Freshworks grows AI revenue & launches non-IT service solution

Freshworks has reported its third consecutive quarter of exceeding earnings estimates, with revenue for the most recent period rising 15% year-over-year and operating margin expanding to 21%.

The company disclosed that its free cash flow margin reached 27% during the quarter. In addition to overall financial performance, Freshworks highlighted robust growth linked to its artificial intelligence (AI) offerings and expansion into non-IT departments.

AI adoption and product usage

Freshworks detailed significant year-over-year advances across its AI portfolio. Annual recurring revenue (ARR) for AI-based products doubled compared to the previous year in the third quarter. Usage of its Freddy AI Agent increased six-fold over the past seven months, while Freddy AI Copilot saw usage double compared to the previous year. According to Freshworks, customers now rely on Freddy AI to resolve millions of customer issues each week.

Expansion to business teams

The Freshservice platform, which generates over USD $400 million in ARR, continues to see increased adoption beyond the IT sector, including within departments such as Human Resources (HR), legal, and facilities management. ARR from these so-called Business Teams doubled in the past year, reaching USD $35 million. Freshworks also announced a new standalone Enterprise Service Management (ESM) offering, allowing non-IT departments to independently purchase Freshservice for Business Teams.

Freshworks reported that one in four eligible Freshservice ITSM customers is now using Freshservice for Business Teams. As of 30 September 2025, ARR for the solution had reached USD $35 million. The move to offer Freshservice for Business Teams as a standalone product is designed to help businesses deliver service management capabilities consistently across HR, finance, legal, and other functions without requiring an existing ITSM implementation.

Quotes from company leaders

"Business leaders need to move fast, but keep getting stuck with tools that were never designed for departments like HR, Finance or Legal. That friction slows growth and is especially true with cross-functional work. Now businesses have another option. Enabling non-IT workers to create their own support environments is a force multiplier that can benefit the entire organization by enabling workers closest to business processes to create the employee experiences they want and need," said Srini Raghavan, Chief Product Officer at Freshworks.

Key benefits outlined

Freshworks outlined several core benefits of Freshservice for Business Teams, encompassing people-first AI, unified service delivery, rapid impact for HR and employee support, and seamless configuration for fast deployment.

The company stated that its AI capabilities empower non-IT functions to accelerate ticket resolutions and automate processes like account verification and document retrieval. AI is also used to support agents by generating quality responses and managing workloads. The University of Oxford selected Freshservice and Freddy Copilot, citing the system's scalability and simplicity in meeting requirements for the university's IT, finance, and HR teams.

As an example of unified service delivery, Freshworks cited Databricks, which reported a 23% deflection rate after rolling out Freshservice to eight departments, including HR, legal, and learning and development. Pradeep Singh, Vice President of Infrastructure and Operations at Databricks, said, "Consolidating from 10 different platforms down to a single intuitive one has not only improved employee experience, it has saved us a significant amount of money."

In terms of HR and employee support, Freshworks noted that prebuilt workspaces and workflow templates simplify tasks such as onboarding and offboarding, enabling quicker adoption without extensive customisation. Anantha Ganga, Chief Information Officer of Coherent, commented, "We're excited to integrate Freshservice with even more systems. Our ultimate goal is to create a 'one-stop shop' for the employee experience. Freshservice will remain a central component of our strategy for achieving this."

According to Freshworks, the platform's no-code automation and user interface empower teams to launch service portals securely, while built-in integrations with systems such as ADP, DocuSign, Microsoft Teams, Slack, Bamboo HR, and Workday simplify service delivery. EDF Renewables has adopted Freshservice for its ease of use and codeless customisation, using the platform to manage diverse non-IT departments.

Market context and analyst view

Freshworks positions its standalone business team solution as an alternative to complex IT suites or limited HR tools. The company claims it offers orchestration, enterprise-grade AI, and a low total cost of ownership.

Snow Tempest, Research Manager at IDC, said, "Improved employee experiences are one of the top priorities for organizations these days, as are related goals like improved resolution times for requests and issues. For organizations seeking to streamline their processes and reduce complexity without extensive customization requirements, there is a demand for a product that can be deployed quickly to meet the needs of multiple departments."

As Freshworks continues to focus on upmarket growth, the company revealed that ARR from customers spending over USD $100,000 increased 25% year-over-year in Q3. Freddy Copilot featured in more than 60% of new customer agreements valued at over USD $30,000.