Citizens reduced its price target for Freshworks Inc (NASDAQ:FRSH) to $16.00 from $27.00 while maintaining a Market Outperform rating, following the software company’s fourth-quarter results that outpaced analyst expectations.
The brokerage pointed to Freshworks’ better-than-expected non-GAAP earnings per share of $0.14, compared with a consensus estimate of $0.12. The quarter also showed an operating margin of 18.7%, above the 14.7% consensus, and revenue of $223 million that topped the $219 million consensus. On a year-over-year basis, that revenue represented 14% growth, a slight deceleration from the 15% growth recorded in the prior quarter.
Citizens’ analysis highlighted product-level ARR performance. Experience, or EX, annual recurring revenue reached $510 million in the quarter, up 26% year-over-year versus 24% growth in the previous quarter. Customer Experience, or CX, ARR stood at $395 million, increasing 9% year-over-year compared with 8% in the prior quarter. The brokerage also noted that Freddy AI ARR rose to $25 million from $20 million in the preceding quarter.
Separately, Freshworks’ reported fourth-quarter 2025 results included a non-GAAP EPS of $0.14, which exceeded a forecasted $0.11, representing a 27.27% surprise. Revenue in that report was $222.7 million versus an expected $218.76 million.
Despite the quarterly outperformance, Oppenheimer adjusted its price target for Freshworks from $18.00 to $15.00 but preserved an Outperform rating. Oppenheimer attributed the lower target to peer multiples while acknowledging that Freshworks’ EX business and AI products were key drivers of the company’s strong showing.
Analysis
The consensus-busting quarter combined top-line beats, margin expansion and accelerating AI-related ARR growth. Citizens’ cut in price target suggests the firm is revaluing the stock against revised expectations for multiples, rather than the company’s near-term operational trajectory, which the reported metrics portray as improving.
Key takeaways
- Freshworks posted a non-GAAP EPS of $0.14, beating consensus estimates cited by Citizens and by other reports.
- Revenue and operating margin outperformed consensus, with revenue around $222.7 million to $223 million and operating margin at 18.7% versus a 14.7% consensus.
- Product-level ARR gains were led by EX ARR at $510 million (up 26% year-over-year) and Freddy AI ARR rising to $25 million.
Impacted sectors
- SaaS and enterprise software - results and ARR trends directly reflect demand and monetization in subscription software.
- AI application layer - Freddy AI ARR growth points to commercial traction for AI-enabled products within the software stack.
- Equity markets and analyst coverage - price-target adjustments and maintained Outperform ratings affect investor sentiment toward the shares.
Risks and uncertainties
- Valuation compression - both Citizens and Oppenheimer lowered price targets, pointing to pressure from peer multiples on Freshworks’ valuation.
- Revenue growth moderation - year-over-year revenue growth decelerated slightly to 14% from 15% in the prior quarter, indicating potential near-term headwinds for topline expansion.
- Dependence on product momentum - continued upside may rely on sustaining EX and AI ARR growth, which will be closely watched by investors and analysts.
The quarter provided evidence of improving unit economics and product traction, yet analysts recalibrated price targets in light of market multiple dynamics. Freshworks’ operating results and ARR breakdown offer clear signals on where the company’s commercial strength is concentrated.