Freshworks to cut 500 jobs as AI reshapes software industry

Freshworks is cutting 11% of its workforce, about 500 jobs, while saying artificial intelligence is also helping drive the company’s next phase of efficiency. The move puts a sharp edge on a contradiction spreading through software: vendors sell AI as a way to reduce labor for customers, then use the same logic to shrink their own staffs.

The San Mateo, California-based company said the restructuring is tied to AI adoption and the automation of routine work. That pressure is hitting a business built on customer service and technical support software, where repetitive tasks are increasingly easier for AI tools to handle. Shares fell more than 8% in extended trading after the announcement, signaling that investors read the layoffs as more than routine cost control.

Freshworks’ first-quarter 2026 results showed why management believes it can cut and still grow. Revenue rose 16% to $228.6 million from $196.3 million a year earlier, non-GAAP operating income reached $41.0 million, and the company ended March 31 with $780.4 million in cash, cash equivalents, restricted cash and marketable securities. Chief executive Dennis Woodside said the company had delivered its sixth straight quarter of exceeding expectations and was focused on “sustainable growth and increased profitability.”

Woodside said more than half of Freshworks’ code is now written by AI, a sign that automation is already reshaping the company’s own engineering workflow. He also said Freshworks does not plan additional layoffs, but will be more selective about backfilling roles and stay “fast and nimble” as it uses AI more deeply.

The cuts are Freshworks’ first major workforce reduction since November 2024, when it said it would eliminate about 13% of staff, or roughly 660 employees globally. That restructuring was expected to cost about $11 million to $13 million. The new round carries about $8 million in one-time charges, showing the company is again using layoffs to reset costs while leaning harder into software automation.

Freshworks’ move fits a broader pattern across the sector. Atlassian said in March that it would cut 10% of its workforce, or about 1,600 jobs, to self-fund AI and enterprise sales. Larger rivals such as Salesforce and ServiceNow have also faced pressure from investors as generative AI threatens traditional software pricing power and makes product defensibility harder to prove.

The broader message for software employment is clear: AI is no longer just a sales pitch. It is changing what software companies build, how they staff engineering and support teams, and how Wall Street judges whether headcount still belongs on the expense line.