monday.com’s AI reset trims fourth-quarter growth outlook to 14%

By Tom Whitfield

What does the guidance show?

monday.com expects fourth-quarter 2026 revenue of $380 million to $382 million, about 14% above a year earlier, after reporting third-quarter revenue of $377.5 million, up 19%. Full-year revenue guidance is $1.473 billion to $1.475 billion, and fourth-quarter non-GAAP operating income guidance of $68 million to $70 million represents an 18% margin. Second-quarter revenue was $364.6 million, up 22%.

Third-quarter revenue exceeded the $368 million to $370 million range guided in August. Shares nevertheless fell 7.26% to $81.55 in premarket trading after Monday’s forecast, according to Investing.com. The market is looking past the revenue beat and focusing on the lower growth rate.

How does the AI-first reset change operations?

Co-founders and co-CEOs Roy Mann and Eran Zinman said: “Our business is undergoing a fundamental evolution, and we took significant steps this quarter to become an AI-first company.” They added that “an initiative of this scope introduces near-term operational headwinds.”

On the earnings call, Zinman said the restructuring announced in July cut the workforce by roughly 20% during the quarter and created near-term disruption. He also said SMB customer additions were lower and SMB churn higher, which he called by design. The workforce reduction trims operating overhead, but management expects disruption as the company becomes AI-first.

What did the restructuring do to financial results?

GAAP operating income reached $31.2 million, compared with a $2.4 million loss a year earlier, after $10.0 million in restructuring charges. Non-GAAP operating income rose to a record $89.4 million from $47.5 million, equal to a 24% margin.

Net income was $35.2 million, or $0.80 per diluted share, on 43.8 million diluted shares, against $13.1 million and $0.25 on 53.3 million shares a year earlier. Operating cash flow fell to $20.4 million from $95.1 million, while adjusted free cash flow declined to $63.0 million from $92.3 million.

In the second quarter of 2026, monday.com generated a $1.5 million GAAP operating loss, $61.1 million of non-GAAP operating income, $3.5 million of net income and $0.08 in diluted earnings per share. Revenue in the year-ago third quarter was $316.9 million. Higher accounting profit did not translate into stronger cash generation.

Where is customer growth coming from?

Customers paying more than $100,000 a year rose 33% to 2,127, while those paying more than $500,000 increased 58% to 123. Customers with more than 10 users grew 5% to 65,965. The high-value cohorts expanded much faster than the 5% growth recorded among customers with more than 10 users.

Net dollar retention eased to 108% from 109% in the second quarter. AI products, including AI credits, agents and vibe, reached $36 million in annual recurring revenue, while monday agents passed 6 million interactions in less than two quarters.

The account data point toward larger contract values as a source of growth. They do not eliminate the pressure from a one-point decline in net dollar retention.

What does the 2026 outlook require?

For 2026, monday.com now expects revenue of $1.473 billion to $1.475 billion, about 20% growth, up from $1.466 billion to $1.474 billion. It raised full-year non-GAAP operating income guidance to $268 million to $270 million from $230 million to $234 million.

The fourth-quarter operating-income range points to an 18% margin, below the third quarter’s record 24%, consistent with the disruption described during the restructuring. Chief financial officer Eliran Glazer said the guidance assumes trends similar to the third quarter and called the slowdown a momentary transition, according to Investing.com.

Management therefore expects the slowdown to ease without abandoning its raised operating-income target. The fourth quarter will test whether AI revenue and high-value accounts can offset lower SMB additions, elevated churn and weaker retention.