Monday.com falls hard as AI threatens how companies buy software
Earnings beat expectations, but rising costs and tech shifts spark selloff.
2025 was supposed to be a turning point for Israeli software company Monday.com, with revenue projected to cross the $1 billion mark for the first time and its workforce expected to grow 30% to nearly 3,000 employees.
A decade after its founding and four years after its Nasdaq IPO, Monday appeared poised to join the ranks of the software elite.
On the business side, Monday was meeting its targets. But investors weren’t satisfied. Since the start of the year, the stock has risen just 7%, lagging the broader market, and has dropped 24% over the past six months, even as the Nasdaq hovers near record highs with an 11% gain in 2025.
That was before Monday’s plunge. Following the company’s Q2 2025 earnings call, Monday’s shares tumbled nearly 30%, pushing its market value below $10 billion.
Better results, worse reaction
The financials looked solid at first glance. Revenue climbed 27% to $299 million, operating profit (excluding certain accounting items) rose to $45.1 million from $38.4 million a year earlier, and cash flow improved to $66.8 million from $55.8 million.
Yet Wall Street zeroed in on the fine print. While Monday met EPS forecasts, helped by financial income on cash holdings, the GAAP operating loss was much larger than expected, surprising analysts who had seen the company post a profit in that line item several times before. Operating margin dropped to 15%, translating into an $11.6 million loss.
The culprit: rising costs. Expenses jumped from 16% of revenue a year ago to 20% in Q2, driven by higher R&D spending and aggressive hiring, headcount reached 2,900 by quarter’s end. The company also boosted stock-based compensation as part of an upgraded sales and marketing push and a revamped executive team, hurting net profit under accounting rules.
Investor anxiety runs deeper than a single quarter. The enterprise software sector faces an existential question: in the AI era, will companies still need to buy traditional software platforms?
Why pay Monday.com tens of dollars per user per month for project management when an AI agent can perform the same tasks, integrating workflows across an organization, for less money and more customization?
"The general sentiment in the software world today is negative," Eran Zinman and Roy Mann, co-founders and CEOs of Monday.com, told Calcalist after the results were released. "Everyone understands that there is going to be a transformation in the software world, and the emergence of a new perception of what software will mean for organizations in the future is causing unrest. We are not alone in this, there is no software company that isn’t going through it, but we are also changing along with the market and believe that, with time, the results we present, including the use of AI and the adaptation of our products to these transformations, will speak for themselves," they added.
That uncertainty is reflected in peers’ stock prices: Salesforce is down 27% year-to-date, while direct competitors like HubSpot and Atlassian (maker of Jira) have each fallen more than 30%.
Monday is investing heavily to weave AI into its platform, highlighting growing adoption of new AI-powered features. The company touts its inherently modular system, built to work like a set of functional “blocks” that can be rearranged and adapted, similar to how AI agents operate.
But AI is also disrupting Monday’s go-to-market strategy. Investors are concerned that Google’s shift to AI-generated search summaries has hurt click-through rates on ads. Monday admits that this has impacted small-business leads, but said that large enterprise demand remains strong.
“We’re reallocating marketing budgets for more precision,” the CEOs said. “High-quality enterprise customers are still converting. The drop is mostly in general interest.”
Monday is doubling down on large-enterprise clients while continuing to sell its flagship work management tools. Its CRM product, targeted at small businesses, has reached a $100 million annual run rate, three years after launch.
To better serve global clients, the company has recruited a more U.S.-centric management team, with some leadership roles now based outside Israel for the first time.
Despite the stock rout, Monday slightly raised its full-year forecast: revenue of $1.22 billion and non-GAAP operating profit of $154–158 million. For Q3, it expects revenue of about $313 million, up 24–25% year over year, and operating profit (ex-items) of $34–36 million.
