Monday.com Reports Strong Q2 but Shares Drop on Conservative Outlook and Restructuring

Monday.com, the Israeli software company, reported better-than-expected financial results for the second quarter of 2026, with revenues reaching $364.6 million, a 22% increase year-over-year, surpassing the $355 million forecast. Despite this, its shares fell by 8% at the start of trading on Wall Street, later recovering slightly to a 5% decline, bringing the company's market value down to $3.6 billion, near an all-time low. The stock drop was mainly due to investor disappointment over Monday.com’s decision to keep its full-year revenue guidance unchanged at $1.45 billion, despite exceeding quarterly revenue expectations and reporting that its annual recurring revenue (ARR) surpassed $1.5 billion in July.

CEO and co-founder Roy Man explained in the earnings call that the company prefers to "underpromise and overdeliver," citing ongoing restructuring efforts including layoffs of 620 employees across departments. This extensive cost-cutting, which reduced the workforce by 20%, aims to streamline management layers and accelerate growth, with savings reinvested in personnel, products, and AI development. Monday.com also highlighted that its AI product revenue doubled from the previous quarter and now accounts for 17% of new annual contract revenues.

Investors interpreted the cautious outlook as a sign that Monday.com may struggle to meet second-half 2026 targets and that its AI offerings have yet to gain significant traction. The company is shifting focus toward larger clients, with the number of customers paying over $500,000 annually rising 68% to 114 organizations, and those paying over $100,000 increasing 37% to 2,019, representing 30% of ARR. Monday.com is also adopting a Forward Deployed Engineer model, sending AI specialists to client sites to help implement AI solutions.

Profitability improved, with operating profit before one-time items reaching $57-59 million in Q2 and expected to total $234 million in 2026. Operating margin rose to 17%, and net profit doubled to $3.5 million compared to the prior year, despite a $21 million one-time restructuring charge and $870 million spent on share buybacks. The company’s shares have fallen 40% since the start of 2026.

Looking ahead, Monday.com anticipates accelerated growth in the second half of 2026 driven by AI products and plans to provide a longer-term outlook after previously withdrawing its 2027 revenue guidance of $1.8 billion. Recently, the board approved doubling the annual compensation packages for CEOs Roy Man and Eran Zinman from $7 million to $14 million each, mostly in stock-based incentives, aligning their interests with improving investor sentiment and company performance in coming years.