Startup Deep Dive : Freshworks — a Chennai help desk that reached Nasdaq, then lost two-thirds of its value

In 2010, Zendesk raised the price of its help-desk software from $9 to $19 per agent per month. Girish Mathrubootham, then a product manager at Zoho in Chennai, read about the increase and decided the market had room for a cheaper rival. Fifteen years later, that rival, Freshworks, closed 2025 as a GAAP-profitable company for the first time in its history, reporting net income of $183.7 million on revenue of $838.8 million.

Read the filing closely, though, and $151.7 million of that profit came from a single accounting entry: the release of a US tax valuation allowance, not from a sudden jump in how the business itself makes money. Freshworks is also, as of 18 September 2026, valued on Nasdaq at roughly $3.2 billion — less than a third of the $10.13 billion the market gave it on its first day of trading in September 2021. This is the story of how a Chennai help-desk startup got to Nasdaq, why its stock has spent most of its public life falling, and what its first “profitable” year actually proves.

Quick facts

What they do

Freshworks sells subscription software that businesses use to run their customer support desks, their internal IT help desks, and their sales pipelines, sold under separate product names — Freshdesk for customer service, Freshservice for IT service management, Freshsales for CRM — that share one back end and are increasingly wrapped in an AI layer called Freddy. Its customers range from small businesses paying a few thousand dollars a year to large enterprises running Freshservice as their internal IT ticketing system across thousands of employees. As of 31 December 2025, the company counted roughly 75,000 customers in about 170 countries, though the business increasingly leans on a smaller set of larger accounts: more than 60% of its annual recurring revenue (ARR) now comes from customers with over 250 employees, according to its FY2025 Form 10-K.

The origin

Mathrubootham has said in multiple interviews that the founding insight was not a new idea but a mispriced one: Zendesk, the dominant help-desk software of the time, had just raised its price, and he believed a large segment of smaller businesses would pay for a simpler, cheaper alternative. He teamed up with Shan Krishnasamy, a technical architect he had worked with at Zoho, and launched Freshdesk on 13 October 2010 out of a rented meeting room in Chennai with a team of six developers. The company’s first paying customer, an Australian college called Atwell College, signed up in June 2011. Freshdesk then won $40,000 in Microsoft’s BizSpark India Startup Challenge and used the credibility from that win to close a $1 million Series A from Accel Partners later in 2011 — the first institutional money into what would eventually become Freshworks.

The struggle years

Freshdesk’s early growth on a single help-desk product ran into a ceiling by the mid-2010s, as Zendesk, Salesforce and a wave of newer entrants competed for the same customer-support budget. The company’s response was to stop being a single product: it launched Freshservice for IT service management in 2014 and Freshsales for CRM in 2016, then in 2017 renamed the entire company from Freshdesk to Freshworks to reflect a multi-product suite rather than one app. That rebrand was, in effect, an admission that a company built around one cheap help desk could not keep growing on that alone.

The bigger and more personal setback came from home. Zoho, the company both founders had left to start Freshdesk, sued Freshworks and named individual executives, alleging theft of trade secrets and improper poaching of staff, a dispute that ran through 2020 and 2021 — exactly the period Freshworks was preparing its US listing — before the two companies settled in December 2021. Then came the cost of being public: after the IPO, Freshworks cut jobs in two separate rounds in 2023, followed by a 13% workforce reduction (about 660 people) in November 2024, and a further 11% cut (roughly 500 jobs) in 2026 tied to what the company called an AI-led restructuring. None of these rounds coincided with falling revenue — Freshworks grew revenue in every one of those years — which says the pressure was on margins and investor patience, not on demand for the product.

The turning point

The clearest before-and-after moment in Freshworks’ history is its Nasdaq debut. In 2019, in its last private funding round, investors valued the company at $3.5 billion. Two years later, on 22 September 2021, Freshworks priced its IPO at $36 a share, raising about $1.03 billion and valuing the company at just over $10.13 billion (about ₹97.2 thousand crore, converted) — nearly three times its last private mark in under two years. The stock jumped as much as 32% on its first day, touching a high of $47.50, before the market’s mood on unprofitable software companies turned in 2022 and the stock spent most of the following four years giving that valuation back.

The money behind it

Freshworks raised roughly $400 million in venture funding before going public, according to aggregated deal-tracking data, built up over several rounds after that first $1 million Accel check in 2011. Accel stayed on as a lead investor through the company’s growth and, together with Sequoia Capital, co-led a $100 million Series G in 2018 that valued Freshworks at $1.5 billion, with participation from CapitalG, Google’s growth-equity arm. The same three — Sequoia, CapitalG and Accel — came back to lead a $150 million Series H in 2019 at a $3.5 billion valuation, the round that effectively funded the last stretch of product breadth and international expansion before the IPO. Tiger Global Management also invested in later private rounds. Since listing, Freshworks has used its balance sheet rather than fresh funding to grow: it bought IT-asset-management company Device42 for $230 million in 2024 and AI-driven incident-management platform FireHydrant around the end of 2025, both funded from cash on hand rather than new capital raises.

How it makes money

Freshworks earns money the way most enterprise SaaS companies do: customers pay a recurring subscription, tiered by the number of agents or seats and by which features they unlock, across its Freshdesk, Freshservice and Freshsales product lines, plus newer per-usage add-ons for Freddy AI agents. There is no marketplace take rate or transaction fee to speak of; the entire model is subscription plus expansion, measured by a net dollar retention rate of 108% in the fourth quarter of 2025 — meaning existing customers, on average, spent 8% more year over year. The company’s own numbers show where the real weight sits: customers paying more than $50,000 a year in ARR grew 23% year over year to 3,760 accounts by the end of 2025, and that group alone represents nearly 55% of total ARR. The part that is easy to get wrong is treating Freshworks as a budget product for small businesses because of its origin story; the growth engine has quietly become large-account expansion, not new small-business sign-ups.

The numbers

Freshworks reports in US dollars as a Nasdaq-listed company. Four consecutive years of audited results show consistent revenue growth alongside a genuine, if recent, shift toward profitability:

Revenue grew between 16% and 21% each year over this period. The non-GAAP operating income line, which strips out stock-based compensation and other non-cash items, has been positive and growing since 2023, which is the more honest measure of an operating turnaround. The GAAP net income figure for 2025, by contrast, was flattered by the $151.7 million release of a US federal and state tax valuation allowance — a non-cash accounting decision that Freshworks was allowed to make once it judged its deferred tax assets likely to be usable, not a sign that the underlying business generated $183.7 million of cash profit. Strip that one item out and 2025’s result looks like a company that is closing in on breakeven, not one that has already arrived.

Where the money comes from

Freshworks does not publish a clean percentage split of revenue by product or region, but it does disclose ARR milestones that show where the growth is concentrated. By the fourth quarter of 2025, its employee-experience and IT service management line — built around Freshservice — had crossed $500 million in ARR, while two newer lines, Enterprise Service Management and the acquired Device42, had each passed $40 million in ARR, and Freddy AI, the company’s AI-agent layer sold as an add-on across products, had passed $25 million in ARR. The surprise is on the cost side rather than the revenue side: as of 31 December 2025, Freshworks employed about 4,500 full-time staff worldwide, and the company states plainly that a majority of them are based in India, supporting engineering, product design, customer support and sales functions. So a company whose revenue is overwhelmingly dollar-denominated and increasingly weighted toward large Western enterprises still runs its cost base substantially out of the country where it was founded — a structural link back to Chennai that the Nasdaq listing and San Mateo headquarters (adopted in 2018) do not erase.

The risks

Three risks stand out, each disclosed by the company itself in its SEC filings or visible in its recent results. First, currency exposure: Freshworks earns in dollars but pays a large share of its cost base in Indian rupees, British pounds and euros, so a strengthening rupee against the dollar mechanically compresses margins even if the underlying business is unchanged. Second, competitive intensity: Freshworks competes against Zendesk in customer service, ServiceNow in IT service management, and Salesforce, Microsoft and HubSpot in CRM — all larger, better-capitalised rivals with broader product suites, which puts continuous pressure on pricing and feature parity. Third, and most immediate, is AI monetisation risk: Freddy AI’s $25 million in ARR is still a small fraction of the company’s $838.8 million in total 2025 revenue, and how usage-based AI-agent pricing will scale, and whether customers will pay a premium for it once the novelty fades, is not yet proven — a point industry analysts have flagged directly when questioning whether Freshworks’ AI push justifies its current valuation. The repeated rounds of layoffs since 2023, run alongside genuine revenue growth, are a visible symptom of the company still working out its cost structure even as the AI transition adds a new source of uncertainty.

The takeaway

The lesson in Freshworks’ numbers is not about India, or SaaS, or even artificial intelligence — it is about reading a profit headline before believing it. A company can report its first-ever GAAP net income and still not have crossed the line investors think it has, if most of that number came from a tax accounting entry rather than from selling more software for less cost. The more reliable signal sat one line lower in the same set of results: non-GAAP operating income that grew every year since 2023, funded by real revenue growth and real cost discipline. Anyone evaluating a “we turned profitable” claim, at any company, owes it to themselves to ask what specific line item did the turning — because the honest answer is sometimes an accountant’s decision, not a change in what customers are paying for.

Frequently asked questions

What does Freshworks actually sell?

Subscription software for customer service (Freshdesk, Freshchat), IT service management (Freshservice, Device42) and sales/CRM (Freshsales, Freshmarketer), increasingly bundled with Freddy AI agents that sit across all three product lines.

Was 2025 really Freshworks’ first profitable year?

On a GAAP basis, yes: it reported net income of $183.7 million for 2025 against losses every year before that. But $151.7 million of that figure came from releasing a US tax valuation allowance, an accounting entry, not new cash from operations, so the cleaner measure of an operating turnaround is non-GAAP operating income, which was $178.0 million in 2025, up from $99.1 million in 2024.

How much is Freshworks worth now compared to its IPO?

Freshworks was valued at $10.13 billion when it began trading on Nasdaq on 22 September 2021. As of 18 September 2026, its market capitalisation was about $3.2 billion, according to both StockAnalysis.com and CompaniesMarketCap.com — roughly a two-thirds decline from its IPO-day valuation.

Who runs Freshworks today?

Dennis Woodside has been CEO since May 2024. Founder Girish Mathrubootham moved to the role of Executive Chairman at the same time, after recruiting Woodside as President in 2022 specifically as a potential successor.

What is the biggest risk to Freshworks’ business?

Analysts point to AI monetisation: Freddy AI had crossed only $25 million in ARR by the end of 2025, a small share of the company’s $838.8 million in total revenue, and it is not yet clear how agentic AI features will be priced at scale or whether customers will pay premiums for them once initial interest cools.

Sources

Figures are as of September 2026. Currency converted at $1 ≈ ₹96.0 as of 18 September 2026 (Trading Economics).

• Freshworks, “Freshworks Announces Pricing of Initial Public Offering,” company press release, September 2021
• PYMNTS, “Freshworks Valued At $10B in Nasdaq Trading Debut,” September 2021
• Business Standard, “Freshworks prices IPO at $36 per share to raise over $1 bn via US listing,” September 2021
• Freshworks, “Freshworks Reports Fourth Quarter and Full Year 2022 Results,” GlobeNewswire, February 2023
• Freshworks, “Freshworks Reports Fourth Quarter and Full Year 2023 Results,” GlobeNewswire, February 2024
• Freshworks, “Freshworks Reports Fourth Quarter and Full Year 2024 Results,” GlobeNewswire, February 2025
• Freshworks, “Freshworks Reports Fourth Quarter and Full Year 2025 Results,” company press release / investor relations, February 2026
• Freshworks Inc., Form 10-K for fiscal year 2025, US Securities and Exchange Commission, filed 2026
• StockAnalysis.com, “Freshworks (FRSH) Market Cap & Net Worth,” accessed 18 September 2026
• CompaniesMarketCap.com, “Freshworks (FRSH) — Market capitalization,” accessed 18 September 2026
• PR Newswire, “Freshworks Secures $100 Million Investment Led by Accel and Sequoia,” July 2018
• PR Newswire, “Freshworks Secures $150M Funding Round, Led by Sequoia, CapitalG and Accel at $3.5 Billion Market Valuation,” 2019
• Inc42, “Zoho Sues Freshworks For Misusing Trade Secrets, Poaching,” 2020
• Business Standard, “Freshworks to lay off 660 employees as part of global restructuring plan,” November 2024
• Inc42, “Freshworks Layoffs: Co To Cut 660 Jobs In Restructuring Exercise,” November 2024
• Outlook Business, “Freshworks Layoffs: 11% Job Cuts as AI Restructuring Reshapes Global Operations and Costs,” 2026
• Freshworks, “Freshworks Announces CEO Transition,” company press release, May 2024
• Business Today, “Freshworks appoints Dennis Woodside as CEO, Girish Mathrubootham named executive chairman,” May 2024
• Business Today, “Freshworks fiasco: Top VC says Indian founders should see it as a ‘cautionary tale’,” November 2022
• StartupTalky, “Freshworks Story — The Journey from a Small Startup to Nasdaq,” accessed September 2026
• Business Insider India, “Meet Girish Mathrubootham, founder and CEO of Freshworks,” accessed September 2026
• Futurum Group, “Freshworks Q2 FY 2026: Freddy AI and EX Drive Commercial Momentum,” 2026
• Simply Wall St, “Freshworks’ Agentic AI Push: Evolution Of Its ServiceOps Edge Or Overhyped Incremental Upgrade For FRSH?,” 2026
• Wikipedia, “Freshworks,” accessed September 2026, for chronology cross-reference

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