monday.com Ltd. (MNDY) drops on beat: deep earnings analysis
monday.com Ltd. (MNDY) beat Q2 EPS and revenue estimates, yet the stock dropped as investors weighed margin trends, FX pressure, AI ARR momentum, and guidance. This deep-dive examines operating leverage, customer mix, pricing changes, and why strong results still failed to lift shares.
monday.com Ltd. (MNDY) delivered a strong Q2 fiscal 2026 beat, with EPS of $1.48 versus $1.11 expected and revenue of $365 million, but the stock fell 6.06% as investors looked past the headline numbers. The market is signaling concern that near-term growth guidance, modest net retention pressure, and ongoing execution risk may outweigh the company’s improving profitability and AI-driven momentum.
monday.com Ltd. (MNDY) drops after Q2 earnings beat
monday.com Ltd. (MNDY) beat its Q2 fiscal 2026 EPS estimate, reporting $1.48 versus $1.11 expected, while revenue reached $365M against a $0.36B estimate. Despite the strong profit result, MNDY drops 6.06% to $87.49 in regular trading, with volume at 3,952,185 shares versus a 1,734,882 average. The split between operating progress and stock performance defines this monday.com Ltd. earnings analysis.
Key Takeaways
MNDY reported diluted EPS of $1.48, well above the $1.11 estimate. Revenue of $365M matched the $0.36B estimate.
AI ARR doubled from Q1 to Q2 and represented 17% of net new ARR. The new seat and credit pricing model also gained early customer adoption.
The upmarket motion remains the strongest customer segment. Customers above $100,000 in ARR grew 37%, while customers above $500,000 grew 68%.
Q3 revenue guidance is $368M to $370M, with 16% to 17% year-over-year growth. Full-year revenue guidance is $1.466B to $1.474B.
Management expects full-year operating margin of about 16% and adjusted free cash flow of $280M to $290M, while headcount is expected to fall about 20% by year-end.
The analyst backdrop remains constructive but cautious: 19 analysts rate MNDY Buy, 6 rate it Hold, and the consensus rating is Buy. Recent target actions include BTIG's cut to $105 from $115 and Piper Sandler's downgrade to Neutral.
monday.com Ltd. Q2 FY2026 Financial Performance
The core MNDY earnings result was solid. Q2 revenue came in at $365M, up 22% year-over-year, compared with $350M in Q1 and $330M in the December quarter. Revenue has risen across each quarter in the five-quarter financial series, from $280M in March 2025 to $365M in the latest period. That steady climb gives the business a firm base as management shifts resources toward artificial intelligence.
Profitability also improved. Non-GAAP operating income reached $61.1M, up from $45.1M in the year-ago quarter, and operating margin expanded to 17% from 15%. Sales and marketing expense fell to 41% of revenue from 47%, while general and administrative expense declined to 8% from 9%. In contrast, research and development spending rose to 23% of revenue from 20%, reflecting continued product investment during the AI transition.
Gross margin moved in the opposite direction, slipping to 89% from 90% in the year-ago quarter. Management cited a negative foreign-exchange impact of about 210 basis points on Q2 operating margin, mainly from the stronger Israeli shekel against the U.S. dollar. Net income reached $65.5M versus $58.3M a year earlier, and diluted EPS rose to $1.48.
EPS remains volatile from quarter to quarter. The latest $1.48 compares with $0.58 in Q1, $1.48 in Q4, $0.25 in Q3, and $0.0306 in the June 2025 quarter. The revenue trend is smoother than the earnings trend, so investors should place more weight on operating margin, recurring revenue growth, and cash flow than on any single EPS print.
Customer mix supplied the clearest growth signal. AI ARR doubled from Q1 to Q2 and accounted for 17% of net new ARR. Meanwhile, record net additions in the $100,000-plus and $500,000-plus customer groups confirmed that the upmarket strategy is gaining traction. Overall net dollar retention was 109%, although management expects it to move toward about 108% as earlier pricing actions roll off.
Cash generation remained meaningful, with Q2 adjusted free cash flow of $52.3M and a 14% margin. Cash, equivalents, and marketable securities ended the quarter at $1.07B, down from $1.21B in Q1 after $182M of share repurchases. The full $870M authorization has now been used, leaving buybacks with no remaining authorization under that program.
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monday.com Ltd. Market Reaction and Analyst Response
MNDY's regular-session reaction was negative despite the EPS beat. The stock traded at $87.49, down 6.06%, while volume reached 3,952,185 shares. That volume exceeded the stated average of 1,734,882 shares, showing that the decline reflected active repositioning rather than a quiet drift.
The market response points to a familiar software equation: strong current earnings do not automatically overcome concern about future growth. Q3 guidance calls for 16% to 17% revenue growth, below the full-year range of 19% to 20%. Management also expects modest NDR pressure, no rebound in performance marketing, and a workforce reduction of about 20% by the end of fiscal 2026.
The analyst consensus remains Buy, with 19 Buy ratings, 6 Holds, and no Sell ratings. However, recent actions show a more measured tone. BTIG maintained Buy but cut its price target to $105 from $115 on July 14. Piper Sandler downgraded MNDY from Overweight to Neutral on April 14 and reduced its target to $85 from $100. Tigress Financial maintained Buy with a $165 target on May 22, while JPMorgan initiated coverage with Buy and a $90 target on May 27. The published average 12-month target was $108.54.
monday.com Ltd. Management Commentary
CEO Roy Mann framed the quarter as part of a major strategic reset. On July 22, monday.com reduced its global workforce by approximately 20%. Mann said most savings will be reinvested in people, products, and AI, with fewer management layers and more focused teams. The company also plans dedicated product development, sales motions, and investment road maps for monday service and monday CRM.
"Over the past 9 months, monday.com has undergone the most meaningful strategic shift in our history." - Roy Mann, Co-CEO, MNDY earnings call
Mann's message was direct: monday.com is moving from software that helps people manage work toward a unified workspace where people and AI agents work together. That strategy carries execution risk, but AI adoption provides an early operating signal. Eran Zinman said customers are choosing the new capabilities across both smaller and larger accounts, while the seat and credit pricing model is seeing strong early engagement.
CFO Eliran Glazer supplied the financial guardrails. The company expects Q3 operating income of $57M to $59M and full-year operating income of $230M to $234M. Full-year adjusted free cash flow is guided to $280M to $290M, with a 19% to 20% margin and a 100 to 200 basis-point negative FX impact.
"Our guidance does not assume any rebound in performance marketing or top of funnel activity." - Eliran Glazer, CFO, MNDY earnings call
The first revealing exchange involved demand at different customer sizes. Ryan MacWilliams of Wells Fargo pressed management on strong AI and upmarket activity alongside weaker new additions in the downmarket segment.
"AI and upmarket seems to be doing well, but new adds down market seems to be less strong. How would you characterize overall what you're seeing in your current demand environment?" - Ryan MacWilliams, Wells Fargo
"We don't see any meaningful change in demand environment pretty much as we expected and guided for." - Eran Zinman, Co-CEO, MNDY earnings call
Zinman defended the existing demand outlook and said AI adoption is strong across downmarket and upmarket customers. CRO Casey George added that gross retention is at historical highs and that net additions in the $100,000-plus and $500,000-plus cohorts are at records. The response defended enterprise execution, but it also confirmed that smaller-account momentum is not the main growth engine in the current plan.
A second exchange focused on the lower Q3 growth outlook. Scott Berg of Needham challenged management on what had changed over the prior 90 days. The question put the guidance reset, rather than the EPS beat, at the center of the discussion.
"What's changed in your view on the demand environment for the last 90 days? ... your updated revenue guidance is a little weaker than what we saw 90 days ago." - Scott Berg, Needham
"The moderation of the guidance reflects our discipline and a moment of transition in the organization as we continue to move upmarket and also restructuring the organization." - Eliran Glazer, CFO, MNDY earnings call
Glazer linked the moderation to three concrete factors: the short-term impact of the organizational restructuring, the comparison against a period of strong growth, and NDR pressure from pricing actions now being lapped. He also said the plan assumes growth from enterprise expansion, AI adoption, and tighter internal efficiency. That answer makes the workforce reduction part of the financial model, not merely a cost-cutting headline.
Alinda Li, speaking for William Blair, asked why customers above $100,000 and $500,000 in ARR are accelerating. Casey George cited vendor consolidation, rapid expansion after landing smaller accounts, and demand for AI platforms that preserve customer context. He also said larger enterprise buying cycles are naturally longer, but sales cycles have shown no material change.
MNDY delivered a strong Q2 EPS beat, expanding margins while AI ARR doubled and enterprise customer growth accelerated. Still, the 6.06% drop reflects concern about slower Q3 growth, NDR pressure, and the execution burden of a 20% workforce reduction. For investors, the central test is whether AI adoption and upmarket expansion can sustain growth as the company operates with fewer people and a narrower product focus.
+Why did monday.com (MNDY) stock fall after beating earnings?
monday.com beat Q2 fiscal 2026 EPS estimates with $1.48 versus $1.11 expected and posted $365 million in revenue, but shares fell 6.06% to $87.49. Investors appeared focused on Q3 revenue guidance of $368 million to $370 million and the slower growth outlook rather than the earnings beat.
+How strong was monday.com’s Q2 revenue and profit growth?
Q2 revenue rose 22% year over year to $365 million, while non-GAAP operating income increased to $61.1 million and operating margin expanded to 17%. Net income reached $65.5 million, and diluted EPS came in at $1.48.
+What did monday.com say about AI and customer growth?
Management said AI ARR doubled from Q1 to Q2 and represented 17% of net new ARR. The company also reported strong upmarket traction, with customers above $100,000 in ARR up 37% and customers above $500,000 in ARR up 68%.
+What is monday.com’s guidance for the rest of fiscal 2026?
monday.com guided Q3 revenue to $368 million to $370 million, implying 16% to 17% year-over-year growth. For the full year, management expects revenue of $1.466 billion to $1.474 billion, operating margin of about 16%, and adjusted free cash flow of $280 million to $290 million.
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