Freshworks Cuts 500 Jobs as AI Reshapes Business Software
Freshworks said Tuesday it will eliminate approximately 500 positions, representing 11% of its total workforce, as the business-software company restructures around artificial intelligence capabilities. The cuts mark one of the largest AI-driven headcount reductions at a publicly traded software firm in 2026.
Chief Financial Officer Tyler Sloat said the restructuring would free up investment for AI product development. The move sent shares lower in after-hours trading.
What Happened
Freshworks is a Nasdaq-listed customer engagement software company.
It builds tools for customer support, sales automation, and IT service management, selling primarily to mid-market and enterprise clients. The company announced the cuts Tuesday, citing AI’s ability to perform tasks that previously required human headcount across its product and engineering teams.
Freshworks CEO Dennis Woodside said the company was reorganizing to move faster on AI product delivery.
Woodside said the displaced roles largely covered functions that AI tooling now handles within Freshworks’ own development and support operations.
The company did not specify a severance package timeline in the announcement. Freshworks employs roughly 4,500 people globally, with major offices in San Mateo, California, and Chennai, India.
Background
Freshworks has faced pressure on its growth rates since going public in September 2021.
The company’s stock, trading under the ticker Freshworks (FRSH), dropped sharply through 2022 and 2023 as investor sentiment toward mid-tier software vendors cooled. Freshworks had been investing heavily in AI-assisted features through 2024 and 2025, embedding generative AI into its Freddy AI platform to automate ticket resolution and customer conversations.
The layoff follows a wave of similar moves across enterprise software.
Salesforce, Workday, and smaller SaaS vendors have each cited AI efficiency gains as justification for workforce reductions in the past 12 months. Analysts tracking the sector have pointed to AI-led consolidation as a structural shift rather than a cyclical one, with platforms replacing headcount rather than complementing it.
According to Reuters, Freshworks plans to reinvest cost savings into autonomous AI agent development within its product suite.
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What Comes Next
Freshworks will report its next quarterly earnings in the coming weeks. Investors will watch whether the restructuring improves operating margins, which have remained under pressure despite revenue growth.
The broader question for the software sector is whether AI-driven headcount reductions translate into durable profitability or simply reset cost bases before the next investment cycle. Freshworks’ Freddy AI product roadmap will be the key variable to watch as the company attempts to position itself as an AI-native vendor rather than a legacy SaaS platform.
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