Freshworks (NASDAQ:FRSH) CFO Tyler Sloat said the company is positioning its employee experience, or EX, portfolio around enterprise-grade technology designed to avoid the complexity typically associated with larger software platforms.
Speaking during a company webinar, Sloat said Freshworks faces competition in virtually every deal and that its primary differentiator is delivering products that are easy to use, deploy and manage while still providing enterprise capabilities. He said the company’s roots serving small and midsize businesses helped establish that emphasis on usability.
EX portfolio expands beyond IT ticketing
Sloat said Freshworks has broadened its EX offering from core IT service management, or ITSM, ticketing into several adjacent product areas. Those include enterprise service management, or ESM, IT asset management, or ITAM, and IT operations management, or ITOM.
The company’s ESM capabilities are intended to support business functions outside IT, with human resources representing the largest current use case, according to Sloat. He said Freshworks rearchitected its database layer to create separate workspaces with security and compliance controls, allowing functions such as HR to operate separately from IT teams.
Freshworks also expanded its ITAM capabilities through its acquisition of Device42. Sloat said the company initially partnered with and resold Device42’s product before acquiring the business. Freshworks has since rewritten the configuration management database, or CMDB, in its Freshservice product to incorporate Device42 capabilities in a cloud framework.
ITOM is the next major area of focus, Sloat said, following Freshworks’ acquisition of FireHydrant. He described ITOM as a category often used by technology operations teams within product or chief technology officer organizations to respond to incidents. He said FireHydrant was one of Freshworks’ top three deals in the second quarter, involving a large organization that selected FireHydrant without also being a Freshservice customer.
While Freshworks plans to consider additional adjacent markets, Sloat said it intends to prioritize integrating new offerings into a seamless and manageable platform rather than adding disconnected products.
AI viewed as table stakes and internal efficiency driver
Sloat said artificial intelligence capabilities have become essential in competitive software evaluations. He pointed to growing attach rates for Freddy Copilot on “significant” deals, which Freshworks defines as transactions above $30,000.
He said Freshworks sees its system of record and ITIL-compliant workflows as a durable competitive advantage, even as AI may make competing products easier to configure or administer. The company is building AI features including AI Agent Studio for EX, Copilot capabilities and AI Insights on top of those workflows.
Internally, Sloat said the engineering organization has been among the largest users of AI tools, using them to improve coding speed and accuracy. He said Freshworks’ headcount is down more than 20% from its peak a couple of years ago, while annual recurring revenue has increased by roughly 30%.
The company has also adopted AI-enabled software it already licenses, selected AI-first vendors for certain new tools, and made tools including Gemini, Claude and OpenAI available to employees, according to Sloat. He said Freshworks is requiring teams to demonstrate returns from those investments rather than treating AI tools as experimental products.
AI pricing and revenue recognition
Sloat said Freshworks is monitoring AI-related token costs internally and has teams dedicated to managing usage and evaluating returns. For customers, the company offers Freddy Copilot as an add-on and sells AI Agent Studio through session packs priced at $0.49 per resolution.
He said customer AI use has increased significantly this year and that the company’s pricing structure is intended to support both customer value and Freshworks’ margins. Sloat said Freshworks continues to report gross margins in the mid-80% range.
The CFO said session-pack revenue is recognized ratably rather than immediately upon consumption. For example, if a customer purchases an annual session pack, revenue is recognized over the applicable subscription period, he said.
Sloat also said AI-related revenue assumptions are included in Freshworks’ previously disclosed long-term targets of $1.4 billion in annual recurring revenue and $1.3 billion in revenue. However, he said the company does not plan to provide a separate AI revenue figure every quarter as AI features become embedded across its products.
Capital allocation and October event
Freshworks had $664 million in net cash and effectively no debt, according to Sloat. He said the company does not view itself as overcapitalized and expects to continue deploying capital through stock repurchases, net settlement of restricted stock units and selective acquisitions.
Sloat said Freshworks expects to generate $265 million of free cash flow this year and has discussed potentially committing a portion of annual free cash flow to buybacks in the future. He said the company aims to grow free cash flow per share by 20% annually through a combination of revenue growth, profitability and share-count reduction.
The company’s next virtual Refresh event is scheduled for October and will highlight new product features, with a substantial focus on AI capabilities, Sloat said.
About Freshworks (NASDAQ:FRSH)
Freshworks, Inc is a global provider of cloud-based customer engagement software designed to help businesses streamline customer support, sales, marketing, and IT service operations. The company’s integrated suite of solutions enables organizations of all sizes to deliver seamless experiences across multiple channels, including email, chat, phone, and social media. Freshworks’ platform is built on modern, user-friendly interfaces and offers native automation, AI-powered insights, and analytics to improve efficiency and customer satisfaction.
The company’s flagship product, Freshdesk, serves as a helpdesk solution for customer support teams, while Freshservice addresses IT service management needs.
-logo-1200x675.jpg){kind=logo}
