Freshworks, the Nasdaq-listed SaaS company, reported a net profit of $3.2 million in the second quarter ended June 30, reversing a net loss of $1.7 million in the same quarter last year. Revenue for Q2 CY26 rose 16% year-on-year to $237.4 million, up from $204.7 million, while sequential revenue increased 3.8% from $228.6 million in Q1 CY26, according to inc42.com.
The company’s improved financial performance was driven by growing adoption of its AI products, including the Freddy AI Copilot, which was included in over 71% of new enterprise deals during the quarter. Operating expenses remained largely flat year-on-year at $204.6 million, with a slight sequential increase of 1.3%. General and administrative expenses declined 11% to $41.7 million, while sales and marketing expenses rose 19% to $113 million. Non-GAAP operating income increased 25% to $55.9 million, with the operating margin expanding to 23.6% from 21.9%. CEO Dennis Woodside noted the company’s seventh consecutive quarter of exceeding revenue expectations and its eighth straight quarter meeting the Rule of 40 benchmark.
Freshworks’ results highlight the growing importance of AI integration in SaaS offerings, as the company’s expansion annual recurring revenue (ARR) grew 24% year-on-year. The Rule of 40 metric, which combines revenue growth and profit margin, is a key indicator of SaaS company health and Freshworks’ consistent performance places it among strong peers in the sector. This quarter’s profit turnaround contrasts with the previous quarter’s GAAP net loss of $4.8 million, underscoring the impact of AI-driven product adoption on financial outcomes.
Freshworks’ next financial update is expected with the Q3 earnings release, where investors will assess whether the momentum in AI adoption and revenue growth continues. The company’s sustained expansion ARR growth and profitability mark key metrics to watch in the evolving SaaS market, per inc42.com.