Monday is doing almost everything right. Wall Street still isn’t convinced
The Israeli software company beat second-quarter expectations and is seeing rapid growth in its AI products, but investors punished its decision to leave its full-year forecast unchanged.
Monday is once again doing many things right, but investors are not convinced.
The Israeli software company, which has become one of the symbols of the “SaaS apocalypse” hitting stocks of companies seen as vulnerable to AI disruption, reported better-than-expected second-quarter results on Monday. Yet its shares fell again in response, dropping as much as 12% in early trading on Wall Street before recovering to around 5% lower. The decline brought monday.com closer to its all-time low and reduced its market value to roughly $3.6 billion.
The main reason for the selloff appears to be investor dissatisfaction with the company's decision not to raise its full-year revenue forecast. Despite beating expectations in the second quarter and reporting strong growth in its AI products, monday.com maintained its 2026 revenue guidance at $1.466 billion to $1.474 billion, roughly $1.47 billion.
During the conference call following the results, analysts repeatedly asked why management was not raising its guidance. Revenue in the second quarter was about $10 million above expectations, AI-related ARR has doubled from the previous quarter, and AI products accounted for 17% of net new ARR in the quarter. Yet management remained cautious.
“We prefer to under-promise and surprise favorably,” the company said.
Management also pointed to the ongoing reorganization of its sales organization and the broader restructuring that included the layoffs of roughly 620 employees, or about 20% of the workforce, announced earlier this year.
“Such an extensive cutback, which was also made across almost all departments, is affecting the company's operations,” co-founder and co-CEO Roy Mann said.
The company said ARR from AI products doubled from the first quarter and represented 17% of net new ARR in the second quarter.
Investors appear to have interpreted the conservative guidance as a sign that monday.com may struggle to deliver the acceleration expected in the second half of the year, or that its new AI products are not yet gaining traction quickly enough to offset the disruption to its traditional software business.
That skepticism is particularly important because monday.com is in the middle of the biggest strategic transformation in its history.
“In the last five months, monday has undergone the largest strategic transformation in its history, from software that manages work to software that does the work,” Mann said, describing the company's response to the disruption AI is bringing to enterprise software.
“This also required us to change ourselves, and therefore we also laid off 20% of the employees, in the most difficult decision we have made since the company was founded. Despite the difficulty, we are confident that this was the right decision. Most of the savings will be invested in people, products and AI.”
Mann said the layoffs were aimed at reducing management layers and allowing the company to move faster.
The restructuring is already showing up in monday.com's financial statements. The company recorded $21.4 million in restructuring charges in the second quarter, consisting primarily of non-cash impairment charges related to office space and leasehold improvements in Israel that were no longer needed after the company abandoned plans for further workforce expansion.
At the same time, the company expects the restructuring to improve profitability over time by reducing its cost base and allowing it to redirect resources toward AI and product development.
One of the more significant changes monday.com highlighted is its growing emphasis on large enterprise customers and the adoption of a Forward Deployed Engineer, or FDE, model.
FDEs are engineers who work directly with customers to help them implement AI capabilities and deploy AI agents, effectively helping organizations identify problems and build solutions using monday.com's new AI platform.
The shift is notable because it comes at the same time as the company is cutting hundreds of jobs. Rather than simply reducing headcount across the board, monday.com is attempting to change the composition of its workforce, cutting layers and roles it considers less critical while recruiting specialized talent in areas it believes will be crucial to its AI strategy.
The company also continues to see stronger growth among its largest customers.
Second-quarter revenue reached $364.6 million, up 22% from a year earlier and above analysts' expectations of roughly $355 million.
For the third quarter, however, monday.com forecast revenue of $368 million to $370 million, representing year-over-year growth of 16% to 17%. That guidance was viewed as conservative given the second-quarter beat.
Profitability is expected to continue improving as the restructuring takes effect. monday.com expects third-quarter non-GAAP operating income of $57 million to $59 million, with full-year non-GAAP operating income of $230 million to $234 million.
In the second quarter, non-GAAP operating income reached a record $61.1 million, up from $45.1 million a year earlier. The non-GAAP operating margin rose to 17% from 15%.
Under GAAP accounting rules, however, monday.com recorded an operating loss of $1.5 million, compared with a $11.6 million loss a year earlier, partly because of the $21.4 million restructuring charge.
Net income was $3.5 million, compared with $1.6 million in the second quarter of 2025.
Monday.com is also using its substantial cash reserves to try to support its stock price.
During the second quarter, the company repurchased approximately 2.33 million shares for $182 million. Since the beginning of the year, it has spent roughly $735 million on share repurchases and has now exhausted the entire $870 million authorization approved by its board.
The strategy has done little to halt the decline. monday.com's shares are down roughly 40% since the beginning of 2026.
The company ended the second quarter with $853 million in cash and cash equivalents, compared with $1.5 billion at the end of 2025, while also holding $219 million in marketable securities.
The buybacks have reduced the number of shares outstanding, but investors have so far continued to value the company lower despite the aggressive capital return.
There are, however, several encouraging signs in the results.
Monday.com's largest customers are continuing to expand their spending. The number of customers generating more than $500,000 in annual recurring revenue rose 68% year-over-year to 114. Customers generating more than $100,000 in ARR increased 37% to 2,019.
Those customers now account for 30% of the company's total ARR, compared with 26% a year earlier.
The company says this reflects a broader shift among large organizations toward consolidating their software suppliers and choosing platforms capable of incorporating AI.
“Large customers continue to drive growth,” management said. “We recognize among large customers that they want to consolidate suppliers and are also looking for large platforms that have already moved to AI, which gives us a tailwind.”
That could ultimately prove to be one of monday.com's most important advantages. If large enterprises decide that AI makes it more attractive to consolidate workflows onto fewer platforms, monday.com could benefit from having work management, CRM, development and service products operating on a common AI layer.
But the company still needs to prove that its AI strategy can translate into sustained growth rather than simply improving efficiency and margins.
Overall, monday.com's results contain several encouraging signs. The company is still growing revenue at a double-digit rate, expanding its largest customer relationships and improving profitability at the same time that it is making a painful transition toward an AI-focused business model.
But Wall Street's initial reaction highlights the problem facing Mann and Zinman: good results are no longer enough.
The company is being judged against a much higher bar because investors are questioning whether enterprise software companies can maintain their growth and pricing power as AI changes how organizations buy and use software.
Monday.com expects growth to accelerate in the second half of 2026 as new AI products gain traction. The company is betting that its transformation from software that helps employees manage work into software that can actually perform work will eventually create a new growth engine.
That argument has yet to be fully proven.
And that makes the decision to keep its full-year forecast unchanged particularly important. For investors already skeptical of monday.com's ability to navigate the AI disruption, conservative guidance can look less like prudence and more like a warning.
The pressure on management is also heightened by last week's shareholder vote approving a significant increase in the compensation packages of Mann and Zinman.
The two co-founders' potential compensation was effectively doubled from about $7 million each to as much as $14 million each, with most of the increase tied to equity.
The structure gives the two executives a greater financial incentive to reverse the decline in monday.com's stock and deliver long-term growth.
Their base salaries, which had been set to rise by 3% annually, will increase by 19% in 2027 to NIS 110,000 per month, followed by increases to NIS 115,000 in 2028 and NIS 120,000 in 2029. The company said that even after the increase, the base salary would be around 85% of the 25th percentile of its peer group.
The annual bonus structure remains unchanged. Each CEO can receive a target bonus of up to 100% of annual base salary, with a maximum bonus of 200% if performance exceeds the relevant targets.
For Mann and Zinman, therefore, the challenge is no longer simply to deliver another quarter of solid numbers. They need to convince investors that the painful restructuring, the shift toward AI and the growing focus on large customers can turn monday.com into one of the software companies that emerges stronger from the AI revolution rather than one of the companies it destroys.
For now, Wall Street remains unconvinced.
