Mid‑Market Companies Lose an Average of 25% of Their AI Budget Before Seeing a Single Return, New Freshworks Research Finds

Rhea-AI Summary

Freshworks (NASDAQ: FRSH) released The Global Cost of Complexity Report on mid-market AI adoption. Surveying 12,021 IT leaders, it finds an average 25% of AI spend is lost to complexity, equal to an estimated $16.29 billion annually in US mid-market firms.

Key issues include long deployment timelines, integration challenges, talent shortages, and “AI slop” from noisy, error-prone outputs. Despite this, 89% plan to increase AI investment, and buying preferences are shifting toward integrated, out-of-the-box AI with built-in workflows.

News Market Reaction – FRSH

-0.66%

-0.66% Session close to close

In the May 27 session, FRSH declined 0.66%, reflecting a mild negative market reaction.

Data tracked by StockTitan Argus on the day of publication.

Market Context

This announcement quantifies how mid‑market firms lose 25% of AI budgets to complexity and highlight...

Analysis

This announcement quantifies how mid‑market firms lose 25% of AI budgets to complexity and highlights an estimated $16.29 billion in wasted US spend. It reinforces Freshworks’ ongoing AI narrative seen across past Freddy and agentic AI launches. Investors tracking the story may focus on how these findings support demand for integrated, out‑of‑the‑box AI, while also watching upcoming AI product updates, enterprise adoption metrics, and execution on previously guided financial targets.

Key Figures

AI spend lost to complexity: 25% Wasted AI spend: $16.29 billion Workload increase from AI: 86% +5 more

8 metrics

AI spend lost to complexity 25% Average share of mid-market AI spend lost to complexity overhead

Wasted AI spend $16.29 billion Estimated annual US mid-market AI spend wasted making AI functional

Workload increase from AI 86% Mid-market IT leaders reporting AI complexity increased team workload

AI slop incidence 80% Mid-market IT leaders reporting AI outputs create noise, errors, or rework

Planned AI investment increase 89% Mid-market companies planning to increase AI investment in 12–24 months

AI integrated at scale 15% Organizations with AI integrated across core business operations

Stuck in pilots 36% Mid-market organizations whose AI programs remain in pilot phase

Survey sample size 12,021 IT decision makers Respondents across US, UK, Germany, France, Singapore, India

Previous AI Reports

5 past events · Latest: May 14 (Positive)

Same Type Pattern 5 events

Date	Event	Sentiment	24h Move	Catalyst
May 14	AI platform update	Positive	+2.7%	Launched Freddy AI Agent Studio and new agentic AI capabilities in Freshservice.
Nov 13	AI feature launch	Positive	+2.3%	Rolled out AI-powered capabilities in Freshservice and Freddy AI to streamline IT service.
Nov 13	Customer AI tools	Positive	+2.3%	Introduced Freshdesk Command Center and vertical AI agents to reduce service fragmentation.
Jun 11	Agentic AI upgrade	Positive	-1.6%	Upgraded Freddy Agentic AI Platform with autonomous resolution and productivity benefits.
Oct 23	AI agent launch	Positive	-2.1%	Launched Freddy AI Agent for autonomous customer and employee support without coding.

24h Move is the share-price change in the day after each event; other market factors may also have contributed.

Pattern Detected

AI-related releases have generally been framed as positive product/platform advances, with three of the last five AI announcements followed by positive next-day moves and two seeing declines.

Recent Company History

Over the last year, Freshworks has repeatedly highlighted enhancements to its Freddy AI and agentic AI platforms, including autonomous service agents, AI Agent Studio, and vertical AI capabilities. These AI updates often cite strong customer adoption, ticket deflection, and productivity gains. Price reactions to prior AI news were mixed but leaned positive, with three events showing gains and two declines. Today’s report on mid‑market AI complexity fits the ongoing narrative of positioning Freshworks in AI-driven service optimization rather than introducing a new product.

Key Terms

ai, roi

2 terms

ai technical

"A global Freshworks research report of over 9,000 IT decision makers finds 86% say AI"

Artificial intelligence (AI) is technology that enables machines to mimic human thinking and learning, allowing them to analyze information, recognize patterns, and make decisions. For investors, AI matters because it can improve how businesses operate, create new products, or identify opportunities faster and more accurately than humans alone, potentially impacting company success and market trends.

roi financial

"While 72% of mid-market executives expect AI investments to show ROI within 8 months"

Return on investment (ROI) measures how much money an investor makes or loses relative to the amount they put in, expressed as a percentage. It helps compare the efficiency of different investments—like checking which of several gardens produced the most fruit for the seeds planted—so investors can decide which opportunities deliver the best payoff for the risk and capital they commit.

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AI-generated analysis. How Rhea-AI works. Not financial advice.

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• A global Freshworks research report of over 9,000 IT decision makers finds 86% say AI complexity has increased their team’s workload
• 80% of mid-market IT leaders report AI outputs introduce noise, errors, or rework, a phenomenon the report terms "AI slop"
• An estimated $16.29 billion in US mid-market AI spend is wasted every year on making AI functional
  

SAN MATEO, Calif., May 27, 2026 (GLOBE NEWSWIRE) -- Freshworks Inc. (NASDAQ: FRSH) today released The Global Cost of Complexity Report: The Mid-Market AI Complexity Trap, a survey of 12,021 IT professionals, including more than 9,000 in mid-market organizations. The research puts a dollar figure on how complexity is consuming mid-market AI budgets before real business outcomes are delivered, finding an average 25% of mid-market AI spend is lost to complexity overhead, an estimated $16.29 billion annually in the US alone.

With tighter margins than larger enterprises, mid-market companies feel this “complexity tax” harder and faster. Nearly 9 in 10 (89%) plan to increase AI investment over the next 12 to 24 months, yet only 15% have AI integrated across core business operations and 36% remain stuck in pilots.

"Mid-market IT leaders don't have time for AI that takes months to deliver value. They need AI that works inside the business they already run and shows value fast," said Srinivasan Raghavan, Chief Product Officer at Freshworks. "The companies that move from purchase to performance fastest will turn AI from a complexity tax into a competitive advantage.”

The ROI Reality Gap: IT is Being Judged on Timelines Shorter Than Deployment

Mid-market AI programs are stalling in the gap between executive expectation and deployment reality. While 72% of mid-market executives expect AI investments to show ROI within 8 months, 55% of organizations say deployment alone takes between 6 and 12 months before meaningful ROI can even begin.

The barriers are structural. System integration complexity (27%), skilled talent shortages (26%), and excessive configuration requirements (26%) are the top reasons pilots fail to become full programs. With deployment timelines running longer than the windows executives are watching, programs risk being cut before they can deliver value.

The Productivity Paradox: AI Was Supposed to Create Headroom, But For Most Mid-Market Teams It Has Done the Opposite

Managing AI is now adding to the workload it was meant to reduce, with teams fixing flawed outputs and governing tool sprawl across a growing stack of AI products.

More than 8 in 10 (86%) of mid-market IT leaders say managing AI complexity has actually increased their team’s workload, and 80% report that AI outputs are introducing noise, errors, or rework, a phenomenon the report terms “AI slop.” AI is generating work faster than it is eliminating it, and IT teams are absorbing the difference.

Sprawl is compounding the problem. Mid-market organizations use an average of 4.2 AI tools, with 10% running seven or more, yet only 33% have a formal, consistently applied AI governance framework. Separate Freshworks research found 71% of US mid-market IT leaders say unapproved “shadow AI” use is common inside their organization.

The Execution Pivot: Mid-market IT leaders Are Buying Differently

Mid-market organizations are responding to the AI complexity trap by changing how they buy. The new priority is AI that delivers value early, plugs into existing systems, and does not require a major build-out to work.

"Middle market businesses tend not to be early innovators and often lag in realizing full-scale implementation benefits until they are confident of ROI. Until then, smaller pilots and tests are often used to prove feasibility," said Doug Farren, Executive Director, National Center for the Middle Market.

Mid-market buying behavior is shifting decisively toward AI that works out of the box. A third (34%) of mid-market IT leaders name workflow integration as their top priority for the next two to three years, 90% favor built-in workflows over heavy configuration, and 54% are buying AI capabilities rather than building in-house.

To download the full report, visit https://www.freshworks.com/cost-complexity-mid-market-report-2026/.

Methodology
Freshworks surveyed 12,021 IT decision makers at director level and above across the US, UK, Germany, France, Singapore and India, within organizations of 250 or more employees, including over 9,000 mid-market organizations (up to 5,000 employees). Fieldwork took place in March 2026.

About Freshworks
Freshworks Inc. provides service software that delivers exceptional employee and customer experiences. Its enterprise-grade solutions are powerful yet intuitive, and quick to deliver value. With a people-first approach to AI, Freshworks helps teams be more effective and organizations more productive. Companies including Bridgestone, New Balance, S&P Global, and Sony Music trust Freshworks to improve service efficiency and fuel long-term loyalty. For the latest updates, visit freshworks.com and follow Freshworks on LinkedIn, X, and Facebook.

© 2026 Freshworks Inc. All Rights Reserved. Freshworks, Freshservice and any associated logo are trademarks of Freshworks Inc. All other company, brand and product names may be trademarks or registered trademarks of their respective companies. Nothing in this press release should be construed to the contrary, or as an approval, endorsement or sponsorship by any third parties of Freshworks Inc. or any aspect of this press release.

Media Relations Contact:
PR@freshworks.com

FAQ

What does the Freshworks (FRSH) 2026 AI complexity report reveal about wasted mid-market AI spend?

The report estimates that mid-market companies lose about 25% of their AI budget to complexity overhead. According to Freshworks, this equals roughly $16.29 billion in wasted US mid-market AI spending every year before meaningful business outcomes appear.

How much AI budget do mid-market companies lose before ROI, according to Freshworks (FRSH)?

Freshworks finds that mid-market organizations lose an average of 25% of their AI spend before seeing returns. According to Freshworks, this loss stems from complexity, integration challenges, configuration overhead, and long deployment timelines that delay meaningful ROI realization.

What is "AI slop" in the Freshworks (FRSH) 2026 mid-market AI report?

“AI slop” describes AI outputs that introduce noise, errors, or rework for IT teams. According to Freshworks, 80% of mid-market IT leaders report such flawed outputs, which increase workload instead of reducing it, undermining expected productivity gains from AI investments.

How does AI complexity affect IT workloads in the Freshworks (FRSH) survey?

AI complexity is increasing, not reducing, IT workloads for most mid-market teams. According to Freshworks, 86% of mid-market IT leaders say managing AI complexity has raised their team’s workload as they fix flawed outputs and manage tool sprawl across multiple AI products.

What deployment and ROI timelines does the Freshworks (FRSH) AI report highlight for mid-market firms?

Mid-market executives often expect AI ROI within eight months, creating pressure on IT teams. According to Freshworks, 55% of organizations report AI deployment alone takes six to twelve months before meaningful returns can even begin, creating a gap between expectations and reality.

How are mid-market IT leaders changing AI buying behavior, according to Freshworks (FRSH)?

Mid-market buyers are prioritizing AI that works quickly with existing systems. According to Freshworks, 34% rank workflow integration as a top priority, 90% favor built-in workflows over heavy configuration, and 54% now purchase AI capabilities instead of building them in-house.

What methodology underpins the Freshworks (FRSH) Global Cost of Complexity AI report?

The report is based on a survey of 12,021 IT decision makers at director level and above. According to Freshworks, respondents came from organizations with 250+ employees across the US, UK, Germany, France, Singapore, and India, including over 9,000 mid-market organizations.