Artisan Small Cap Fund Sold Freshworks (FRSH) Due to Concerns Over the Effectiveness of AI Transition

Artisan Partners, an investment management company, released its “Artisan Small Cap Fund” second-quarter 2025 investor letter. A copy of the letter can be downloaded here. Global markets saw an incredible but volatile second quarter, shifting from deep declines to strong gains. In the quarter, its Investor Class fund ARTSX returned 7.30%, Advisor Class fund APDSX posted a return of 7.33%, and Institutional Class fund APHSX returned 7.36%, compared to a return of 11.97% for the Russell 2000 Growth Index. In addition, you can check the fund’s top 5 holdings to find out its best picks for 2025.

In its second-quarter 2025 investor letter, Artisan Small Cap Fund highlighted stocks such Freshworks Inc. (NASDAQ:FRSH). Freshworks Inc. (NASDAQ:FRSH) is a software development company that offers software-as-a-service products. The one-month return of Freshworks Inc. (NASDAQ:FRSH) was -0.21%, and its shares gained 15.07% of their value over the last 52 weeks. On August 22, 2025, Freshworks Inc. (NASDAQ:FRSH) stock closed at $13.97 per share, with a market capitalization of $4.071 billion.

Artisan Small Cap Fund stated the following regarding Freshworks Inc. (NASDAQ:FRSH) in its second quarter 2025 investor letter:

“We ended our investment campaigns in Saia, Freshworks Inc. (NASDAQ:FRSH) and Iovance during the quarter. Freshworks is a cloud-based software company that provides solutions to enhance customer and employee experiences across various business functions. We initiated a GardenSM campaign at the end of 2024 based on the thesis that Freshworks would successfully move upmarket, capturing business from ServiceNow, and that the company would benefit from artificial intelligence (AI) trends, particularly given its customer service chatbot product, which had been successfully monetized for several quarters. We ended the campaign this quarter due to concerns regarding how effectively Freshworks could transition from a seat-based to an enterprise-based pricing model given AI’s potential to improve the performance of its customers while also enabling those customers to reduce employment levels.”

Freshworks Inc. (FRSH): Among Billionaire David E. Shaw’s Small-Cap Stock Picks with Huge Upside Potential

A close-up picture of a software engineer typing code on a laptop.

Freshworks Inc. (NASDAQ:FRSH) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 35 hedge fund portfolios held Freshworks Inc. (NASDAQ:FRSH) at the end of the second quarter, which was 41 in the previous quarter. Freshworks Inc. (NASDAQ: FRSH) reported Q2 revenue of $204.7 million, marking an 18% year-over-year growth, with a non-GAAP operating margin of 22% and adjusted free cash flow margin of 27%. While we acknowledge the risk and potential of Freshworks Inc. (NASDAQ:FRSH) as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than Freshworks Inc. (NASDAQ:FRSH) and that has 10,000% upside potential, check out our report about this cheapest AI stock.

In another article, we covered Freshworks Inc. (NASDAQ:FRSH) and shared the list of best stocks under $20 to buy for the long term. In addition, please check out our hedge fund investor letters Q2 2025 page for more investor letters from hedge funds and other leading investors.

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Disclosure: None. This article is originally published at Insider Monkey.