Monday.com (NASDAQ:MNDY) shares dropped 5.5% in pre-market trading after the work management software company reported better-than-expected second-quarter results but issued third-quarter revenue guidance below Wall Street forecasts.
Adjusted earnings came in at $1.48 per share, significantly ahead of the analyst consensus estimate of $1.11.
Revenue increased 22% year-on-year to $364.6 million, beating expectations of $355.53 million and rising from $299.0 million in the corresponding quarter of 2025.
Monday.com delivers record adjusted operating profit
Profitability also strengthened during the quarter, with Monday.com generating record adjusted operating income of $61.1 million.
The figure represented an adjusted operating margin of 17%, improving from 15% in the second quarter of last year.
The combination of stronger-than-expected revenue, a sizeable earnings beat and margin expansion demonstrated continued progress in the underlying business, but investors focused instead on signs that revenue growth could moderate during the third quarter.
Q3 revenue forecast falls short of Wall Street expectations
Monday.com expects third-quarter revenue of between $368 million and $370 million, below the analyst consensus forecast of $372.85 million.
At the midpoint of $369 million, the outlook implies year-on-year growth of approximately 16% to 17%.
That would represent a noticeable slowdown from the 22% growth achieved during the second quarter, contributing to the negative reaction in Monday.com shares despite the stronger-than-expected Q2 performance.
AI products become a larger contributor to new business
Management highlighted growing adoption of the company’s artificial intelligence products as an increasingly important part of its expansion strategy.
“Q2 reinforced our conviction that our strategy is working and that it was time to move faster,” said co-founders and co-CEOs Roy Mann and Eran Zinman. “ARR from AI products doubled from the first quarter, representing 17% of net new ARR in the second quarter, and customer response to our new direction continues to exceed our expectations.”
The rapid increase in AI-related annual recurring revenue indicates that the company’s newer products are beginning to make a more meaningful contribution to customer growth and overall bookings.
High-value customer base continues to expand
Monday.com also reported strong growth among its largest customers, providing another positive signal for the longer-term outlook.
The number of customers generating more than $100,000 in annual recurring revenue increased 37% year-on-year to 2,019.
Growth was even stronger at the upper end of the customer base, with the number spending more than $500,000 annually rising 68% to 114.
The expansion among larger accounts suggests Monday.com continues to gain traction with enterprise customers despite expectations for slower overall revenue growth in the third quarter.
Monday.com maintains double-digit full-year growth outlook
For the full 2026 financial year, Monday.com expects revenue of between $1.466 billion and $1.474 billion, representing annual growth of approximately 19% to 20%.
Adjusted operating income is forecast at between $230 million and $234 million.
While the second-quarter earnings and revenue figures exceeded expectations and AI adoption continued to accelerate, investors concentrated on the softer Q3 outlook. That growth deceleration ultimately outweighed the quarterly beat, sending Monday.com (NASDAQ:MNDY) shares lower ahead of Monday’s opening bell.