Shocking: Freshworks lays off 660 employees to focus on AI and customer experience

Freshworks Inc., a prominent name in customer engagement software, has announced the layoff of 660 employees, equivalent to 13% of its global workforce. The drastic move aims to help the company refocus on three core areas: customer experience, artificial intelligence, and employee experience. The decision, part of a larger global restructuring effort, marks the fourth round of layoffs at Freshworks in the past year.

Dennis Woodside, Freshworks’ CEO, emphasized that the restructuring would optimize the company’s focus on high-growth sectors, allowing for a more agile approach to the rapidly evolving software market. Woodside, appointed in May 2024, noted that by concentrating resources on customer experience products and artificial intelligence, Freshworks aims to provide enhanced value to its clients. This change comes as Freshworks prioritizes aligning its products to meet the demands of an increasingly competitive software-as-a-service (SaaS) landscape.

Restructuring Hits U.S. and Indian Operations

The layoffs will impact Freshworks employees across multiple locations, with significant numbers in the United States and India. Freshworks has committed to offering support packages, which will include financial assistance, extended medical benefits, and career transition resources. The company has stated that support offerings will be customized based on local labor laws, aiming to help employees transition smoothly during this time.

Freshworks’ announcement came after a strong quarterly report, where it posted favorable earnings despite industry-wide pressures. Yet, as the SaaS sector faces unprecedented demands to streamline and focus, Freshworks follows in the footsteps of several tech firms recalibrating their workforce in pursuit of a leaner, more focused strategy.

Financial Moves: Cost Savings and Stock Buyback

This latest workforce reduction is expected to cost Freshworks between $11 million and $13 million in severance and other employee-related charges in Q4 2024. However, analysts predict that the cost-cutting measures may contribute positively to the company’s bottom line in the long term. Additionally, Freshworks’ board has approved a $400 million share buyback program. This buyback is seen as a show of confidence in the company’s future, which is expected to strengthen investor sentiment.

Following the announcement, Freshworks’ stock saw a notable surge, closing at $16.82, reflecting a 28.4% increase. The stock rally is being interpreted as investor support for the company’s renewed focus on AI and customer experience products, areas that are increasingly essential in the competitive SaaS environment.

Industry Analysts See Potential in Focused Strategy

Experts in the SaaS industry believe Freshworks’ pivot to artificial intelligence and customer experience solutions could boost the company’s market standing. Analysts see the emphasis on AI as a smart move given the growing demand for AI-driven solutions across industries. Some believe that this focused approach could allow Freshworks to outpace its competitors, especially as clients in diverse sectors look to AI to enhance service efficiency and personalization. However, they also caution that Freshworks’ ability to execute this strategy effectively will be critical for sustained growth.

“Freshworks is betting on AI and customer experience to solidify its role in the market,” one industry expert commented, highlighting the SaaS firm’s determination to remain competitive in an environment increasingly shaped by AI innovation. This shift could potentially transform Freshworks into a go-to provider for businesses seeking comprehensive customer engagement solutions powered by AI.

A History of Layoffs: Freshworks’ Workforce Strategy

This round of layoffs is part of an ongoing effort by Freshworks to restructure and streamline operations. In December 2022, the company cut around 90 jobs, or roughly 2% of its workforce, as part of an initial restructuring phase. Further layoffs in March and June 2023 targeted higher-level roles across product development, engineering, and sales teams. Now, with a more substantial 13% reduction, Freshworks aims to recalibrate its workforce to match its renewed focus on strategic growth areas.

Freshworks Looks Ahead

Freshworks’ decision to cut 660 jobs underscores the company’s commitment to re-aligning its strategy with market demands and technological advancements. By investing in AI and prioritizing customer experience, Freshworks aims to position itself as a leader in the SaaS industry. While the layoffs mark a difficult transition, the company’s proactive approach in offering support to affected employees reflects its dedication to responsible restructuring.

The broader SaaS industry will be watching closely as Freshworks embarks on this new chapter, with investors showing initial optimism in the company’s future trajectory. As Freshworks narrows its focus, the company’s ability to deliver on its AI and customer experience ambitions will be key to maintaining its standing in a highly competitive market.