Freshworks to Lay Off 500 Employees as Part of AI Transformation Strategy

As the software company speeds up its transformation powered by artificial intelligence, Freshworks will slash about 500 workers worldwide. In response to industry-wide advances in enterprise technology, the company is reorganising its operations. On May 5th, the business announced that it would be laying off about 11% of its employees. As a result, Freshworks is just the latest software company to announce layoffs tied to the rise of artificial intelligence and other forms of automation.

In prolonged trading following the announcement, shares of the San Mateo, California-based corporation dropped by over 8%. One reason for the reorganisation, according to Freshworks—a software developer for customer service and IT support—is the increasing use of artificial intelligence (AI) in engineering and business processes.

AI Vs Humans the Battle Continues

An international media agency was informed by CEO Dennis Woodside that AI is already an integral part of the way the company develops new products. According to Woodside, artificial intelligence writes more than 50% of the firm's code. The repetitive tasks that technology can handle have been decreased due to automation, he continued. The remarks are indicative of a larger trend in the worldwide software industry. Now, businesses are shifting their attention from manual coding and support tasks to automated operational workflows and AI-focused products and infrastructure.

According to a news source, as the software industry reacts to comparable challenges, competitor Atlassian last month revealed intentions to lay off about 10% of its employees. Freshworks anticipated about $8 million in one-time restructuring expenditures and indicated that the layoffs will impact departments worldwide.

Freshworks' Employee Experience segment, which includes its IT service management platform, Freshservice, will get the reinvestment of restructuring savings, according to Woodside. Consolidating sales teams, cutting managerial layers, and improving operational automation are projected to result in the savings.

Layoffs a New Normal for Software Firms

All of these recent layoffs highlight how fast AI tools are changing the software industry. Companies like Anthropic are generating technologies that are seen as potential dangers to well-established software firms. Thus, putting downward pressure on market values and growth projections. As generative AI tools begin to automate functions that were previously managed through enterprise applications, larger software groups such as Salesforce and ServiceNow have also been subjected to increased scrutiny from investors.

More than 92,000 people throughout the world have lost their jobs in the technology sector this year, according to Layoffs.fyi. Freshworks' most recent financial report revealed that revenue growth was ongoing despite increasing industry disruption, coinciding with the announcement of the reorganisation. In the second quarter, the business expected to earn $232–235 million. Based on LSEG data, the guidance's midpoint was higher than the average analyst forecast of $232.7 million. Revenue for the first quarter came in at $228.6 million for Freshworks, up 16% year over year and higher than the $223.24 million predicted by analysts.