monday.com Q2 Earnings Call Highlights
Key Points
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- Strong Q2 results: Revenue rose 22% year over year to $365 million, while non-GAAP operating margin expanded to 17% and adjusted free cash flow reached $52.3 million.
- AI-driven strategic shift: monday.com is moving toward software operated by people and AI agents, with AI annual recurring revenue doubling sequentially and accounting for 17% of net new ARR. The company is also prioritizing monday service, monday CRM and larger enterprise customers.
- Restructuring creates near-term risks: The company cut its workforce by about 20% to generate roughly $100 million in annualized savings, most of which will be reinvested in AI and products. Fiscal 2026 guidance calls for 19%–20% revenue growth, but management expects temporary disruption, lower net dollar retention and foreign-exchange pressure.
monday.com (NASDAQ:MNDY) reported second-quarter fiscal 2026 revenue growth of 22% year over year and expanded its non-GAAP operating margin, while outlining a broad organizational restructuring intended to support a shift toward AI-enabled products and larger enterprise customers.
Co-CEO Roy Mann said the company has undergone “the most meaningful strategic shift” in its history, moving from software designed to help users manage work toward software that can perform work through people and AI agents in a unified workspace.
On July 22, monday.com reduced its global workforce by approximately 20%. Mann called the decision the company’s hardest since its founding, but said it was necessary to position the business for its AI-focused strategy. Most of the resulting savings will be reinvested in personnel, products and AI, he said.
Second-Quarter Results
Revenue totaled $365 million in the second quarter, up 22% from the prior-year period. Non-GAAP operating income rose to $61.1 million from $45.1 million a year earlier, while non-GAAP operating margin increased to 17% from 15%.
- Non-GAAP gross margin was 89%, compared with 90% a year earlier.
- Non-GAAP net income was $65.5 million, compared with $58.3 million in the prior-year quarter.
- Diluted non-GAAP earnings per share were $1.48, based on 44.4 million fully diluted shares outstanding.
- Adjusted free cash flow was $52.3 million, representing a 14% adjusted free-cash-flow margin.
- Net dollar retention was 109% in the quarter.
CFO Eliran Glazer said the company’s second-quarter operating margin included an approximately 210-basis-point negative foreign-exchange effect, primarily related to appreciation of the Israeli shekel against the U.S. dollar.
Research and development expense was $83 million, or 23% of revenue, compared with 20% of revenue a year earlier. Sales and marketing expense was $149.4 million, or 41% of revenue, down from 47% in the year-ago period. General and administrative expense was $30.7 million, or 8% of revenue, compared with 9% a year earlier.
The company ended the quarter with $1.07 billion in cash, cash equivalents and marketable securities, down from $1.21 billion at the end of the first quarter. The decline reflected $182 million in share repurchases during the quarter. Glazer said the company had used its entire $870 million repurchase authorization, leaving no shares available for further repurchases under the program.
AI Adoption and Product Focus
Management said AI adoption accelerated during the quarter. Co-CEO Eran Zinman said AI annual recurring revenue doubled from the first quarter to the second quarter and represented 17% of net new ARR added during the period.
The company launched a seat-and-credit AI pricing model in May. Zinman said adoption was strong early in the rollout, with customers engaging deeply enough with the products to purchase usage beyond their default packages. Mann said both new and existing customers were adopting the AI offerings and that some customers had reached their allotted consumption levels before adding more credits.
“This is the first time since we added the new agent that we see customers expand not only on the seats for humans, but on AI consumption,” Zinman said, describing AI usage as a new growth vector for the company.
monday.com is sharpening its focus on monday service and monday CRM, according to Zinman. Each product will have dedicated product-development, go-to-market and investment roadmaps. The company sees distinct buyers, workflows and AI opportunities for the two products.
The company continues to support monday dev, though Zinman said the product has received less focus as developer workflows have changed. Management is reconsidering the product’s strategy and may add capabilities or alter its direction, he said.
Enterprise Momentum and Go-to-Market Changes
Management highlighted record net additions among customers contributing more than $100,000 and more than $500,000 in ARR. Chief Revenue Officer Casey George said the company remains early in its move upmarket and is benefiting from customer expansion, vendor consolidation and enterprise interest in deploying AI on platforms with contextual data.
George said gross retention was at historical highs and that the company continued to see double-digit year-over-year seat growth among enterprise customers. He also said sales cycles have not changed materially, although larger customers typically have longer buying cycles.
The restructuring within the go-to-market organization was concentrated among non-quota-carrying and down-market resources, George said. monday.com plans to continue investing in mid-market and enterprise sales resources while increasingly using partners to support down-market sales.
The company is also expanding its forward-deployed engineering model to help customers implement AI applications and agents. Zinman said the initiative has already produced several initial customer implementations and is expected over time to support larger deals, deeper customer relationships and access to more senior buyers.
Guidance Reflects Transition Risks
For the third quarter, monday.com forecast revenue of $368 million to $370 million, representing year-over-year growth of 16% to 17%. It expects non-GAAP operating income of $57 million to $59 million and an operating margin of about 16%, including a projected 100- to 200-basis-point foreign-exchange headwind.
For fiscal 2026, the company projected revenue of $1.466 billion to $1.474 billion, or growth of 19% to 20%. It expects non-GAAP operating income of $230 million to $234 million, a non-GAAP operating margin of approximately 16%, and adjusted free cash flow of $280 million to $290 million.
Glazer said the outlook does not assume a rebound in performance marketing or top-of-funnel activity. The guidance also reflects potential near-term disruption from the workforce reduction and pressure on net dollar retention as the company laps pricing actions taken in fiscal 2024 and 2025. Management expects fiscal 2026 net dollar retention of about 108%.
Despite the near-term transition, Glazer said monday.com expects operating margin to expand further in 2027 as it realizes a fuller benefit from the restructuring. The company expects annualized gross cost savings from the workforce action of about $100 million, though it plans to reinvest the vast majority in talent, products and AI.
About monday.com (NASDAQ:MNDY)
monday.com is a software-as-a-service (SaaS) company that provides a cloud-based Work Operating System (Work OS) designed to help teams plan, organize and track their work. The platform offers customizable workflows that support project management, task delegation, time tracking and collaboration across departments. monday.com's visual interface enables users to create boards, automations and dashboards to centralize information and streamline processes without requiring extensive coding knowledge.
The company's product portfolio includes monday Work OS, which can be adapted for use cases ranging from marketing campaign management and sales pipelines to software development sprints and human resources onboarding.
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