What Happened?
Shares of business software provider Freshworks (NASDAQ: FRSH) fell 16.5% in the afternoon session after the company issued a full-year profit forecast that fell short of Wall Street's expectations, overshadowing an otherwise solid fourth-quarter report. While the company's fourth-quarter revenue and earnings per share both topped analysts' estimates, its outlook disappointed investors. Freshworks guided for full-year 2026 adjusted earnings per share to be between $0.55 and $0.57, which missed the consensus estimate of $0.69. Similarly, the first-quarter profit forecast also came in below expectations.
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What Is The Market Telling Us
Freshworks’s shares are somewhat volatile and have had 14 moves greater than 5% over the last year. But moves this big are rare even for Freshworks and indicate this news significantly impacted the market’s perception of the business.
The previous big move we wrote about was 6 days ago when the stock dropped 5.3% on the news that the "AI replacement" narrative reached a fever pitch following the release of new models from Anthropic and OpenAI. The simultaneous debut of Anthropic's Claude Opus 4.6 and OpenAI's "Frontier" agent platform raised concerns that autonomous agents are no longer just tools, but new operating systems that can cannibalize traditional software. This suggests that specialized applications might be reduced to mere features within frontier models, rendering legacy seat-based licensing models increasingly obsolete. The catalyst is the models' unprecedented agentic power. Opus 4.6’s "software hunting" capability allows it to autonomously audit and patch complex codebases, while OpenAI's Frontier platform bypasses traditional CRM and ticketing interfaces to perform enterprise work directly. By commoditizing sophisticated workflows into low-cost API calls, these releases threaten the recurring revenue of software giants. As AI builds bespoke tools on demand, the market is aggressively repricing the entire software application layer.
Freshworks is down 36.8% since the beginning of the year, and at $7.33 per share, it is trading 59.6% below its 52-week high of $18.12 from February 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 $154.11.
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