Freshworks turns profitable as Q3 CY26 revenue reaches $245.4 million

By Grace Kim

Freshworks reported $245.4 million in revenue for Q3 CY26, up 14% from $215.1 million in Q3 CY25. The Nasdaq-listed SaaS company also swung to $18.3 million in net profit from a $4.7 million net loss in the year-ago quarter.

What changed in Freshworks' profitability?

Freshworks reported gross profit of $209.4 million, up 15% from $182.2 million in Q3 CY25. Gross margin improved to 85.3% from 84.7%.

At the operating level, Freshworks posted operating profit of $28.2 million, compared with an operating loss of $7.5 million in Q3 CY25. Operating margin stood at 11.5%, against a negative 3.5% in the year-ago quarter.

Freshworks' reported figures show the improvement reached both the top and bottom lines. Revenue, gross profit, operating profit and net profit all moved above their year-ago levels.

Freshworks turned a year-ago net loss and operating loss into profit while both gross and operating margins improved.

How did Freshworks expand its margins?

Freshworks said its non-GAAP operating income rose 62% to $73.2 million. The corresponding non-GAAP operating margin expanded to 29.8% from 21% in Q3 CY25. That earnings growth ran well ahead of the company's 14% revenue increase.

Spending moved unevenly as revenue rose:

• Sales and marketing expenses declined 2.5% to $98.5 million.
• Research and development expenses increased 7.8% to $44.7 million.
• General and administrative expenses fell 19% to $38.2 million.

Freshworks reported that total operating expenses declined 4.4% to $181.2 million from $189.6 million in Q3 CY25. Sales and marketing remained its largest expense category at $98.5 million, ahead of R&D at $44.7 million and G&A at $38.2 million.

Freshworks paired 14% revenue growth with lower total operating expenses. It did so while increasing R&D spending, though G&A recorded the sharpest percentage reduction among the three categories.

Freshworks widened margins by growing revenue faster than total costs, not by cutting R&D.

How strong was Freshworks' cash generation?

Freshworks generated $77.7 million in cash from operating activities, compared with $63.5 million in Q3 CY25. Adjusted free cash flow rose 29% to $73.9 million, and adjusted FCF margin improved to 30.1% from 26.6%.

At September 30, 2026, Freshworks held $697.3 million in cash, cash equivalents, restricted cash and marketable securities. The company's operating cash flow and adjusted free cash flow both increased from the year-ago quarter.

Freshworks backed stronger earnings with $77.7 million of operating cash and ended September with $697.3 million in cash, cash equivalents, restricted cash and marketable securities.

Did recurring revenue and customer economics improve?

Freshworks disclosed that annual recurring revenue crossed $1 billion after the close of Q3, ahead of its earlier year-end estimate. Customers contributing more than $100,000 in ARR increased 25% year on year to 1,821.

The company also reported a 104% net dollar retention rate. Freshworks ended the period with 1,821 customers in the $100,000-plus ARR cohort and a retention rate above 100%.

Freshworks reached the $1 billion ARR mark early and expanded the $100,000-plus ARR customer base by 25%.

What has Freshworks guided for Q4 and 2026?

Freshworks expects Q4 CY26 revenue of $253.5 million to $254.5 million. For calendar 2026, the company projects revenue of $965 million to $966 million, representing approximately 15% annual growth.

The ARR milestone arrived after the quarter closed and ahead of Freshworks' earlier year-end estimate. For revenue, however, the company's full-year target remains below $1 billion.

Freshworks' full-year forecast calls for approximately 15% growth, slightly above its 14% increase in Q3. The next test is whether Freshworks can deliver the $965 million-to-$966 million target while sustaining the 30.1% adjusted free cash flow margin it posted in Q3.