What Happened:
Shares of business software provider Freshworks (NASDAQ: FRSH) jumped 15.9% in the morning session after the company reported a "beat and raise" quarter. Second-quarter results surpassed analysts' expectations for revenue, operating profits, free cash flow and earnings per share (EPS). The number of customers spending more than $5k in annual recurring revenue (ARR) continued to grow and came in ahead of Consensus. Retention rate was also stable.
Moving ahead, revenue and EPS guidance for the next quarter and the full year were roughly in line with expectations. The company touched on its AI initiatives stating, "In Q2, we launched new generative AI enhancements across our product lines and outperformed our estimates across all our key financial metrics. I'm excited about the opportunity for companies to take advantage of our software to delight their customers and employees." Overall, it was a positive quarter for the company, with a decent beat of key estimates and encouraging guidance.
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What is the market telling us:
Freshworks's shares are very volatile and over the last year have had 40 moves greater than 5%. But moves this big are very rare even for Freshworks and that is indicating to us that this news had a significant impact on the market's perception of the business. The previous big move was three months ago, when the stock gained 6.91% on the news that the company reported first-quarter results that beat analysts' revenue, free cash flow, and earnings per share (EPS) estimates. In addition, revenue and EPS guidance for the next quarter and full year came in roughly in-line with the Consensus estimates. Overall, it was a strong quarter for the company.
Freshworks is up 45.3% since the beginning of the year. Investors who bought $1,000 worth of Freshworks's shares at the IPO in September 2021 would now be looking at an investment worth $453.10.
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