Imagine a test engineer in her second year at a mid-sized software company, the kind that sells help-desk tools to other companies. She is invented, a stand-in for the people whose jobs the numbers below describe. Her first task each Monday used to be a regression pass: click through the release candidate, log what broke, write it up for a senior colleague. This autumn the pass runs overnight, driven by an agent, and her Monday begins with a list of failures to triage. Nobody has told her the job is gone. Nobody has told her what the job is now, either.

On 3 November Fortune published an interview with a chief executive who describes that shift in his own company. Dennis Woodside of Freshworks said the company had passed $1 billion in annual recurring revenue, a contracted figure that runs ahead of reported sales. It ended September at about $992 million and crossed the line in October after closing two acquisitions, Torii and Robusta; Freshworks does not say how much of the total those deals supplied. It did so with roughly 3,800 full-time employees, down from a peak of about 5,400 in 2022. That is a reduction of about 30 percent, and Woodside says it was “not a choice.”

What the filing shows

Freshworks reported its third-quarter results the same day. According to the earnings release filed with the US Securities and Exchange Commission, revenue was $245.4 million, up 14 percent from a year earlier. The company posted GAAP net income of $18.3 million, against a loss of $4.7 million in the third quarter of 2025, and adjusted free cash flow of $73.9 million, a 30.1 percent margin. The release does not mention headcount. It does show customers paying more than $100,000 a year rising 25 percent, to 1,821, while customers above $5,000 rose 6 percent, to 25,498.

The headcount comes from Woodside. The path to it has three dated steps. In November 2024 the company said it would cut 660 jobs, about 13 percent of staff, while it realigned around customer experience, employee experience and AI. In May 2026 it announced another 11 percent, about 500 jobs from a base of roughly 4,500 at the end of 2025, with about $8 million in one-time charges. Reuters quoted Woodside then: “Over half of our code is written by AI.” Shares fell more than 8 percent in after-hours trading and stood about 26 percent lower for the year.

What Woodside says AI replaced

In the Fortune interview he is specific about the work. “A lot of work that used to be done by kind of early-tenure employees, we are doing with AI,” he told Fortune. Designers build prototypes that go to code, and testing, he said, “is mostly done by AI today as well.” What remains for people, in his words, is to “think at a higher level about: what’s the business problem that I need to go solve.” He told Fortune that early-career talent “remains essential,” although the work will no longer be the “repetitive, mechanical work” it has been.

Woodside also describes cutting products. Under him the company deemphasised small tools such as Freshping, Freshteams and Freshsurvey to concentrate on Freshservice, its IT service product. Employee-experience software made up 59 percent of annual recurring revenue, $588 million, at the end of September, against 35 percent at the 2021 stock-market listing; the older customer-service business accounted for $404 million. The peak he cites is from 2022, and the company’s account ties the shrinkage to several causes at once: portfolio focus, acquisitions, merged sales teams and automation. The filing and the interview do not say how many of the roughly 1,600 departed jobs AI alone accounts for.

The questions outside voices ask

Fortune sets Woodside beside people who doubt that many companies have done what he describes. McKinsey’s Alex Panas joked that “AI is everywhere except in the EBIT line.” His colleague Michael Park said that the number of companies that have really rethought how they do work is “very small.” In McKinsey’s State of AI survey, as Fortune reports it, 39 percent of respondents expected AI to shrink their headcount in the next year, while 14 percent said it already had.

Ethan Mollick, the Wharton professor, asks a simpler test: “Have you stopped doing anything?” Almost every company, he told Fortune, has failed it. His larger worry sits at the bottom of the ladder. The old apprenticeship deal “all broke down because interns are doing work with AI, and middle managers would rather turn to AI than interns,” he told the newsletter Charter this month. Mollick was not commenting on Freshworks, and Fortune records that its strategy, with output rising rather than flat, differs from the aggressive cutting he fears.

The labour data is cautious in the same way. A Goldman Sachs note reported by Fortune on 30 October found that workers displaced from AI-exposed jobs since 2025 took about a month longer to find new work than other displaced workers. Goldman built the AI-exposure label itself from occupation and industry measures, and says it is too early to judge every dimension. Freshworks is one firm’s account of one set of jobs.

A market that pays for it, for now

The market has noticed. Early in 2026, software stocks were hit by what Fortune calls the “Saaspocalypse,” as AI-native startups went after incumbents’ customers. Freshworks traded under $8 in late March, down about 31 percent for the year. By late October it was around $15, up more than 25 percent on the year. Woodside believes software’s bottom came in February and says investors have since sorted the sector; companies with simpler products that AI can replicate, he said, “haven’t come back.”

The threat runs both ways. Park told Fortune that customers can now ask a model to help them migrate between systems, which weakens the lock-in enterprise software relied on. Freshworks, which started as a small-business help desk in Chennai, now prices partly by usage, assets managed and problems resolved, though customers still want seats for the predictability. Inside the company, Woodside said, the talk has already turned to the path to $2 billion.

Back in our invented company, the test engineer’s manager reads the same headlines and does the same arithmetic. The overnight pass is cheap and the list of failures it produces needs someone who can tell a real regression from a flaky one, which she learned only by running the old pass by hand. Whether anyone will still be hired to learn that, a year from now, is the question that Woodside’s numbers do not answer and his interview, to its credit, leaves open.

References

  • Fortune (2026). Freshworks CEO on crossing $1 billion in ARR with 30% fewer employees in the AI software age, by Nick Lichtenberg, 3 November. fortune.com
  • Fortune (2026). Goldman Sachs on AI layoffs, displaced workers and past tech disruptions, 30 October. fortune.com
  • Freshworks Inc. (2026). Form 8-K: third quarter 2026 earnings release. US Securities and Exchange Commission. sec.gov
  • Outlook Start-Up Desk (2024). Freshworks Lays Off 660 Employees Globally Amid Strong Q3 Results. Outlook Business, 7 November. outlookbusiness.com
  • Rooprai, A. (2026). Freshworks to cut 11% jobs as AI reshapes software industry. Reuters, via The Star, 6 May. thestar.com.my