monday.com Beats Third-Quarter Estimates but Guides Fourth-Quarter Growth Down to About 14%

monday.com reported revenue of $377.5 million for the third quarter ended September 30, up 19% from a year earlier.

Non-GAAP diluted earnings per share were $2.14 in the quarter. That compares with $1.16 a year earlier.

Non-GAAP figures exclude share-based pay, restructuring charges and a charitable contribution. They are the company's preferred profit basis.

FactSet put the consensus estimate at $1.41 a share. Non-GAAP EPS therefore beat that estimate by 51.8%, a calculation.

Revenue also cleared the FactSet consensus projection of $369 million. The beat on that measure was 2.3%, a calculation.

Shares fell about 6% in intraday trading on Monday. The snapshot is as of 2:07 p.m. ET, from Friday's $87.93 close.

That move is intraday only, not a settled reaction. Monday's closing price is the first settled verdict.

A record margin, on lower costs

Non-GAAP operating income rose to $89.4 million in the quarter. Its margin reached 24%, up from 15% a year earlier.

monday.com called both figures records for the company. The non-GAAP basis excludes $30.2 million of share-based compensation.

The company had guided third-quarter non-GAAP operating income of $57 million to $59 million. The result topped that guide midpoint by 54.1%, a calculation.

It also excludes $10.0 million of third-quarter restructuring charges. A further $18.0 million charitable contribution is excluded as well.

GAAP operating income was $31.2 million in the quarter. That compares with a $2.4 million operating loss a year earlier.

GAAP is the standard accounting basis, before those exclusions. The GAAP operating margin was 8% of revenue.

A year earlier the GAAP margin was negative 1%. GAAP diluted earnings per share were $0.80 in the quarter.

Non-GAAP net income was $93.6 million, up from $61.9 million. GAAP net income was $35.2 million in the quarter.

Diluted shares fell to 43.8 million from 53.3 million. That is a fall of 17.9% from a year earlier, a calculation.

A smaller share count lifts per-share growth above profit growth. It is why EPS growth outruns net income growth here.

The guide points to slower growth

For the fourth quarter, monday.com forecast revenue of $380 million to $382 million. That range implies growth of about 14% from a year earlier.

The midpoint implies sequential growth of about 1%, a calculation. Growth would slow from the third quarter's 19% pace.

Fourth-quarter non-GAAP operating income is forecast at $68 million to $70 million. The implied margin is about 18% of revenue.

FactSet put the fourth-quarter revenue consensus at $386 million. The guide midpoint sits 1.3% below that estimate, a calculation.

The margin guide is stated assuming a negative FX impact of 100 to 200 basis points. A basis point is one hundredth of a percentage point.

"An initiative of this scope introduces near-term operational headwinds," said co-founders and co-CEOs Roy Mann and Eran Zinman.

They said the business is undergoing a fundamental evolution. The company took significant steps this quarter toward becoming AI-first.

For the full year, revenue is forecast at $1.47 billion to $1.48 billion. The prior forecast was $1.47 billion to $1.47 billion.

That revenue raise is nominal, about $4 million at the midpoint, a calculation. It is only $1 million at the top end.

Full-year non-GAAP operating income is forecast at $268 million to $270 million. The prior forecast was $230 million to $234 million.

That operating-income raise is $37 million at the midpoint, a calculation. Adjusted free cash flow is forecast at $282 million to $288 million.

Larger customers spent more; retention eased

Net dollar retention was 108% in the quarter, down from 109% in the second quarter. Retention measures how much existing customers expand or shrink spending.

Retention was 112% for customers with more than 10 users. It reached 114% above $50,000 in annual recurring revenue.

It was 113% for customers above $100,000 in ARR. Every band eased from the second quarter as well.

Paid customers above $50,000 in ARR rose 26% to 5,038. Customers above $100,000 rose 33% to 2,127.

Remaining performance obligations rose 27% to $946 million. Those obligations are contracted work not yet recognized as revenue.

Current remaining performance obligations rose 22% to $759 million. The largest customer deployment grew beyond 87,000 seats.

AI annual recurring revenue reached $36 million in the quarter. monday agents passed six million interactions in under two quarters.

AI ARR includes an allocated share of subscription plans for included AI credits. It excludes one-time purchases and overages.

Cash flow fell sharply in the quarter

Net cash from operations was $20.4 million in the quarter. A year earlier it was $95.1 million, a fall of 78.6%, a calculation.

The quarter included $47.2 million of restructuring cash payments. Those payments are tied to the company's 2026 Restructuring Plan.

The payments explain only part of the decline in operating cash flow. Adding them back still leaves cash flow $27.6 million lower, a calculation.

Adjusted free cash flow was $63.0 million in the quarter. A year earlier it was $92.3 million.

The adjusted measure adds back the restructuring payments. Unadjusted free cash flow was $15.8 million in the quarter.

Cash and marketable securities totaled about $1.1 billion, a calculation. Cash alone was $869.6 million, with $229.8 million in securities.

What remains unknown

What remains unknown starts with the settled verdict. The intraday fall is known; Monday's closing price is not.

Whether growth stabilizes near 14% is also unknown. Management has guided to that pace for one quarter only.

How far retention drifts from 108% is also unknown. The release carries no retention forecast for year-end.

Whether AI revenue can offset slower core growth is unknown. AI ARR is $36 million against a $1.47 billion revenue guide.

The fourth-quarter report is the next test

What to watch: fourth-quarter results, due in early 2027. They will show whether growth held near the guided 14%.

Retention is the second test for investors. A print below 108% would deepen concern about expansion.

AI ARR growth from $36 million is the third test. So is a recovery in operating cash flow from $20.4 million.