Freshworks Inc. Discusses AI Integration and Growth Strategies at Bank of America Global Technology Conference 2025

Key Takeaways

TL;DR: Freshworks is leveraging AI to drive adoption and enhanced economics in its SMB and CX biz. Key initiatives include a 20%+ Freddy Copilot attach rate, evolving pricing strategies, revamped partner programs, and a tightened free-to-paid conversion strategy—all pointing to accelerated growth and improved margins amid competitive market conditions.

• AI & Freddy Copilot Adoption
  • Accelerated AI Adoption: Freddy Copilot attach rate in the SMB segment has surged beyond 20% QoQ, transitioning customers from pilot to production to achieve efficiencies while preserving customer & employee satisfaction.
  • Customer Efficiency & ROI: Customers cite substantial benefits, including 50%-70% L1 ticket deflection with the AI Agent and 30%-40% time savings for agents with Copilot, directly contributing to better ROI and retention.
• Pricing Strategy & Economic Model
  • Pricing Evolution: Currently using a per agent fee bundled with higher-tier plans, the co is studying market trends toward usage-, resolution-, or employee-based pricing to potentially shift away from strictly agent-based models.
  • Preservation of Top-Line: The bundling approach is designed to prevent excessive discounting, ensuring that the pricing strategy supports top-line growth while maintaining margins.
• CX Business Growth & Product Innovation
  • Stabilization & Growth: After a challenging period for the CX biz, Freshworks stabilized with a 7% ARR growth reported last Q, with Q2 on track as the co pushes for mid-teens growth in a market growing similarly.
  • Unified Customer Experience: Focus on a unified CX strategy—including integration across e-mail, social, web, and voice—together with AI enhancements like Freddy AI Copilot and AI Agent that drive faster time-to-market and ROI.
  • Innovation Pipeline: Announcements on additional product innovations are expected next week, with emphasis on a unified customer view and added efficiencies.
• Revamped Partner & PLG Strategies
  • Partner Relationships: The partner channel is being actively reworked under new leadership with a shift from commission-based to performance-based compensation tied to partner success, frequent enablement sessions, and co-selling initiatives.
  • Expanding Distribution: A proactive pipeline for recruiting and curating productive partners aims to drive enhanced field and PLG motions, supported by in-product nudges and workshops to modernize partners’ go-to-market strategies.
• Free-to-Paid Conversion Strategy
  • Strategic Restrictions: Previously unlimited free agents are now capped at 2, driving robust conversion efforts—converting approx. 2,000 customers in Q4 and 600 in Q1 to paid subscriptions.
  • Duration Limits: Upcoming changes will further limit free access to 6 months, reinforcing accelerated conversion and sustainable rev. growth in the SMB segment.
• Competitive Positioning & Macro Outlook
  • Competitive Edge: Freshworks positions itself as the plug‑and‑play, less complex alternative to larger competitors like ServiceNow, Zendesk, and Intercom, winning more head-to-head deals due to ease of use, lower operational costs, and quicker ROI.
  • Macro Resilience: Despite macro uncertainty, customers are investing based on immediate ROI and efficiency gains, not being deterred by broader economic concerns, with the co seeing improved win rates across segments.

Mika Yamamoto’s commentary underscores that Freshworks’ strategic pivot in AI, pricing, partner relationships, and product innovation is designed to drive robust growth, increase ACV, and improve retention—all key signals for investors evaluating the competitive and financial outlook of the co amidst a dynamically shifting market.

Call Q&A

• Unknown Analyst: Can you talk about the Freddy Copilot attach rates in SMB?
  • Mika Yamamoto: It's been a good accelerator for growth, with over 20% attach rate for Freddy Copilot.
• Unknown Analyst: What has been the catalyst for companies moving from thinking about AI to implementing it?
  • Mika Yamamoto: The main catalyst is finding efficiencies while increasing customer satisfaction and retention.
• Unknown Analyst: How is Freddy Copilot contributing to customer ACV and retention?
  • Mika Yamamoto: It's helping customers buy higher plans and increasing ACV, with a shift towards add-ons in expansion.
• Unknown Analyst: What is the right pricing strategy for Freddy Copilot?
  • Mika Yamamoto: We're currently using per agent pricing but considering use-based models to reduce friction.