Freshworks Q2 2023 Earnings: Will rising revenues, easing losses drive Freshworks shares higher?

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Freshworks Q2 2023 Results

Freshworks, the cloud-based customer engagement platform, released its Q2 2023 earnings report on August 1, 2023. The company reported revenue of $145.1 million, up 19% year-over-year (YoY) due to a large and growing customer base as demand for tech and AI related tools and services is on the upside in the US and across the globe. 

The firm’s reported a net loss for the April to June 2023 period of $35.65 miilion which was 48.87% lower than the corresponding quarter last year. This probably can be attributed to a rising revenues from a wide range of customer engagement products like Freddy Copilot AI Assistant.

Freshworks share price soared about 19% on August 2, 2023 on the back of robust earnings, however, shares dipped slightly by 0.5% in premarket trading on August 3, 2023. 

Freshworks Q2 2023 Earnings: Key Highlights

  • Revenue rose by $145.1 million, up 19% YoY, driven by strong demand for Freshworks' ITSM (IT Service Management) suite.
  • Non-GAAP income from operations scaled to $11.7 million, which is up by 174%.
  • The company's dollar-based net retention rate (DBNRR) was 108%, which is a measure of how much revenue Freshworks is generating from its existing customers.
  • Freshworks' customer cohort paying over $50,000 in annual recurring revenue (ARR) grew 33% year-over-year.
ParametersQ2-2022Q2-2023% Change
Revenue$145.07 million$121.43 miilion19%
Net Loss$35.658 million-$69.753 million48.87%

Freshworks Q2 2023 Earnings: Driving forces behind the company's success

Growth in Customer Metrics: The company's focus on landing bigger customers is paying off. Growth in the number of paying customers increased by 18% to 19,105. New customer additions were up 24% YoY, and customer retention rates remained high. Freshworks' customer base grew to 131,000 customers, up 23% YoY.

Customer MetricsQ2-2022Q2-2023
Customers >$5K ARR 16,21219,105
Customers >$50K ARR1,6482,186

New Product Launches: Expansion of the company's product portfolio, which now includes new products such as Freshdesk and Freshchat for Customer Contact Center, Freshservice for Salesforce, Freshsales for Sales Automation. and Freshmarketer for Marketing Automation. 

The company reported large-customer wins from the features of Freddy Copilot AI assistant. Strong demand for Freshworks' products and services, particularly in the ITSM (IT Service Management) and CRM (Customer Relationship Management) markets led the revenue growth.

Freshworks Q2 2023 Earnings: Global Reach of the Company

Freshworks, the SaaS company has made its mark on the globe, with North America being the major contributor of revenue. Here’s a revenue breakdown by geographical region: 

RegionPercentage of Contribution to Revenue
North America44%
Europe, Middle East, Africa39%
Rest of World3%

Freshworks Q2 2023 Earnings: Financial Outlook

Freshworks is forecasting revenue of $587 million to $595 million for the full year 2023, which would represent growth of 18% to 19% YoY. The company is also expecting non-GAAP earnings per share to be in the range of $0.18 to $0.22.

Moreover, Freshworks is investing in AI and automation to develop new AI-powered features for its products. It is also investing in automation to improve its customer support operations.

Overall, the company is growing its revenue, customer base, and DBNRR. Freshworks may be well-positioned for continued growth in the years to come.

Freshworks Q2 2023 Earnings: Share Price Performance

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The share price of Freshworks has fallen in the past 5 years by 53.78%. There are numerous reasons for the decline but in particular, the competitors like Salesforce, Oracle, Zendesk, and Microsoft have made it more difficult for Freshworks to grow its market share.

This is not investment advice. Investments in the securities market are subject to market risk, read all the related documents carefully before investing. Past performance is not indicative of future returns.