Monday.com (MNDY) saw its shares decline more than 6% in Monday trading after the work management software company issued third-quarter revenue guidance that came in below analyst expectations. The cautious outlook overshadowed a stronger-than-expected second-quarter earnings report and continued momentum in its artificial intelligence initiatives.
The company projected third-quarter revenue in the range of $368 million to $370 million, representing year-over-year growth of 16% to 17%. That forecast fell short of the $372.8 million consensus estimate, according to FactSet. Management maintained its full-year revenue guidance of $1.466 billion to $1.474 billion, which is broadly in line with Wall Street expectations at the midpoint.
Q2 results beat, but guidance reflects restructuring and pricing changes
Monday.com reported adjusted second-quarter earnings of $1.48 per share, well ahead of the $1.11 analysts had expected. Revenue rose 22% year over year to $364.6 million, topping the $355.6 million consensus. Despite the beat, the company's softer third-quarter outlook was attributed to organizational changes following its decision to reduce its global workforce by approximately 20% in late July, along with the impact of pricing adjustments.
Chief Financial Officer Eliran Glazer said on the earnings call that the company is being disciplined during a transition period. "We always try to be responsible, but we do have a strong conviction on the trajectory and the moderation of the guidance reflect our discipline in the moment of transitioning the organization as we continue to move upmarket and also restructuring the organization," he said.
Co-CEOs Roy Mann and Eran Zinman explained that the restructuring is designed to accelerate the company's long-term AI strategy. "We made the difficult decision to restructure our organization, sharpen our product portfolio, and commit fully to the AI Work Platform in order to capture the largest opportunity we have ever seen in software," they said. Mann described the workforce reduction as "the hardest decision we have made since founding the company," adding that the restructuring will reduce management layers, create smaller teams, and shift the go-to-market strategy toward AI.
AI adoption accelerates despite cautious outlook
Monday.com said it has spent the past nine months transforming its platform from a work management application into one where employees and AI agents collaborate. The company has introduced an AI agent builder, tools that allow customers to create their own work applications, and a pricing model based on AI usage rather than user seats. Management said adoption of its AI products continued to strengthen during the second quarter.
"More telling than any single metric is that AI products adoption continues to accelerate, and customers respond to our new direction," Mann said. Annual recurring revenue from AI products doubled from the first quarter and represented 17% of net new ARR during the second quarter. The company also surpassed $1.5 billion in annual recurring revenue in July while adding more than 105,000 customers during the quarter.
Large enterprise customers continue to grow
Monday.com also continued expanding its presence among larger enterprise customers. The number of paid customers generating more than $500,000 in annual recurring revenue increased 68% year over year to 114, up from 68 a year earlier. Even with those improvements, investors remained focused on the company's near-term revenue outlook.
The stock's decline mirrors a broader trend in the software sector, where companies with strong AI narratives have seen their valuations pressured by cautious guidance. For context, Cloudflare's AI-driven outlook recently lifted its shares, while Datadog's plunge despite a beat shows how sensitive investors are to forward guidance. Similarly, Duolingo's weak Q3 outlook weighed on its stock, and AMD's flat margin outlook also triggered a selloff.
Monday.com's situation underscores the tension between long-term AI investments and near-term financial discipline. While the company's AI products are gaining traction, the market is demanding clearer evidence that these investments will translate into sustained revenue growth.
This article is for informational purposes only and does not constitute financial advice.
