Freshworks reported third-quarter 2026 revenue of $245.4 million, up 14% year over year, and a 30% non-GAAP operating margin. The company also raised its full-year revenue outlook and said it surpassed $1 billion in annual recurring revenue in October. Its shares fell about 6% in after-hours trading following the results.
Non-GAAP operating income rose to $73.2 million from $45.2 million a year earlier. The operating margin improved by nine percentage points year over year, while adjusted free cash flow reached $73.9 million, also a 30% margin. Freshworks ended the quarter with $697 million in cash and investments and no debt.
The company’s results also showed continued progress in its push toward larger customers. Accounts generating more than $100,000 in annual recurring revenue increased 25% year over year to 1,821, while customers above the $50,000 threshold grew 18% to 4,257. More than 60% of Freshworks’ ARR now comes from mid-market and enterprise customers.
Net dollar retention was 104% on a reported basis and 105% in constant currency. Freshworks said its employee experience business derives 81% of ARR from mid-market and enterprise customers; the equivalent share for its customer experience business was 48%.
For the fourth quarter, Freshworks expects revenue of $253.5 million to $254.5 million, representing about 14% year-over-year growth. It forecast non-GAAP operating income of $68 million to $70 million and non-GAAP earnings per share of approximately $0.21.
The company raised its 2026 revenue forecast to $965 million to $966 million and its non-GAAP operating income outlook to $238 million to $240 million. It expects full-year adjusted free cash flow of about $265 million, with a margin above 27%.
The after-hours decline followed a regular-session close of $14.15, with shares later trading around $13.30. The report attributed the reaction to investor expectations for stronger growth acceleration: Q3 revenue was only slightly above the cited analyst estimate of $245.1 million, and Q4 guidance points to growth at the same 14% rate as the latest quarter. The company also noted that larger enterprise deals can take longer to close and that a change in how some Device42 revenue is recognized could weigh on reported growth comparisons.
Freshworks reported GAAP net income of $18.3 million, or $0.07 per share, its second consecutive profitable quarter. CEO Dennis Woodside described the company as focused on employee experience and larger deals, while CFO Tyler Sloat said revenue had exceeded expectations for an eighth consecutive quarter and highlighted the improvement in operating margin and free cash flow.
Sources: Investing.com News.