Why Freshworks Is Laying Off 11% of Its Workforce as AI Takes over the Majority of Coding Work

Why It Matters

The layoffs illustrate how AI‑driven automation is reshaping software development labor needs, while Freshworks’ strategic shift to higher‑margin EX products aims to restore profitability and attract up‑market customers.

Key Takeaways

• Freshworks cuts 500 jobs, 11% of workforce.
• AI now writes over 50% of Freshworks code.
• EX ARR grew 27% YoY, outpacing CX 6%.
• Freddy AI Copilot attachment rate exceeds 65% on $30k+ deals.
• Restructuring charge of $8 million hits Q1 earnings.

Pulse Analysis

Artificial intelligence is rapidly moving from a supportive tool to a core production engine in software firms. Freshworks reports that more than half of its codebase is now generated by AI models, slashing development cycles and reducing the need for traditional engineering headcount. This productivity boost mirrors a broader industry pattern where vendors such as Microsoft, Google, and smaller SaaS players are trimming staff after AI automates routine coding tasks, prompting a wave of restructuring announcements across the tech sector.

Financially, Freshworks posted a 16% revenue jump to $228.6 million, yet the quarter slipped into an $8.1 million operating loss after a $39.7 million profit in the previous period. The company attributes the shortfall to the $8 million restructuring expense and a strategic pivot toward its Employee Experience (EX) suite, which delivered a 27% year‑over‑year ARR increase, far outpacing the 6% growth in its traditional Customer Experience (CX) line. Meanwhile, the Freddy AI Copilot feature is gaining traction, with an attachment rate above 65% on deals exceeding $30,000 ARR and an 80% YoY growth in AI‑driven customer adoption, signaling strong demand for AI‑enhanced workflow automation.

For investors and market watchers, Freshworks’ actions signal two converging trends: the commoditization of AI‑assisted development and the monetization of higher‑margin, enterprise‑focused solutions. By reallocating resources to EX and embedding AI deeper into its product stack, Freshworks aims to improve unit economics and win larger, up‑market contracts. However, the layoff announcement may temper short‑term sentiment, making the upcoming Refresh conference a critical venue for the company to reassure customers and demonstrate the tangible value of its AI‑powered offerings. Success in this pivot could set a benchmark for SaaS firms navigating the AI‑driven productivity revolution.