Strong earnings meet soft guidance as investors question growth momentum.
Cloud software company monday.com (MNDY) delivered strong third-quarter results that topped Wall Street’s expectations. However, a softer revenue outlook for the next quarter led to a steep selloff, sending shares of MNDY down nearly 16%.
Key Points
- Q3 earnings beat forecasts with $1.16 per share versus $0.88 expected.
- Revenue rose 26% year over year to $316.9 million.
- Shares fell after Q4 revenue guidance came in slightly below analyst estimates.
monday.com Delivers Strong Quarter but Misses the Mark on Outlook
monday.com, best known for its cloud-based work operating system, posted impressive financial results this quarter. The company reported $316.9 million in revenue, surpassing Wall Street’s forecast of $312 million, and earnings of $1.16 per share, well above the expected $0.88.
Despite the solid quarter, investor enthusiasm cooled after management guided for fourth-quarter revenue between $328 million and $330 million—slightly short of analysts’ expectations of $334 million. The company’s focus on profitability was evident, with an adjusted operating margin of 15%, up from 13% a year ago, and free cash flow margins nearing 29%.
How Is monday.com Using AI to Power Growth?
monday.com has been rapidly embedding artificial intelligence into its platform to enhance automation, productivity, and collaboration. In July, the company launched three new AI-powered features designed to help teams work more efficiently.
The company’s new products—including monday CRM, monday campaigns, and monday dev—now make up more than 10% of total recurring revenue. This growth in product diversification and AI adoption is helping monday.com attract larger enterprise clients and expand into new verticals.
Are Investors Overreacting to monday.com’s Guidance?
While the lowered Q4 forecast triggered a sharp drop in share price, monday.com’s fundamentals remain solid. The company’s annual recurring revenue growth continues at a healthy 26%, and it boasts a strong customer retention rate of 115%, meaning existing clients are spending more over time.
Profitability also continues to improve, with a non-GAAP operating income of $47.5 million, up from $32.2 million last year. CFO Eliran Glazer emphasized that monday.com achieved its highest-ever operating profit, crediting a balance of innovation and cost control.
What It Means for Investors
The market reaction highlights the sensitivity investors have toward future growth guidance in high-valuation software names. While short-term sentiment is cautious, monday.com’s financial health remains robust. Its strong balance sheet, expanding product suite, and rapid AI adoption could drive long-term growth once macro headwinds ease.
For investors learning the basics of investing or analyzing stocks, monday.com illustrates a key lesson: even profitable growth companies can face volatility when forecasts don’t meet lofty expectations. Long-term investors seeking companies that are good to invest in may find opportunities if the stock stabilizes and AI initiatives continue to gain traction.
Conclusion
monday.com’s third-quarter results showcase strong execution, growing profitability, and steady demand from enterprise customers. While the stock’s pullback reflects short-term concerns, its focus on AI innovation, efficient scaling, and durable customer loyalty positions it as one of the best company investments to watch in the cloud software space.
FAQs
What caused monday.com’s stock to drop after earnings?
Despite strong Q3 results, the company issued Q4 revenue guidance slightly below analyst estimates, prompting a selloff.
How is monday.com using AI in its platform?
The company has launched multiple AI-powered tools to automate workflows, improve decision-making, and enhance team collaboration.
Is monday.com profitable?
Yes. monday.com reported its highest-ever non-GAAP operating profit and strong free cash flow margins, signaling efficient growth.
What is monday.com’s customer growth trend?
The company’s base of large customers continues to grow rapidly, with nearly 4,000 clients now spending more than $50,000 annually.
Is monday.com a good stock to buy right now?
For long-term investors focused on fundamentals, monday.com remains a strong player in the AI-driven software market despite short-term volatility.
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