Freshworks at Public Technology Conference: AI and Growth Strategy

On Wednesday, 28 May 2025, Freshworks Inc (NASDAQ:FRSH) took center stage at the Public Technology Conference. The company outlined its strategic focus on expanding AI capabilities and strengthening its Employee Experience (EX) products. While Freshworks reported solid growth, challenges remain in revitalizing its Customer Experience (CX) segment.

Key Takeaways

• Freshworks is prioritizing AI-powered solutions and EX products, with Freshservice now accounting for over 50% of its Annual Recurring Revenue (ARR).
• The company is focusing on revitalizing growth in its Freshdesk (CX) segment, particularly targeting small to mid-sized businesses.
• Freshworks acquired Device42 to bolster its EX offerings and enhance competitiveness against ServiceNow.
• The company aims for a 20% growth rate, with plans to provide more AI revenue insights at its Investor Day in September.
• Freshworks maintains a strong balance sheet with a billion dollars in cash and has announced a $400 million share buyback.

Financial Results

• ARR: Freshservice ARR exceeds 50% of the total, with Freshdesk ARR at $370 million and Freshservice at $420 million.
• Growth: Overall ARR growth is around 19%, influenced by the Device42 acquisition, with guidance for 13% to 15% growth by year-end.
• Free Cash Flow: Improved significantly, moving from a $17 million burn to generating over $200 million.
• Capital Allocation: Announced a $400 million buyback and plans for net settlements on RSUs between $60 million and $120 million annually.

Operational Updates

• Leadership: Dennis Woodside was appointed CEO in May, bringing a focus on operational rigor.
• Acquisition: Acquired Device42 to enhance EX offerings.
• Product Focus: Emphasis on EX products, AI integration across all products, and revitalizing CX growth.
• AI Products: Introduced Freddie CoPilot, Freddie AI Agent, and Freddie Insights.
• Workforce: Reduced headcount by 13% to improve efficiency, focusing on automation and scaling systems.

Future Outlook

• Growth Targets: Aiming for a 20% growth rate; plans to boost CX business to double-digit growth.
• AI Materiality: More details on AI’s revenue contribution to be shared at the September Investor Day.
• Revenue Models: Exploring consumption-based and resolution-based pricing for AI solutions.
• Longer-Term Vision: Plans to update the three-year model at the Investor Day in September.

Q&A Highlights

• Competitive Advantage: Freshworks differentiates itself with ease of use and quick time to value.
• AI Adoption: Customers appreciate AI products but still prioritize core functionality.
• Market Growth: The company sees potential for high teens to low 20s growth.
• India: Over 80% of Freshworks employees are based in India.

Readers are encouraged to refer to the full transcript for a detailed understanding of Freshworks’ strategic insights.

Full transcript - Public Technology Conference:

Unidentified speaker, Interviewer: Great. Welcome back. We have Tyler, from Freshworks.

He, has been at the company now since 02/2020?

Tyler, Executive, Freshworks: I think so. Yes. It’s been a couple of years. Great conference.

Unidentified speaker, Interviewer: Tyler and I have known each other for a while. He’s been a fixture in the software industry and tech industry for quite a while. So it’s great to have you back, and thanks for supporting the conference. I think a lot of people know the Freshworks story, but maybe in your abbreviated 40,000 foot view, bringing everyone up to speed, kind of where you’re at today versus maybe a few years ago, the strategy shifted a little bit. Your teams come in, growth rate’s been really good.

Just bring us up to speed on where you’re at now.

Tyler, Executive, Freshworks: Yeah, so let me start. Just Freshworks, I think most people know who we are, but I still every once in while get, are you the food delivery business? We are not. Enterprise software company really founded fifteen years ago as FreshDesk for customer support software. And then a few years after that, realized a lot of our customers were using our desk product internally for IT.

We said you actually need a purpose built solution for that. We built Freshservice and changed them to Freshworks. And that’s who we are today. Really focusing on two main categories, CX products and EX products, so products focused on the customer and products focused on the employee. And now very, very much focused on human enabled AI products that we think we’ve had AI for years and years, but now everything is kind of changing and we feel that we’re at the forefront of it.

Brent just mentioned things shifted a little bit. So I joined the company five and a half years ago. We went public four years ago And really went public on Freshdesk. And it was a very rapidly growing product and doing very well, competing against Zendesk, Salesforce and others. And Freshservice was a little bit of the side story as we also have this other product.

Things have shifted today where fresh service is now greater than 50% of our ARR, growing faster and doing really, really well, and really just kind of starting to own that mid market low enterprise space as the number one alternative underneath service now. And we’re completely leaning into that. Freshdesk is still there. It’s a $370,000,000 ARR product, kind of growing at high single digits. And really, our focus right there is, Okay, how can we get this thing back to double digit growth?

We think the market is growing around low to mid teens. We need to get that back to that range. And we’re refocusing on the SMB low mid market for that space, but very much focused on the AI products that we’re bringing forth as well.

Unidentified speaker, Interviewer: That’s great. With your new leader, feels like the pace has picked up. Maybe share kind of, since Dennis has been on board, what’s happened, that transformation, and what you’re seeing. Both at the top and bottom line have been you’re moving at a faster cadence.

Tyler, Executive, Freshworks: Yeah. I would say that, so we appointed Dennis Woodside the board appointed Dennis Woodside, our CEO, last May, so essentially a year ago. He had joined as our president about a year and a half before that, and so it was kind of a natural known transition from Girish, was our co founder CEO, who hired me five and a half years ago. Dennis really came in. He’s got great operational chops.

He had actually been on the board of ServiceNow for, I think, four years. He had been the CEO of Dropbox. He had been the CEO of Motorola division of Google. Ran a lot of sales for Google for years before that. And so really comes in with a lot of operational rigor.

And I think that is one of the biggest changes, where it’s really truly about focus and how do we actually take Freshworks with incredible products and our legacy now nearing a billion dollars to truly focus on that multi billion dollar company. And what is the management team we need, what is the leadership we need, and what is the strategy we need. So the board appointed him CEO and they said, hey, you have ninety days to come back with the strategy. We did. We’re very open about it with the market, and that strategy that we kind of talked about after our Q2 call was really going to be EX first, and we’re going to lean into this and really focus our field motion, which is our outbound NGO sales motion, on really trying to capture as much of that market as possible because we do think we have an opportunity set there.

Next is AI across all products, and we have three AI products. We have a Freddie Co Pilot product, we have a Freddie AI agent product, and we have a Freddie insights product, and I can talk about those in a minute. So it’s really AI across all products. And then CX, really making sure that we are focused on the ICP and making sure that we can bring that whole product group back to growth. And that’s what we’ve been executing against since.

Coming out of the year, refocused a lot of the teams, and you’re starting to see some of the traction already start to take hold on some of those things. At the same time, we also did our first acquisition. So we kind of closed it very shortly after we named Dennis as CEO, and that was Device 42, which is an ITAM solution really which is part of our EX offerings, making us more competitive in that enterprise space so that we can confidently go in and compete against ServiceNow for that low enterprise.

Unidentified speaker, Interviewer: That was comprehensive. Thank you. Maybe if we go into the EX segment, you mentioned over 50% of your ARR still growing at this really, really strong rate. Everyone asks, like, how much is left there? Like, What are you seeing?

What are the drivers? Maybe help us better understand the next leg of this move.

Tyler, Executive, Freshworks: Yeah, I think you’re right. EX has been doing great. And a lot of it is because it’s just positioned very well competitively. But a lot of it is because we’ve been innovating on this product for years now, really listening to customers and just focused on staying true to our roots, which is building for ease of use, building for the end user, but at the same time adding feature functionality that makes us relevant to that low enterprise, mid market customer. In that space, you have some legacy providers in the BMC, Helix, Remedy stuff and the Avanti Sharewell, which are going through their own issues in terms of on premise solutions moving to cloud, which has been a great tailwind for us as that cloud migrations happen, customers naturally will look at alternatives.

You’ve got players that are more at the SMB to low mid market space, which is really JSM from Atlassian and Managed Engine. And you have some point kind of competitors, and you have ServiceNow. And there’s just this big void of providing really easy to deploy, really easy to use enterprise grade software at a great value. And we are filling that void. And now as we’ve continued to innovate, we’re actually starting to just get pulled into larger and larger deals at that low enterprise.

So in terms of capability for growth, we absolutely feel we have a long ways to go there. And I think the thing is we’re not big yet. It’s a $420,000,000 ARR product at a great growth rate. And our capability to move the needle on that, we don’t have to do anything exceptional. We did have to fill out some gaps.

One of those gaps was in ITAM to get to enterprise grade ITAM, and that was a true builder buy situation. There wasn’t that many independent players out there, and Device forty two was by far the best. And that acquisition has done really well in terms of what the thesis was. There are adjacencies that we’ve been talking about going into, is really ITOM, deeper into ITOM and security operations. But those will come and we don’t have to have those to grow.

The other thing that’s doing really well is fresh service for business teams, which is this ESM application. So enterprise service management, which is selling kind of workflow and ticketing into other functions outside of IT. So it starts usually with HR, but it’s also procurement, facilities, and finance. Right now, we don’t land with ESM. It’s actually truly just an upsell product on fresh service.

That will become a true land product, and that, I think, will be one of our big Trojan horse products, where we can go in to visions of ServiceNow companies and go sell to their HR, get them up and running really, really fast, provide them a solution that truly works, and then be able to proliferate out from there. And so we’re pretty excited about what the opportunity is for our EX products.

Unidentified speaker, Interviewer: One of the questions I get is the categories you’re in have been around for a long time. They’re not new. And so I want to ask, is there a killer app, or is there something new you’re developing that can take these markets that have been around and re energize them? And maybe Freddie. I don’t if you named me that for Freddie Freeman, We did it.

Okay.

Tyler, Executive, Freshworks: But

Unidentified speaker, Interviewer: what’s the secret exciting sauce that gets these established markets that have been around forever to kind of

Tyler, Executive, Freshworks: Yep. So I quitted everything goes through evolution. The reason that Freshworks even exists was because of Freshdesk. And it was an experience that G had in a personal support experience that he had that was just really horrible. And then he looked at the solutions that are out there and he’s like, there can be something better.

And that really led to a conversational first support. Truly omnichannel where the whole world is changing, it’s gonna come from Twitter and everything that’s being put out there in social is going to have an influence on companies, you’ll be able to reach your consumer where they are, as opposed to forcing them into an email channel or something like that. That was desk’s opportunity, and it continues to be Desk’s opportunity. The world is clearly going to AgenTik, and we are big proponents of that. And we think that that is going to be it’s not going be a killer app, but it is going to change the way software is delivered and how end users use.

And we’ve had so you said Freddie. We’ve actually had Freddie for years. And it was all NLP models that we had built. And yes, the game is different now because you have to build off of LLMs and they’re much more powerful and they’re truly conversational. And they actually are truly agentic, meaning that the software can now go take actions on behalf of what an agent usually had to do.

And that is going to be the big difference that’s going to happen. And we are building all that and we feel that we’re the forefront and we’re delivering that to our customers today. What is next after that? I’m not sure. But I think that this is actually a big progression that’s going to be with us.

And then the things that are going to change are things around pricing and packaging, and then really the stacks of software that you have. You will still need the software at its core that is going to be the system of record, and that has to have things like audibility and things like that. But the solutions that are within that software, I think, are going to change.

Unidentified speaker, Interviewer: And if you had a killer app inside the family of your solutions, what would that be? What would it be?

Tyler, Executive, Freshworks: Freshservice at its core is doing incredibly well. And killer app for us historically has been a software very focused on the end user and time to value. Meaning like, the holy grail of software in my mind is building for an SMB, which means that there’s no implementation, it’s so you can just turn it on and it just works and it’s seamless. And that’s what we we started with. We service the SMB to start and that’s what you have to build.

And then if you add feature functionality as you go, but you stay true to that core, then you’re you’re you’re gonna have a killer app. We give an example of a fifteen year ServiceNow customer that is a big hardware name that everybody would know, that we just took out and we’re able to get them live within six months on Freshservice. That is a herculean feat when you think about a company like that, a multi multi billion dollar company, and to be able to rip out a legacy software to be able to go do that. Now, when you combine that with AgenTic AI, and you keep true to the capabilities that we can now turn on AI for companies overnight and be able to tie into their back end systems and just make it work, that’s going to be the killer app.

Unidentified speaker, Interviewer: SPEAKER That’s great. And then you mentioned you’re not giving up on FreshTax or the CX side. But what’s happening there? What needs to happen to get that back to double digit growth?

Tyler, Executive, Freshworks: Yeah, I think it’s twofold. So I don’t actually think it’s super complicated. I think the first thing is just pure execution, which we’re already working on. CX for us, even though our largest customers tend to be CX customers, they tend to be companies that we closed at a very small amount, let’s call it 5,100 ks, and they’re now million dollar customers just because they’ve grown with us over time. Or they proliferate to other divisions and things like that.

But at the core, our new business is still going to be focused on that SMB, low mid market space. In order to do that, we have to make sure that PLG Motion is truly working. That’s one area I think we probably ignored if you look back over the last five years. We did not really change the trial journey, we didn’t really focus on that, yet our customers have changed. And so we are now very focused on doing that.

So when I say execution, it’s execution on the sales motion and the rigor of that sales assist for PLG, which we hired Mika and she’s had a year now and she’s actually been making huge strides on that. It’s execution on focusing on what is that 80 or 90% of issues that a lot of your little customers might have had, which are bugs and things like that. We’ve cleaned out the majority of that over the last six months. And then it’s gonna be execution on conversion rates on that top of funnel. And so just doing those three things, which is not like new feature functionality necessarily, that’s just kind of like blocking and tackling.

Very focused on that. When you overlay all the agentic capabilities on top of that and make sure we’re staying true to the DNA that I described, then that is just going to have growth. As you do that, that whole world is changing. One of the biggest questions we have is like, oh, are you seeing disruption in your agent counts because of your AI capabilities? And we are saying, no, we’re not right now, meaning we can’t point to a customer that is downsold because they become so much more efficient with all the Copilot capabilities.

That being said, Copilot actually has great adoption rates and it’s continuing to get better, as well as AI agent. And maybe those customers would have grown more without it, but we are supplementing it with the actual ASPs we’re getting on the copilot stuff. And so we’re going to do all of that execution blocking and tackling while continuing to innovate specifically on AI. That’s what’s going to get us to double digits growth.

Unidentified speaker, Interviewer: If you think about AI this year, can you break it out and say it’s going to be x, y, z percent of the growth or x, y, z millions of dollars of revenue? Or are we still ’26, ’20 ’7, until we’re going to get to a point where it’s really material?

Tyler, Executive, Freshworks: What we’ve been breaking out every single quarter in terms of the traction on our AI products is really more the utility and the amount of customers who are using it. We’ve also said we’ve been holding to ASPs and been getting pretty good traction on the prices that we’ve been charging. In terms of materiality of revenue, it’s not quite there yet, but we have our Investor Day on September 11. We said, okay, that’s the time we’ll probably be breaking out some stuff and giving some visions for what AI is going to mean from a materiality perspective. I do think it’s going to be interesting when you look at AI as a revenue stream, because over time, my expectation is more personal opinion than anything else, is that it’s going to become commoditized.

Like, if you do not have these capabilities in your products, you will not compete. And when that happens, it’s like, can you actually end up charging extra for these things, or are they going to be included as part of what you’re buying? And then when they’re included, if they are truly efficient, then the pricing and packaging will eventually change, probably moving away from agent based models to some type of consumption based models, some type of resolution based models. But the reality is the AI products probably aren’t quite there yet to purely move to those. So we have half consumption, half add on at this point.

And we are going to continue to move towards that. The AI agent is pure consumption because there’s no human there. The whole point of the AI agent is for it to go solve its own problems. And so we sell session packs, and those are doing great. So we’ll give an update in September on it.

Unidentified speaker, Interviewer: Has it been slower or faster than you thought?

Tyler, Executive, Freshworks: I think it’s as expected. As expected. Yeah, as expected. But it’s

Unidentified speaker, Interviewer: There was a lot of hype a year ago, and everyone was like, we have massive AI digestion. And in the last three months, no one’s asked me an AI question. So it seems like we went through this enlightened phase and too much excitement, and now it’s like everyone

Tyler, Executive, Freshworks: We’ve always had that expectation. I mean, again, we’ve had AI products for years. They’re completely different AI products now and much more valuable for the end user. Yet, it’s interesting, we go talk to our customers and they say, hey, we love these products and they’re really helping us. But do not forget about traditional core functionality.

We still need all of your basic ticketing and stuff like that. We had a customer of ours that everybody knew was a big customer and they came out and said they were going to move everything to their own AI. And our stock actually dropped by 5%, ten % that day just based on that thing as tangential what the impact to us is. That customer is still a customer and they actually renewed and upgraded. And so it’s not going to happen overnight, as everybody expected, but it absolutely is happening.

So you just have to be part of the journey. Overall,

Unidentified speaker, Interviewer: AR growth around 19%, but you guided to 13% to 15%.

Tyler, Executive, Freshworks: So you’re asking, what’s the difference?

Unidentified speaker, Interviewer: Yeah, like, yeah.

Tyler, Executive, Freshworks: So just as a reminder, we did buy this company Device42. Device42 is a term licensed product. We have a journey we’ve been pretty explicit about how we’re going to move that to the cloud, but as that’s a term licensed product, it does provide a little bit of lumpiness in terms of the revenue recognition that we take a little bit upfront. We’re also going to anniversary that acquisition, so growth rates, which we’ve been very, very open about, will change at the end of Q2 because that acquisition gets anniversaried and you start to take in that growth rate. But a lot of the difference is because of that lumpiness.

Unidentified speaker, Interviewer: And what do you think the overall, in a stable environment, your end market grows at?

Tyler, Executive, Freshworks: Well, we’re not super excited right now about talking about thirteenfourteen percent growth for end of year. It does indicate a slight acceleration as we go through the back half of the year. And we’re confident about that. We had a really good Q1, we beat our numbers in Q1, we took that all the way through for the year, so we did a raise for the year. Raise by more than the beat because we think prudence is a good thing right now, but we’re very confident in how we’re doing and we feel like the business is going really, really well.

Our markets are growing faster than we are, and so we feel there’s no reason we shouldn’t be back to a 20% grower. But we actually have to go through the journey to get there, and we’re not there right now. And so we haven’t given an update on more like a three year model, which we did two years ago at our Investor Day in September, we will be giving an update on what does the longer term vision look for us.

Unidentified speaker, Interviewer: But you think high teens, low 20s is not

Tyler, Executive, Freshworks: We have to take it in piece parts. Our CX business right now is high single digits. And I said, Okay, what do we have to do to get it to double digits? And then what do we have to get it back to market, which is like mid teens for CX, I think. On the EX business, yes, that has a capability to continue to grow at a fast pace, and now it’s a larger product, so on a weighted average basis it’s going to provide a little bit more.

Longer term, like we haven’t updated any of those growth rates, but the markets are there, we just need to go execute. And we’re not that big, we don’t have to go close $2,030,000,000 dollar deals to grow right now. So again, we’ll update in September, but our very much focus is, Okay, let’s just take it step by step, as opposed to try to get to an end goal today. Let’s just take incremental steps.

Unidentified speaker, Interviewer: Billion dollars on the balance sheet, it’s

Tyler, Executive, Freshworks: healthy. 20% of your market cap, everyone’s like, why let it sit there? Well, we’re not. So we are doing a buyback. We’re actively doing one right now.

And we announced it at the end of Q3. And then we’ve been talking about how much we’ve been executing against it. You’re right. We went from two and a half years ago to burning 17,000,000 that year in free cash flow, and we said this year we’re going produce over 200,000,000 in free cash flow. We pride ourselves on being efficient and operating efficiently.

We want to do both. We want to grow at the top line, but we’ll continue to be efficient. And we’re not a bank. So we know that we have a billion in the bank, we’re producing a lot of cash, we’ve to do something with it. We’ve been doing net settles on RSUs since we went public, and that’s been between $60 to, let’s call it, dollars 120,000,000 a year that we’ve been using off our balance sheet.

Now we’re actually adding to that with the $400,000,000 buyback that we had announced. We’re going to continue to have a capital allocation strategy that makes sense for us and makes sense for our shareholders. We’ve also said we’d be very open to acquiring companies, if it makes sense. And so when we look at that, it’s like, okay, we want to be able to have the capacity to do that for deals that make Device 42 is a great example of that. And so everything’s out there, but I think we’re doing the right things right now.

Unidentified speaker, Interviewer: Any questions from the audience? Last couple minutes here.

Tyler, Executive, Freshworks: I try to be very comprehensive in my answers.

Unidentified speaker, Interviewer: You are very comprehensive. You’re very clear. Thank you for being clear. I guess your heritage and the advantage of India, it still over 80% in India?

Tyler, Executive, Freshworks: In terms of total employee base, yes. So the company would always been a US company, but founded out of India. And unlike other companies who might offshore things to India, I kind of equate it that our first offshore employee was in The US, which means every single function was built ground up in India. Now, that has changed over time where we have this inbound motion that is completely run out of India, handles the SMB commercial segment of our business. And we have an outbound field motion, which is really synonymous with EX for new business, and that is NGO sales.

So when you build that out, you have presence all over now. And then as you build out presence, you have to have support on different functions. So we have our headquarters are in San Mateo, California. A lot of our leadership is here, but every single function is represented in India. That provides us a great cost advantage.

It also provides us a capability from a go to market perspective to attack that long tail of SMB, which is very difficult to do efficiently. All of R and D is in India. Sales, part of it’s in India for the inbound. But as we grow, we are very focused on making sure we have the right people in the right places. Fundamentally, the end of last year, we just had too many people.

We had solved problems by throwing bodies at it, as opposed to thinking about automation and really building systems for scale. And so we did a reduction, and it had nothing to do with cost optimization, had everything to do with us being much more focused and efficient in the way we operate as a business. It was 13% of head count, and we didn’t even miss a beat. And I think we’re trying to be right now very prudent about how we hire. We have less head count than we did last year.

We have a lot of open head count we’re trying to hire, but again, it’s about focusing on hiring the right people in the right roles.

Unidentified speaker, Interviewer: Thank you, Tyler. Appreciate you

Tyler, Executive, Freshworks: sharing

Unidentified speaker, Interviewer: Good to see you.

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