Monday.com’s mass layoffs reveal the next phase of the AI shake-up in software
The Israeli software company is restructuring around AI as investors question whether SaaS companies can maintain their old growth models.
The workforce reduction announced by monday.com on Wednesday was not just another restructuring at a technology company. It was a sign of how deeply artificial intelligence is forcing software companies to rethink the assumptions that powered the industry for more than a decade.
The Israeli workplace software company, whose shares have fallen roughly 50% since the beginning of the year and now give it a market value of about $3.1 billion, is attempting one of the most difficult transitions in enterprise technology: moving from selling software that helps people organize work to building software that increasingly performs the work itself.
The company says the restructuring, which includes cutting about 20% of its workforce, is designed to accelerate that transition rather than simply reduce expenses. But the move comes as investors have already begun questioning whether traditional software companies can maintain their growth models in an era when AI agents can increasingly automate tasks that once required dedicated software applications and human employees.
For monday.com, the challenge is particularly significant. The company was once one of the strongest symbols of the SaaS boom, reaching a valuation of more than $10 billion as investors rewarded rapid growth and expanding enterprise adoption. Today, despite continued revenue growth and improving profitability, the market is assigning a much lower value to the company as investors reassess the future of software.
The restructuring represents an acknowledgment that the AI shift is not only changing monday.com's products but also the way the company itself operates.
"We have shifted our core vision moving from managing work to doing the work for our customers, with people and AI agents working together in one workspace," co-founders Roy Mann and Eran Zinman wrote in a message to employees.
The company said that adapting to this market required more than adding AI features. It required changing the organization that built the previous generation of products.
"The organization we built for our previous chapter is not the organization that fits the new AI era," they wrote.
The broader question facing monday.com is whether AI will expand the software market or undermine the companies that built it.
For years, SaaS companies grew by convincing businesses to purchase more software subscriptions, add more users and deploy specialized tools across departments. The AI wave is challenging that model by introducing autonomous systems that can complete tasks directly rather than simply helping employees complete them.
Monday.com has argued that AI will ultimately increase demand for software by creating new categories of work. But investors have been less convinced, particularly as companies across the software industry have seen valuations decline.
Earlier this year, monday.com withdrew its long-term 2027 financial targets, citing uncertainty created by rapid changes in the market and AI development. The company said it remained confident in its strategy but did not want to provide forecasts in an environment where the pace of technological change made long-term predictions difficult.
The workforce restructuring is the next step in that adjustment.
Rather than maintaining the organizational structure built during the company's rapid expansion, monday.com said it plans to reduce management layers, create smaller teams with greater autonomy and change how it works with customers adopting AI products.
That last point could prove particularly important. The company's AI strategy requires deeper engagement with customers, including more implementation support and closer collaboration. The company said some existing roles will change while new roles will be created.
The timing of the restructuring reflects the growing gap between monday.com's operating performance and market perception.
In its first-quarter results, the company reported revenue of $351.3 million, up 24% year-over-year, and operating profit of $20 million, double the previous year. It maintained its full-year revenue forecast of approximately $1.46 billion.
The company has also said internal adoption of AI tools has improved productivity, allowing it to continue growing without expanding its workforce at the same pace.
But Wall Street has focused less on current results and more on what comes next.
The company's decision last week to cancel 10.875 million unissued shares reserved for employee incentives reflected another aspect of the new environment: technology companies are reassessing how much equity they need to allocate as they seek to become more efficient.
The cancellation does not affect existing employee stock options or restricted stock units, but it highlighted a broader shift away from the aggressive hiring and dilution model that characterized the software industry during the previous decade.
Monday.com's bet is that the companies that successfully adapt to AI will not simply be those that add AI features to existing products, but those willing to redesign themselves around the technology.
The company argues that the restructuring will allow it to move faster and eliminate internal complexity that slowed decision-making.
"We had many situations where work that could have been done in a few days took many months with multiple meetings and endless friction," the company said.
The challenge will be proving that a smaller, more AI-focused organization can capture a market opportunity large enough to justify the disruption.
For now, monday.com is asking investors to believe that the same technology creating uncertainty for software companies can also become the foundation of their next phase of growth.
