Freshworks Non-GAAP Operating Margin Reaches 29.8%

The Tip Desk · November 10, 2026 · 3 min read

Adjusted free cash flow hit a record $73.9 million as GAAP operating income reached $28.2 million in the third quarter.

Freshworks Inc. (FRSH) reported third-quarter revenue of $245.4 million, up 14% from a year earlier, as year-over-year growth slowed from 16% in the second quarter.

The AI-powered service-operations software company posted GAAP income from operations of $28.2 million, an 11.5% operating margin, compared with a $7.5 million loss and a (3.5)% margin in the third quarter of 2025. Non-GAAP income from operations was $73.2 million, a 29.8% non-GAAP operating margin, versus $45.2 million and a 21.0% margin a year earlier.

GAAP diluted net income was $0.07 a share, versus a $0.02 loss a share a year earlier. Non-GAAP diluted net income was $0.22 a share, versus $0.16 a share a year earlier.

Chief Executive Dennis Woodside said the upmarket strategy delivered another strong quarter, with new multi-product EX deals increasing more than 35% and partners participating in more than half of new business.

GAAP gross margin was 85.3%, versus 84.7% a year earlier; non-GAAP gross margin was 86.6%, versus 86.0%. GAAP sales and marketing expense was $98.5 million, or 40.1% of revenue, versus $101.0 million, or 47.0% of revenue, a year earlier. GAAP general and administrative expense was $38.2 million, or 15.6% of revenue, versus $47.1 million, or 21.9%. GAAP research and development expense was $44.7 million, or 18.2% of revenue, versus $41.5 million, or 19.3%.

Net cash provided by operating activities was $77.7 million, a 31.7% operating cash flow margin, versus $63.5 million and a 29.5% margin a year earlier. Adjusted free cash flow was a record $73.9 million, up 29% year-over-year, with a 30.1% margin versus $57.2 million and a 26.6% margin a year earlier. Cash, cash equivalents, restricted cash and marketable securities were $697.3 million as of September 30, 2026.

Customers contributing more than $100,000 in ARR were 1,821, up 25% year-over-year. Customers contributing more than $50,000 in ARR were 4,257, up 18% year-over-year. Customers contributing more than $5,000 in ARR were 25,498, up 5% year-over-year. Net dollar retention rate was 104%, compared with 104% in the second quarter of 2026 and 105% in the third quarter of 2025; constant-currency net dollar retention was 105%.

Following the close of the third quarter, annual recurring revenue exceeded $1 billion, ahead of the company’s previously-given year-end estimate. The company said it added to the S&P Small Cap 600 Index and was named a Leader in the IDC MarketScape Worldwide AI-Enabled IT Service Management Software 2026 Vendor Assessment.

For the fourth quarter of 2026, Freshworks expects revenue of $253.5 million to $254.5 million, about 14% year-over-year growth, and non-GAAP income from operations of $68.0 million to $70.0 million, with non-GAAP net income of about $0.21 a share. For full-year 2026, it expects revenue of $965.0 million to $966.0 million, about 15% growth, and non-GAAP income from operations of $238.0 million to $240.0 million, with non-GAAP net income of about $0.71 a share.