Freshworks (FRSH 0.06%) stock is seeing a big valuation contraction in Wednesday's trading. The company's share price was down 14.8% as of 2 p.m. ET. At the same point in the session, the S&P 500 and the Nasdaq Composite were both flat.
Freshworks released its fourth-quarter results after the market closed yesterday and reported sales and earnings for the period that beat Wall Street's expectations. On the other hand, investors had been hoping for stronger forward guidance.
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Q4 sales and earnings beats haven't been enough to support Freshworks stock
Freshworks recorded non-GAAP (adjusted) earnings per share of $0.14 on revenue of $222.7 million in the fourth quarter. Adjusted earnings beat the average Wall Street analyst estimate by $0.03 per share, and sales came in roughly $3.9 million higher than anticipated. Revenue in the quarter was up 14.4% year over year, and per-share earnings were in line with the prior-year period.
NASDAQ: FRSH
Key Data Points
Investors aren't happy with Freshworks' outlook for 2026
For the current quarter, Freshworks is targeting revenue between $222 million and $225 million. Hitting the midpoint of that sales range would mean posting year-over-year sales growth of roughly 13.9%.
For the full-year period, management is guiding for sales between $952 million and $960 million -- representing annual growth of roughly 14% at the midpoint of the guidance range. Meanwhile, adjusted earnings per share for the year are projected to be between $0.55 and $0.57 -- down from $0.66 per share last year.
Freshworks actually raised its full-year sales target from the guidance it issued in September, but adjusted earnings per share look poised for a significant decline this year. Investors have recently been assigning lower valuation multiples for software stocks, and the company's forward guidance wasn't strong enough to spur bullish sentiment.
