Freshworks Passes $1B in ARR as Revenue Rises 14% and Margin Hits 29.8%, but Q4 Profit Guide Dips
Net dollar retention held at 104% and free cash flow rose 29% to $73.9M, but the fourth-quarter profit and EPS guides sit below the third quarter.
Freshworks (FRSH) reported third-quarter 2026 revenue of $245.4 million, up 14% from a year earlier, and non-GAAP earnings of $0.22 per share, up from $0.16. The software company said it passed $1 billion in annual recurring revenue after the quarter closed. It guided fourth-quarter non-GAAP operating income to $68.0 million to $70.0 million, below the $73.2 million it earned in the third quarter. Shares were down about 10.6% in after-hours trading.
Third-quarter results
| Metric | Q3 2026 | Q3 2025 | Change |
|---|---|---|---|
| Revenue | $245.4M | $215.1M | +14% |
| Non-GAAP income from operations | $73.2M (29.8% margin) | 21.0% margin | +8.8 pts |
| Non-GAAP diluted EPS | $0.22 | $0.16 | +$0.06 |
| GAAP net income | $18.3M ($0.07 per share) | n/a | n/a |
| Adjusted free cash flow | $73.9M (30.1% margin) | 26.6% margin | +29% |
| Net dollar retention | 104% | 105% | -1 pt |
Customers above $100,000 in ARR rose 25% to 1,821, customers above $50,000 rose 18% to 4,257, and customers above $5,000 rose 5% to 25,498. The company held $697.3 million of cash, equivalents and marketable securities. Chief Executive Dennis Woodside said the upmarket strategy delivered another strong quarter.
Outlook
| Item | Q4 2026 | Full-year 2026 |
|---|---|---|
| Revenue | $253.5M to $254.5M (about 14%) | $965.0M to $966.0M (about 15%) |
| Non-GAAP income from operations | $68.0M to $70.0M | $238.0M to $240.0M |
| Non-GAAP EPS | About $0.21 | About $0.71 |
By our calculation, the $69 million midpoint for fourth-quarter operating income is about 5.7% below Q3's $73.2 million, even as the $254 million revenue midpoint is about 3.5% above Q3's revenue.
Buybacks
Freshworks repurchased $27.2 million of stock in the third quarter and $234.6 million in the first nine months of 2026. It was added to the S&P SmallCap 600 and reported its ninth consecutive quarter above the Rule of 40.
What to watch
- Conference call. Why fourth-quarter operating income is guided below the third quarter, and the pace of reinvestment.
- Retention. Whether net dollar retention, at 104%, moves back up.
- Smaller customers. Growth of 5% in customers above $5,000 trails the upmarket cohorts.
- Related coverage. See our reports on Upwork, Procore and Palantir.
Sources: Freshworks' announcement of its November 3 results and its third-quarter 2026 results release. The after-hours move comes from market data and may differ by source. Items labeled by our calculation are our own arithmetic. This article is informational only and is not investment advice.
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