 customers contributing over $100,000 in ARR, marking a 25 per cent year-on-year increase. Customers contributing more than $50,000 in ARR reached 4,257, up 18 per cent year-on-year, while those contributing over $5,000 stood at 25,498, a 6 per cent increase. The net dollar retention rate was reported at 104 per cent, compared to 105 per cent in the third quarter of 2025.

Following the earnings announcement, Freshworks shares closed marginally lower at $14.15 on Nasdaq.

"Reaching a $1 billion ARR milestone ahead of schedule while transitioning to profitability demonstrates strong operational discipline and effective product diversification. Freshworks' focus on scaling its Employee Experience vertical, alongside targeted acquisitions, highlights how enterprise SaaS firms can optimize go-to-market strategies to improve margins and sustain growth in a competitive global market." — Dr. Shishir Gupta, Founder & CEO, StartupLanes