Freshworks to Reduce Workforce by 11% Amid Industry Shift Towards AI-Driven Software Solutions

Freshworks Announces 11% Workforce Cuts Amid Industry Shift to AI

May 5 (Reuters) - Business-software company Freshworks has announced that it will cut 11% of its workforce, approximately 500 jobs, as the company adapts to the rapidly changing industry landscape driven by artificial intelligence (AI). This move is part of a broader trend in the software sector, where companies are racing to automate work and reshape products around AI while trying to mitigate its significant costs.

Freshworks' decision comes on the heels of a similar announcement by peer company Atlassian, which revealed plans to slash roughly 10% of its jobs last month. Meanwhile, AI tools from companies like Anthropic are perceived as potential existential threats to traditional software makers, causing a decline in shares of companies such as Freshworks, Salesforce, and ServiceNow. Freshworks' stock has plummeted approximately 26% this year.

The restructuring at Freshworks will affect around 500 roles across various departments globally and incur one-time charges of approximately $8 million. At the end of December 2025, the company had around 4,500 full-time employees. According to CEO Dennis Woodside, the decision was driven partly by the increasing use of AI in product and engineering, as well as the automation of routine work across the business. Woodside noted that over half of Freshworks' code is now written by AI, reducing "rote work that technology can take care of."

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The savings generated from merging sales teams, reducing management layers, and automating work will be reinvested in Freshworks' Employee Experience business, which includes its IT service management software Freshservice. This move is aimed at bolstering the company's offerings and staying competitive in the rapidly evolving industry.

In a separate announcement, Freshworks forecasted second-quarter revenue between $232 million and $235 million, which is above analysts' average estimate of $232.7 million, according to data compiled by LSEG. In the first quarter, revenue rose 16% to $228.6 million, exceeding estimates of $223.24 million. However, the company's adjusted profit came in at 11 cents per share, missing estimates of 12 cents per share.

Freshworks' Restructuring and Revenue Projections

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Freshworks' restructuring efforts are expected to have a significant impact on the company's workforce and bottom line. However, the company's revenue projections for the second quarter indicate a positive outlook, with revenue expected to exceed analysts' estimates. As the industry continues to evolve, Freshworks' ability to adapt to the changing landscape will be crucial to its success.