Softer Growth Outlook Weighs on monday.com Despite Rising AI and Enterprise Demand

Strong Q2 Results Give Way to Concerns About Slower Growth

monday.com (MNDY) shares fell sharply after the AI work platform reported stronger-than-expected second-quarter results but issued third-quarter revenue guidance below Wall Street expectations.

Revenue rose 22% year over year to $364.6 million, above the $355.53 million consensus estimate, while adjusted diluted earnings reached $1.48 per share. Non-GAAP operating income climbed to a record $61.1 million, producing a 17% operating margin. Despite those results, investors focused on guidance that points to a meaningful slowdown in near-term revenue growth.

Key Points

• monday.com Q2 revenue increased 22% year over year to $364.6 million, while non-GAAP operating income reached a record $61.1 million and operating margin expanded to 17%.
• Q3 revenue guidance of $368 million to $370 million implies 16%-17% growth and came in below the $372.85 million consensus estimate, shifting investor attention toward slowing near-term growth.
• Enterprise and AI adoption continued to strengthen, with $100,000-plus ARR customers growing 37%, total RPO rising 34%, and AI products accounting for 17% of net new ARR.

Q3 Guidance Overshadows a Strong Second Quarter

The earnings reaction centered less on what monday.com delivered during Q2 and more on the pace of growth management expects in the coming quarter.

Second-quarter revenue reached $364.6 million, up from $299.0 million a year earlier and above analyst expectations. Adjusted diluted EPS of $1.48 also exceeded consensus estimates, while profitability improved.

Non-GAAP operating income rose to $61.1 million from $45.1 million a year earlier, lifting the operating margin to 17% from 15%. GAAP operating loss narrowed to $1.5 million from $11.6 million.

But the company's Q3 outlook changed the market's focus.

monday.com expects revenue between $368 million and $370 million, below the $372.85 million consensus estimate. The midpoint of $369 million represents expected year-over-year growth of approximately 16%-17%, down noticeably from Q2's 22% pace.

Management attributed the softer near-term outlook to longer sales cycles associated with its move upmarket, changes in its go-to-market strategy, and continued volatility in paid search and the down-market segment.

The company is placing greater emphasis on mid-funnel channels and larger opportunities. That strategy is producing what management describes as a higher-quality pipeline, but larger transactions can also take longer to close and create greater variability in quarterly conversions.

For the full year, monday.com expects revenue between $1.466 billion and $1.474 billion, representing growth of 19%-20%. Non-GAAP operating income is projected at $230 million to $234 million, with an operating margin of approximately 16%.

Why Are Enterprise Growth and RPO Important for monday.com?

While near-term guidance showed slower revenue growth, several underlying business metrics continued to expand faster than reported revenue.

Total remaining performance obligations, or RPO, increased 34% year over year to $937 million. Current RPO, representing contracted revenue expected to be recognized within the next 12 months, rose 27% to $750 million.

Both growth rates exceeded Q2 revenue growth of 22%.

Those figures provide context for management's explanation that longer sales cycles and conversion timing are contributing to the softer near-term outlook.

The company's customer mix is also shifting toward larger accounts.

Customers generating more than $50,000 in annual recurring revenue increased 31% to 4,834 and now account for 43% of total ARR, up from 38% one year earlier.

Customers above $100,000 in ARR increased 37% to 2,019 and represent 30% of total ARR, compared with 26% a year ago. At the highest end, customers generating more than $500,000 in ARR jumped 68% to 114 and now represent 7% of ARR.

The figures show continued progress in monday.com's upmarket strategy even as larger transactions lengthen the sales process.

Retention metrics, however, provide a more mixed signal.

Overall net dollar retention, or NDR, stood at 109%. NDR measures how recurring revenue from existing customers changes over time after accounting for expansion, contraction, and customer losses.

Retention was stronger among larger customers. NDR reached 115% for customers generating more than $50,000 in ARR and 115% among customers above $100,000 in ARR.

The gradual moderation in retention remains an important part of the growth picture because it raises the question of how much of the expected slowdown comes from transaction timing versus broader pressure on expansion within the existing customer base.

AI Adoption Becomes a Bigger Part of monday.com's Growth Story

Artificial intelligence is becoming a more measurable contributor to monday.com's business.

ARR from AI products doubled sequentially from the first quarter and represented 17% of net new ARR during Q2. The company also introduced Agent Factory and tiered AI pricing as it moves more aggressively toward positioning itself as an AI work platform.

Usage is increasing as well. Since launch, monday.com has recorded more than 1.7 million agent interactions and 98 million AI-block actions.

Management said the company has restructured its organization, sharpened its product portfolio, and committed more fully to its AI Work Platform strategy.

The growing AI contribution comes alongside continued profitability.

Non-GAAP gross margin remained high at 89%, although it declined from 90% a year earlier. Non-GAAP operating margin increased to 17%.

Adjusted free cash flow was $52.3 million, representing approximately 14% of revenue, compared with $64.1 million and a 21% margin in the prior-year quarter.

For the full year, management expects adjusted free cash flow between $280 million and $290 million, representing a margin of 19%-20%.

The combination creates a more nuanced picture than the stock's immediate earnings reaction alone suggests. AI adoption, enterprise customer growth, RPO, and operating profitability continued to advance, while the company's near-term revenue outlook points to a slower growth rate.

What It Means for Investors

The market reaction to monday.com earnings reflects a shift in investor attention from current-quarter execution toward the trajectory of future growth.

Q2 itself showed few signs of broad deterioration. Revenue exceeded expectations, adjusted earnings were stronger than anticipated, operating income reached a record, enterprise customer counts expanded, and RPO grew faster than reported revenue.

The concern is whether those underlying trends can translate into revenue quickly enough to prevent a more sustained slowdown.

Management's upmarket strategy is increasingly visible in the numbers. Larger customers represent a growing share of ARR, with $50,000-plus ARR accounts now contributing 43% of the total. But the same shift toward larger transactions is extending sales cycles and increasing the variability of when contracts convert into recognized revenue.

AI provides another metric to watch. AI products represented 17% of net new ARR after doubling sequentially, giving investors a more concrete measure of how the company's AI strategy is contributing to new business.

Retention adds an additional layer. Overall NDR of 109% remains above 100%, meaning the existing customer base generated more recurring revenue than it did a year earlier after accounting for expansion, contraction, and attrition. However, continued moderation in that metric could make the pace of enterprise expansion and new AI-related business increasingly important.

The central issue for MNDY stock is therefore the gap between strong underlying business indicators and slower near-term reported revenue growth.

Conclusion

monday.com's second-quarter report showed continued strength across revenue, profitability, enterprise adoption, contracted demand, and AI products, but those results were overshadowed by a softer third-quarter outlook.

Revenue grew 22%, non-GAAP operating income reached a record $61.1 million, $100,000-plus ARR customers increased 37%, and total RPO expanded 34%. AI products also doubled their ARR from Q1 and generated 17% of net new ARR.

Against those gains, Q3 guidance calls for revenue growth to slow to 16%-17%, while longer enterprise sales cycles and moderating retention have increased uncertainty around the pace of growth over the next several quarters.

The key question following the earnings reaction is whether the slowdown primarily reflects the timing effects of monday.com's upmarket transition or a more persistent moderation in demand. Future revenue conversion, retention, enterprise customer growth, and AI contribution will provide additional evidence.

FAQs

Why did monday.com stock fall after Q2 earnings?

monday.com shares fell because investors focused on softer third-quarter revenue guidance despite stronger-than-expected Q2 results. The company expects Q3 revenue of $368 million to $370 million, below the $372.85 million consensus estimate and implying growth of 16%-17%, down from 22% in Q2.

How did monday.com perform in the second quarter of 2026?

monday.com generated Q2 revenue of $364.6 million, up 22% year over year. Non-GAAP diluted EPS was $1.48, while non-GAAP operating income reached a record $61.1 million and operating margin improved to 17% from 15% a year earlier.

How fast is monday.com's enterprise business growing?

Customers generating more than $100,000 in ARR increased 37% year over year to 2,019, while customers above $500,000 in ARR increased 68% to 114. Customers above $50,000 in ARR now represent 43% of total ARR, up from 38% one year earlier.

How much is AI contributing to monday.com's growth?

ARR from monday.com's AI products doubled sequentially from Q1 and represented 17% of net new ARR during Q2. The company also reported more than 1.7 million agent interactions and 98 million AI-block actions since launch.

What is monday.com's 2026 revenue outlook?

monday.com expects full-year 2026 revenue between $1.466 billion and $1.474 billion, representing year-over-year growth of 19%-20%. The company also expects non-GAAP operating income of $230 million to $234 million.

This article was created with AI assistance and reviewed by an editor. For details, please refer to our Terms of Use.

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