Shares of Freshworks Inc. (FRSH) plunged 5.21% in the pre-market trading session on Wednesday, following the company's fourth-quarter earnings release that showed slowing revenue growth and heightened competition in the software-as-a-service (SaaS) market.

The customer engagement and IT service management software provider reported fourth-quarter revenue of $194.6 million, up 22% year-over-year. While this surpassed analysts' estimates, it marked a deceleration from the previous quarter's growth rate of 24%. The company's net dollar retention rate, a key metric that measures customer satisfaction and expansion, came in at 105% on a constant-currency basis, indicating some pressure on customer retention and upsell.

Freshworks' performance was dampened by increased competition from larger rivals like ServiceNow and Salesforce, which have been aggressively investing in their product offerings and expanding their market presence. According to analysts, Freshworks' unique selling point of providing "enterprise-grade software without the enterprise complexity" is being challenged by these industry giants.

In the earnings call, Freshworks CEO Dennis Woodside acknowledged the competitive landscape, stating, "We hear this all the time. Those companies in that segment, they're looking for something that's enterprise-grade without the enterprise complexity, and that's fast time to value and overall lower total cost." However, the company remains confident in its ability to differentiate itself through its focus on innovation, particularly in the areas of artificial intelligence (AI) and automation.

Freshworks reported strong adoption of its AI-powered products, with over 50% attach rates for its Freddy AI Copilot on new deals exceeding $30,000. The company aims to drive further growth by leveraging AI capabilities across its product suite, including its flagship Freshdesk and Freshservice offerings.