Business software provider Freshworks (NASDAQ: FRSH) reported revenue ahead of Wall Street’s expectations in Q2 CY2025, with sales up 17.5% year on year to $204.7 million. The company expects next quarter’s revenue to be around $208.5 million, close to analysts’ estimates. Its non-GAAP profit of $0.18 per share was 55.9% above analysts’ consensus estimates.

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“Freshworks delivered another strong quarter, exceeding our previously provided financial estimates in Q2 with 18% year-over-year revenue growth to $204.7 million, a 29% operating cash flow margin, and 27% adjusted free cash flow margin,” said Dennis Woodside, Chief Executive Officer & President of Freshworks.

Company Overview

Founded in Chennai, India in 2010 with the idea of creating a “fresh” helpdesk product, Freshworks (NASDAQ: FRSH) offers a broad range of software targeted at small and medium-sized businesses.

Revenue Growth

A company’s long-term sales performance can indicate its overall quality. Any business can have short-term success, but a top-tier one grows for years. Luckily, Freshworks’s sales grew at a decent 21.3% compounded annual growth rate over the last three years. Its growth was slightly above the average software company and shows its offerings resonate with customers.

This quarter, Freshworks reported year-on-year revenue growth of 17.5%, and its $204.7 million of revenue exceeded Wall Street’s estimates by 2.9%. Company management is currently guiding for a 11.8% year-on-year increase in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to grow 11.1% over the next 12 months, a deceleration versus the last three years. Despite the slowdown, this projection is above the sector average and suggests the market sees some success for its newer products and services.

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Billings

Billings is a non-GAAP metric that is often called “cash revenue” because it shows how much money the company has collected from customers in a certain period. This is different from revenue, which must be recognized in pieces over the length of a contract.

Freshworks’s billings punched in at $213.1 million in Q2, and over the last four quarters, its growth was solid as it averaged 18% year-on-year increases. This performance aligned with its total sales growth, indicating robust customer demand. The cash collected from customers also enhances liquidity and provides a solid foundation for future investments and growth.

Customer Retention

One of the best parts about the software-as-a-service business model (and a reason why they trade at high valuation multiples) is that customers typically spend more on a company’s products and services over time.

Freshworks’s net revenue retention rate, a key performance metric measuring how much money existing customers from a year ago are spending today, was 105% in Q2. This means Freshworks would’ve grown its revenue by 5.3% even if it didn’t win any new customers over the last 12 months.

Freshworks has a decent net retention rate, showing us that its customers not only tend to stick around but also get increasing value from its software over time.

Key Takeaways from Freshworks’s Q2 Results

It was great to see Freshworks’s EPS guidance for next quarter top analysts’ expectations. We were also glad its billings outperformed Wall Street’s estimates. Overall, this print had some key positives. The stock remained flat at $14 immediately after reporting.

Freshworks may have had a good quarter, but does that mean you should invest right now? What happened in the latest quarter matters, but not as much as longer-term business quality and valuation, when deciding whether to invest in this stock. We cover that in our actionable full research report which you can read here, it’s free.