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Freshworks gets juiced on its AI customer engagement platform

freshworks logo on laptop

Key Points

  • Freshworks provides an all-in-one artificial intelligence (AI) powered customer relationship management (CRM) platform with tools to enhance customer experience (CX) and boost agent productivity and efficiency.
  • Freshworks is benefiting from three industry tailwinds: digital transformation, modern messaging, and AI.
  • The company beat EPS estimates by 3 cents and reported 19.7% YoY revenue growth in Q3 2023.
  • 5 stocks we like better than Freshworks

Enterprise customer relationship management (CRM) software-as-a-service (SAAS) provider Freshworks Inc. NASDAQ: FRSH has integrated artificial intelligence (AI) into its suite of products. The company has over 60,000 business clients, including Blue Nile, Klarna, Travix and BEL USA. Companies use its tools to enhance the customer experience (CX) and bolster agent productivity through AI-powered assistants and automation. The company is a member of the Business Services sector, competing with Salesforce Inc. NYSE: CRM, Zendesk Inc. NYSE: ZEN and HubSpot Inc. NASDAQ: HUBS. According to its latest 13G filing, Alphabet Inc. NASDAQ: GOOGL Google still owns 4.04 million shares of FRSH.     

Generative AI integration in the platform

Freshworks beefed up its AI capabilities in its latest quarter. The Customer Service Suite has generative AI embedded into the platform. It offers Freshdesk for customer engagement and Freshchat for AI-powered chatbots. Freshbots are AI-powered by Freddy Self-Service to handle up to 70% of conversations and leave customer service agents to handle more complex engagements. Freshsales and Freshmarketer are AI-powered sales and marketing automation tools to drive sales and productivity growth through multichannel marketing. The company's all-in-one solution combines bots, modern messaging, and ticketing.


Agents can access all customer interactions across channels on a unified platform, enabling them to personalize service on the fly and in real-time. Freddy Copilot is the AI-powered always-on assistant that can summarize events, suggest responses and recommend actions.    

Squeezing juice out of the numbers

On October 31, 2023, Freshworks released its fiscal third-quarter 2023 results for the quarter ending September 2023. The company reported an earnings-per-share (EPS) profit of 8 cents versus consensus analyst estimates for a profit of 5 cents, a 3-cent beat. Net loss was $38.7 million or 11 cents per share. Revenues grew 19.3% YoY to $153.6 million, beating analyst estimates of $150.73 million. The free cash flow was $22.1 million, and the margin was 14% for the quarter. Subscription services rose to $150 million, up from $125.5 million in the year-ago period. Freshworks closed the quarter with $1.07 billion in cash and debt securities.

In-line guidance

Freshworks provided Q4 2023 EPS guidance of 4 cents to 6 cents versus 5 cents consensus analyst estimates. Revenues are expected between $156.7 million to $159.3 million versus $157.81 million analyst estimates. The number of customers with an ARR of over $5,000 is expected to grow 17% YoY. The net dollar retention rate is expected to be 108%. The company raised the full-year 2023 outlook midpoint for non-GAAP operating profit to $40 million.

CEO Insights

Freshworks CEO Girish Mathrubootham stated that Freshworks continues to reap benefits from three industry tailwinds: digital transformation, modern messaging, and AI breaking down silos. The company signed on 200 more Customer Service Suite customers from new and existing customers with higher levels of engagement with the AI-embedded product than just Freshchat by itself. He used an example of an adopter to the Customer Service Suite, Fastway Couriers in South Africa, which generates 16 million parcels annually. The company dropped its previous CX provider, which offered disjointed customer service across different channels, in favor of Freshworks. Now, the company's agents can better address issues with live and AI-powered automated chats and gain deep insights into ticket trends.

CEO Mathrubootham concluded, "In summary, Q3 innovation was centered around unlocking more productivity for our customers through AI-powered customer service, IT, and sales and marketing products. And we will continue building and offering richer insights to help businesses understand their customers and employees."

Freshworks analyst ratings and price targets are at MarketBeat. Freshworks peers and competitor stocks can be found with the MarketBeat stock screener.

frsh stock daily cup and handle pattern

Daily cup and handle attempt

The daily candlestick chart for FRSH illustrates a cup and handle attempt. The cup lip line formed a $21.30 gap down on September 13, 2023, as shares fell to a low of $16.86 on November 9, 2023. The daily 200-period moving average held as support, rising to $17.40. The daily market structure low (MSL) breakout triggered above $17.49 as shares formed a rounding bottom grinding up to test the cup lip line on December 1, 2023. FRSH rejected a breakout attempt and fell back down to $19.72 to start forming the handle.

The daily relative strength index (RSI) peaked just under the 70-band when FRSH retested the cup lip line at $21.30 and fell on the pullback. RSI is attempting to bounce through the 60-band as the handle attempts to form. Pullback support levels are at $36.87, $34.00, $32.23 and $31.06. Pullback support levels are at $19.72, $18.66, $17.49 daily MSL trigger and $16.86.

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Should you invest $1,000 in Freshworks right now?

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Companies Mentioned in This Article

CompanyMarketRank™Current PricePrice ChangeDividend YieldP/E RatioConsensus RatingConsensus Price Target
Freshworks (FRSH)
3.6894 of 5 stars
$19.72-2.7%N/A-41.96Moderate Buy$25.00
Zendesk (ZEN)
0.2246 of 5 stars
$77.48flatN/A-33.54N/A
Salesforce (CRM)
4.6945 of 5 stars
$314.64-0.7%N/A74.91Moderate Buy$302.26
HubSpot (HUBS)
4.1665 of 5 stars
$628.74-0.8%N/A-177.11Moderate Buy$631.54
Alphabet (GOOGL)
3.2512 of 5 stars
$133.35-2.8%N/A22.99Moderate Buy$153.65
Alphabet (GOOG)
3.9796 of 5 stars
$134.20-2.8%N/A23.14Buy$146.33
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Jea Yu

About Jea Yu

  • JeaYu21@gmail.com

Contributing Author

Trading Strategies

Experience

Jea Yu has been a contributing writer for MarketBeat since 2018.

Areas of Expertise

Equities, options, ETFs and futures; fundamental, qualitative, quantitative and technical analysis and pattern identification; active and swing trading; trading systems and methodology development

Education

Bachelor of Arts, University of Maryland, College Park

Past Experience

U.S. equity markets trader, writer and analyst for over 25 years. Published four books by publishers McGraw-Hill, John Wiley & Sons, Marketplace Books and Bloomberg Press. Speaker at various expos and seminars and has been quoted and featured in USA Today, The Wall Street Journal, Traders Magazine, The Financial Times and various trade publications, including Stocks & Commodities, Active Trader and Online Investor.


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