Dj Freshworks Inc Cl A, Inst Holders, 2Q 2025 (Frsh)

What Happened?

A number of stocks jumped in the afternoon session after the SaaS sector continued to rally as favorable inflation data bolstered hopes for a Federal Reserve interest rate cut. This optimism was largely driven by a benign July Consumer Price Index (CPI) report, which solidified investor expectations for a Federal Reserve interest rate cut. Following the release of the inflation data, which showed a year-over-year increase of 2.7%, the probability of a rate cut in September surged to over 96%. Lower interest rates are typically beneficial for growth-oriented technology stocks, as they can reduce borrowing costs and increase the present value of future earnings. Adding to the positive sentiment was a 90-day delay in the imposition of higher tariffs on Chinese goods, which reduced trade-related uncertainty for the technology sector.

The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks.

Among others, the following stocks were impacted:

• Data Storage company DigitalOcean jumped 5.6%. Is now the time to buy DigitalOcean? Access our full analysis report here, it’s free.
• Healthcare And Life Sciences Software company Doximity jumped 4.4%. Is now the time to buy Doximity? Access our full analysis report here, it’s free.
• Sales Software company Freshworks jumped 4%. Is now the time to buy Freshworks? Access our full analysis report here, it’s free.
• Marketing Software company Braze jumped 3.9%. Is now the time to buy Braze? Access our full analysis report here, it’s free.
• Data Infrastructure company Teradata jumped 3.9%. Is now the time to buy Teradata? Access our full analysis report here, it’s free.

Zooming In On DigitalOcean (DOCN)

DigitalOcean’s shares are extremely volatile and have had 34 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.

The previous big move we wrote about was 9 days ago when the stock gained 4.3% on the news that the Software as a Service (SaaS) sector rebounded following the sell-off in the previous trading session as a weaker-than-expected U.S. jobs report increased the probability of a Federal Reserve interest rate cut. The July Nonfarm Payrolls (NFP) report showed the U.S. economy added only 73,000 jobs, significantly below the 110,000 forecast. This, combined with downward revisions for May and June, signaled a cooling labor market to investors. In response, market expectations for a September interest rate cut by the Federal Reserve surged from roughly 40% to over 80%. A potential rate cut is generally favorable for growth sectors like technology and SaaS, as lower rates can increase the present value of their future earnings, boosting stock valuations.

DigitalOcean is down 7.3% since the beginning of the year, and at $31.76 per share, it is trading 32% below its 52-week high of $46.69 from February 2025. Investors who bought $1,000 worth of DigitalOcean’s shares at the IPO in March 2021 would now be looking at an investment worth $747.29.

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What Happened?

Shares of business software provider Freshworks jumped 3.1% in the afternoon session after Oppenheimer reiterated an "Outperform" rating on the stock with a $19.00 price target. The positive sentiment followed a presentation by Freshworks' CFO at Oppenheimer's annual technology conference, where management conveyed an upbeat tone regarding the company's market opportunities and AI momentum. The analyst's confidence is supported by the company's strong second-quarter results, reported in late July, which saw revenue grow 17.5% year-over-year, beating Wall Street's expectations. Notably, Freshworks' non-GAAP profit per share of $0.18 was nearly 56% above consensus estimates. Adding to the tailwind, the broader market rallied on the day after a favorable inflation report boosted investor hopes for a potential interest rate cut, with major indexes hitting new highs.

After the initial pop the shares cooled down to $12.55, up 2% from previous close.

Is now the time to buy Freshworks? Access our full analysis report here, it’s free.

What Is The Market Telling Us

Freshworks’s shares are somewhat volatile and have had 11 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.

The previous big move we wrote about was 8 days ago when the stock gained 3.8% on the news that the Software as a Service (SaaS) sector rebounded following the sell-off in the previous trading session as a weaker-than-expected U.S. jobs report increased the probability of a Federal Reserve interest rate cut. The July Nonfarm Payrolls (NFP) report showed the U.S. economy added only 73,000 jobs, significantly below the 110,000 forecast. This, combined with downward revisions for May and June, signaled a cooling labor market to investors. In response, market expectations for a September interest rate cut by the Federal Reserve surged from roughly 40% to over 80%. A potential rate cut is generally favorable for growth sectors like technology and SaaS, as lower rates can increase the present value of their future earnings, boosting stock valuations.

Freshworks is down 21.1% since the beginning of the year, and at $12.55 per share, it is trading 36.5% below its 52-week high of $19.75 from January 2025. Investors who bought $1,000 worth of Freshworks’s shares at the IPO in September 2021 would now be looking at an investment worth $263.83.

Here at StockStory, we certainly understand the potential of thematic investing. Diverse winners from Microsoft (MSFT) to Alphabet (GOOG), Coca-Cola (KO) to Monster Beverage (MNST) could all have been identified as promising growth stories with a megatrend driving the growth. So, in that spirit, we’ve identified a relatively under-the-radar profitable growth stock benefiting from the rise of AI, available to you FREE via this link.

Business software provider Freshworks reported revenue ahead of Wall Street’s expectations in Q2 CY2025, with sales up 17.5% year on year to $204.7 million. The company expects next quarter’s revenue to be around $208.5 million, close to analysts’ estimates. Its non-GAAP profit of $0.18 per share was 55.9% above analysts’ consensus estimates.

Is now the time to buy FRSH? Find out in our full research report (it’s free).

Freshworks (FRSH) Q2 CY2025 Highlights:

• Revenue: $204.7 million vs analyst estimates of $198.9 million (17.5% year-on-year growth, 2.9% beat)
• Adjusted EPS: $0.18 vs analyst estimates of $0.12 (55.9% beat)
• Adjusted Operating Income: $44.83 million vs analyst estimates of $28.74 million (21.9% margin, 56% beat)
• The company slightly lifted its revenue guidance for the full year to $825.9 million at the midpoint from $819.8 million
• Adjusted EPS guidance for the full year is $0.57 at the midpoint, roughly in line with what analysts were expecting
• Operating Margin: -4.2%, up from -25.1% in the same quarter last year
• Customers: 23,975 customers paying more than $5,000 annually
• Net Revenue Retention Rate: 106%, up from 105% in the previous quarter
• Annual Recurring Revenue: $836.3 million at quarter end, up 18.1% year on year
• Billings: $213.4 million at quarter end, up 14.8% year on year
• Market Capitalization: $3.58 billion

StockStory’s Take

Freshworks’ Q2 results outpaced Wall Street’s revenue and profit expectations, yet the market responded negatively, reflecting concerns about future growth and profitability. Management credited the quarter’s performance to robust expansion in its Employee Experience and Customer Experience platforms, with CEO Dennis Woodside highlighting, “Our strategy has focused on three key growth drivers: investing in Employee Experience, delivering AI capabilities, and accelerating adoption in customer experience.” The company pointed to steady demand for its AI-powered solutions and significant customer wins across both new and existing accounts as major contributors to quarterly growth.

Looking ahead, Freshworks’ guidance is shaped by continued investment in AI innovation, expansion of its enterprise sales force, and increased spending on marketing initiatives. Management believes that recently launched AI features, broader adoption of the Device42 platform, and a growing partner ecosystem will support future growth. However, CFO Tyler Sloat noted that incremental spending in the second half of the year—especially in sales and marketing—will impact margins, stating, “We are going to make some investments in the back half of the year…but we will invest in growth.”

Key Insights from Management’s Remarks

Management attributed Q2’s outperformance to strong demand for AI-driven solutions, expansion in mid-market and enterprise segments, and momentum from recent product launches and partnerships.

• Employee Experience (EX) growth: The EX portfolio saw over 24% year-over-year growth, fueled by large customers switching from legacy providers to Freshservice and increased adoption of enterprise service management solutions.
• AI product traction: More than 5,000 customers now pay for Freshworks’ AI copilot and agent products, with ARR from these offerings doubling year-over-year. Freddy Copilot was included in over half of large new deals, and organizations using these AI features reported significant reductions in ticket resolution times.
• Device42 integration: Device42, acquired last year, contributed meaningfully to larger deal sizes and cross-sell opportunities, especially as customers modernize IT operations. Management expects Device42, AI, and enterprise service management to each become $100 million ARR businesses in the near term.
• Momentum in partner channels: Over one-third of ARR was influenced by Freshworks’ partner ecosystem, which added 130 new partners. Larger partners are generating bigger deals and opening access to mature enterprise customers, particularly in international markets.
• Cross-sell and customer expansion: The company cited successful cross-sell initiatives, with customers starting on one platform (like Freshdesk) and expanding to others (such as Freshservice), validating improved efficiency and user satisfaction across both customer and employee experience portfolios.

Drivers of Future Performance

Freshworks’ outlook for the year is anchored in further AI adoption, partner-led expansion, and investments in sales and marketing initiatives that are expected to support both revenue growth and operational scale.

• AI monetization and adoption: Management views AI as a multi-year growth lever, citing the early success of Agentic AI products and a long runway for customer adoption. As newer AI features move from early access to broader rollout, Freshworks expects increased attach rates and incremental revenue, particularly as enterprises seek automation and efficiency.
• Device42 and ESM opportunities: The integration of Device42 and expansion of enterprise service management (ESM) offerings are expected to drive larger deal sizes and higher value contracts, especially as Freshworks moves upmarket. Management anticipates that each of these segments could reach $100 million in annual recurring revenue, reflecting strong demand from enterprises seeking unified IT solutions.
• Sales and marketing investments: Freshworks plans to increase spending on sales capacity, brand initiatives, and strategic hires in the second half of the year. While these investments are intended to capture new growth opportunities and expand market reach, they are also expected to put near-term pressure on operating margins as the company balances growth with profitability.

Catalysts in Upcoming Quarters

As we look to upcoming quarters, our analysts will be monitoring (1) the pace and breadth of AI feature adoption and its effect on expansion within the existing customer base, (2) the impact of Device42’s cloud rollout and integration on enterprise deal momentum, and (3) the effectiveness of increased sales and marketing investments in driving new customer acquisition and partner-led growth. The trajectory of net revenue retention and cross-sell success will also be important indicators.

Freshworks currently trades at $12.76, down from $13.91 just before the earnings. At this price, is it a buy or sell? Find out in our full research report (it’s free).

Stocks That Trumped Tariffs

When Trump unveiled his aggressive tariff plan in April 2025, markets tanked as investors feared a full-blown trade war. But those who panicked and sold missed the subsequent rebound that’s already erased most losses.

Don’t let fear keep you from great opportunities and take a look at Top 5 Strong Momentum Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).

Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-micro-cap company Kadant (+351% five-year return).

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Growth is oxygen. But when it evaporates, the consequences can be severe - ask anyone who bought Cisco in the Dot-Com Bubble or newer investors who lived through the 2020 to 2022 COVID cycle.

Luckily for you, our job at StockStory is to help you avoid short-term fads by pointing you toward high-quality businesses that can generate sustainable long-term growth. That said, here are two growth stocks where the best is yet to come and one climbing an uphill battle.

One Growth Stock to Sell:

Corcept (CORT)

One-Year Revenue Growth: +25.7%

Focusing on the powerful stress hormone that affects everything from metabolism to immune function, Corcept Therapeutics develops and markets medications that modulate cortisol to treat endocrine disorders, cancer, and neurological diseases.

Why Does CORT Fall Short?

• Costs have risen faster than its revenue over the last five years, causing its adjusted operating margin to decline by 16.9 percentage points
• Earnings per share fell by 2.8% annually over the last five years while its revenue grew, showing its incremental sales were much less profitable
• Diminishing returns on capital suggest its earlier profit pools are drying up

Corcept’s stock price of $74.90 implies a valuation ratio of 41.4x forward P/E. Check out our free in-depth research report to learn more about why CORT doesn’t pass our bar.

Two Growth Stocks to Watch:

Freshworks (FRSH)

One-Year Revenue Growth: +19.8%

Founded in Chennai, India in 2010 with the idea of creating a “fresh” helpdesk product, Freshworks offers a broad range of software targeted at small and medium-sized businesses.

Why Could FRSH Be a Winner?

• Ability to secure long-term commitments with customers is evident in its 20.1% ARR growth over the last year
• Software is difficult to replicate at scale and results in a stellar gross margin of 84.6%
• Operating profits and efficiency rose over the last year as it benefited from some fixed cost leverage

At $12.76 per share, Freshworks trades at 4.1x forward price-to-sales. Is now the time to initiate a position? See for yourself in our full research report, it’s free.

American Superconductor (AMSC)

One-Year Revenue Growth: +63.7%

Founded in 1987, American Superconductor has shifted from superconductor research to developing power systems, adapting to changing energy grid needs and naval technology requirements.

Why Are We Backing AMSC?

• Market share has increased this cycle as its 49.8% annual revenue growth over the last two years was exceptional
• Free cash flow profile has moved into positive territory over the last five years, showing the company has crossed a key inflection point
• Improving returns on capital suggest its past investments are beginning to deliver value

American Superconductor is trading at $52.69 per share, or 91.5x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free.

High-Quality Stocks for All Market Conditions

Donald Trump’s April 2025 "Liberation Day" tariffs sent markets into a tailspin, but stocks have since rebounded strongly, proving that knee-jerk reactions often create the best buying opportunities.

The smart money is already positioning for the next leg up. Don’t miss out on the recovery - check out our Top 9 Market-Beating Stocks. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).

Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-small-cap company Comfort Systems (+782% five-year return).

StockStory is growing and hiring equity analyst and marketing roles. Are you a 0 to 1 builder passionate about the markets and AI? See the open roles here.