Freshworks cuts 11% amid AI shifts

Freshworks is a customer-service and IT software company. It is also the latest example of a tech firm saying the AI shift is not just about new products — it is changing who the company needs to employ. On May 5, Freshworks said it will cut about 500 jobs, or roughly 11% of its workforce, as it reshapes the business around AI, trims management layers, and combines some sales teams. The awkward part is that this came with a pretty solid quarter, not a collapse. ### Why cut jobs if the business is still growing? Because this was framed as a redesign, not an emergency brake. Freshworks reported Q1 revenue of $228.6 million, up 16% year over year, and said it beat its own revenue and operating-income expectations. It also landed the two biggest deals in company history, including its first contract worth more than $1 million in annual recurring revenue. ### What did management actually say changed? Dennis Woodside made the clearest point — more than half of Freshworks’ code is now written by AI, and automation is taking over routine work across the company. That does not mean AI replaced 500 people one-for-one. But it does mean the company thinks the old org chart no longer matches how work gets done. ### Where is Freshworks putting the savings? Into the parts of the company growing faster. Management said the money saved from fewer management layers, merged sales functions, and more automation will be redirected toward Employee Experience — basically the Freshservice side of the business — plus, it is growing this year, much faster than the customer-experience segment. ### So is this a weak-company story or a strong-company story? Annoyingly, both. Freshworks is growing, generating cash, and guiding Q2 revenue to $232 million to $235 million. But investors still knocked the stock down more than 8% in extended trading after the announcement, and the shares had already fallen about 26% under pressure. ### Is this just Freshworks? No — it fits a broader software pattern. Freshworks’ move follows other 2026 tech layoffs, and Reuters noted Atlassian cut roughly 10% of jobs last month. The backdrop is simple: companies are spending heavily on AI, but they also think AI lets them run leaner teams. That creates a weird labor market where some roles disappear while others get more expensive. ### More expensive for who? For the people companies still cannot hire fast enough. WTW’s new AI and digital talent pay survey says the U.S. keeps widening its lead on AI compensation. Median total pay for mid-level machine-learning roles in the U.S. is above $170,000, and the gap versus Europe remains. Commodity tech work is getting squeezed, scarce AI work is not.” ### What happens to affected employees? Freshworks said the restructuring is global and expects about $8 million in one-time charges, mostly in Q2. Reports on the employee memo said staff in India and North America were to be notified quickly, with other regions handled under local rules. Woodside also said Freshworks is not planning another layoff round right now, though hiring and backfilling will be more restrained. ### Bottom line? Freshworks did not cut jobs because the company stopped growing. It cut jobs because management thinks AI changes the shape of a healthy software company — fewer layers, fewer routine tasks, and more money pushed toward the teams building and selling the next thing.