Freshworks cuts 500 jobs as AI disrupts software industry
LONDON, UNITED KINGDOM — Another major United States software company is rebuilding itself around artificial intelligence (AI) — and 500 employees are paying the price. Freshworks announced it would cut 11% of its workforce as the San Mateo, California-based business-software firm navigates an industrywide pivot driven by rapid AI advances.
According to a report from Reuters, the move follows Atlassian’s roughly 10% workforce cut last month and adds to a year that has already seen 92,462 tech employees lose their jobs.
For U.S. business leaders, the pattern is impossible to ignore: AI is no longer a productivity story in the software industry — it is a workforce reduction story.
Why software companies are restructuring around AI
The Freshworks cuts reflect a deeper shift in how software is built and sold. CEO Dennis Woodside said the restructuring was driven by AI use in product and engineering, along with automation of routine work across the business.
The company expects one-time charges of about $8 million and plans to reinvest the savings into its Employee Experience business, including its IT service management software Freshservice.
“Over half of our code is written by AI,” Woodside said in the report.
That sentence reframes the conversation for U.S. executives across every industry. When AI is producing the majority of a software company’s core output, traditional staffing models stop making sense — and the headcount cuts follow quickly behind.
Why the AI threat is reshaping the entire software market
The pressure is no longer coming only from internal efficiency goals. AI tools from Anthropic and other competitors have emerged as potential existential threats to traditional software makers, hammering shares of companies ranging from Freshworks to larger rivals such as Salesforce and ServiceNow.
Freshworks’ stock had already declined about 26% this year before the layoff announcement, and shares fell more than 8% in extended trading.
The report noted that the cuts are “the latest tied to AI in the software business, as companies race to automate work and reshape products around the technology while trying to offset its steep costs.”
For U.S. outsourcing firms, that line points to a real opening. Companies executing AI restructurings need partners who can absorb operational complexity, deliver scalable customer support and provide AI-integrated technical services without forcing internal teams to rebuild from scratch.
Outsourcing providers that combine AI fluency with workforce flexibility will capture the contracts shaping how American software companies operate over the next five years. The future of work belongs to companies that can scale AI and human expertise in parallel — and to the partners helping them do both.
