In a significant move that underscores the ongoing transformation in India’s technology sector, Freshworks announced plans to lay off 660 employees, representing 13% of its global workforce. The decision comes at a pivotal moment for the US-listed company, as it reports strong third-quarter earnings driven by increasing demand for its AI-powered products, highlighting the complex dynamics facing Indian-origin tech companies in today’s market.
The restructuring, announced by CEO Dennis Woodside, will impact employees across the company’s global operations, with a significant portion affecting its Indian workforce centered in Chennai, Bengaluru, and Hyderabad. The company expects to incur restructuring charges between $11 million to $13 million in the fourth quarter of 2024, primarily consisting of separation-related payments and employee benefits.
Despite the workforce reduction, Freshworks has raised its annual revenue expectations to between $713.6 million and $716.6 million, up from its previous forecast of $707-713 million. The company’s stock responded positively to the announcement, rising more than 5% on the Nasdaq, though it remains down by over 40% this year.
Strategic Pivot and AI Focus
The restructuring reflects Freshworks’ strategic realignment under new CEO Dennis Woodside, who took the helm in May 2024 after founder Girish Mathrubootham stepped down. The company has identified three key strategic imperatives: strengthening its employee experience business, advancing AI capabilities, and enhancing its customer experience solutions.
“These decisions were made thoughtfully and carefully to set a strong foundation for our future,” Woodside stated in his letter to employees. The company is particularly focusing on its fastest-growing employee experience (EX) business, combining teams focused on customer experience (CX) products, including support, sales, and marketing.
Impact on Indian Tech Ecosystem
The layoffs at Freshworks, which serves over 68,000 customers including global giants like American Express and Sony, signal broader challenges within India’s SaaS sector. As one of India’s most successful software exports, Freshworks’ decisions are closely watched as indicators of market trends and challenges facing Indian technology companies with global operations.
The restructuring highlights a growing trend among Indian-origin tech companies to optimize operations while investing in AI capabilities. This dual approach of cost-cutting while pursuing technological advancement reflects the complex balance companies must strike in today’s competitive landscape.
Market Position and Future Outlook
Despite the workforce reduction, Freshworks’ strong Q3 results and increased revenue forecasts suggest underlying business strength. The company’s focus on AI-powered solutions, particularly through products like Freshservice and Freshdesk, positions it well in the competitive SaaS market, where it competes with industry giants like Salesforce and ServiceNow.
The company’s adjustment of its annual adjusted profit per share forecast to 38-39 cents, up from 32-34 cents, indicates confidence in its restructured operations and strategic direction. This optimistic financial outlook, coupled with the workforce optimization, suggests a calculated move to enhance operational efficiency while maintaining growth momentum.
Conclusion
Freshworks’ restructuring represents a critical moment in the evolution of Indian-origin global tech companies. While the immediate impact of job losses will be felt across its operational centers, particularly in India, the company’s strategic focus on AI and employee experience solutions, backed by strong financial performance, suggests a transformation aimed at long-term sustainability and growth in the global SaaS market. For India’s startup ecosystem, this move highlights the increasing importance of operational efficiency and strategic focus on emerging technologies, even for well-established players.