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    MNDY
    Earnings call· Jun 2026(Q2 FY26)

    monday.com Q2 FY26 earnings call MNDY

    Aug 10, 2026 Source

    Executive summary

    monday.com Q2 FY26 — AI Adoption Accelerates Amidst Strategic Restructuring

    monday.com is undergoing a significant strategic shift towards building AI-powered software, necessitating a 20% workforce reduction and organizational restructuring. The company is seeing strong early adoption of its AI products and new pricing model, particularly in upmarket segments, driving record customer additions. While the restructuring and prior pricing actions are expected to create short-term pressures on guidance and net dollar retention, management is focused on long-term growth and profitability through disciplined investment and a refined go-to-market strategy.

    Highlights

    5

    • Q2 revenue grew 22% year-over-year to $365 million.

    • Non-GAAP operating margin expanded to 17% in Q2, up from 15% in the prior year quarter.

    • AI ARR doubled from Q1 to Q2, now representing 17% of net new ARR added in the quarter.

    • Record net additions of 100,000-plus and 500,000-plus customers in Q2.

    • Gross retention is at historical highs.

    Concerns

    5

    • Workforce reduced by approximately 20% in July, leading to short-term impact on guidance.

    • NDR expected to see modest pressure, around 108% for FY26, due to lapping prior pricing actions from FY24 and FY25.

    • R&D expense as a percentage of revenue increased to 23% in Q2, up from 20% in the year-ago quarter.

    • Deferred revenue was down sequentially in Q2.

    • Negative FX impact of approximately 210 basis points on Q2 operating margin.

    Guidance & targets

    9
    CategoryTargetConfidence
    Revenue
    $368M to $370M
    high materiality
    High
    Non-GAAP operating income
    $57M to $59M
    medium materiality
    High
    Revenue
    $1.466B to $1.474B
    high materiality
    High
    Non-GAAP operating income
    $230M to $234M
    medium materiality
    High
    Adjusted free cash flow
    $280M to $290M
    medium materiality
    High
    Net Dollar Retention (NDR)
    around 108%
    high materiality
    Medium
    Headcount
    down approximately 20%
    medium materiality
    High
    Annualized cost savings from restructuring
    $100M
    medium materiality
    High
    Operating margin
    expand
    high materiality
    High

    Operational metrics

    21
    Non-GAAP operating margin
    17%up from 15% YoY
    Q2 FY26

    Operating margin in Q2 had an approximately 210 basis points negative FX impact.

    Non-GAAP gross margin
    89%compared to 90% YoY
    Q2 FY26
    R&D expense as % of revenue
    23%up from 20% YoY
    Q2 FY26

    Bulk of R&D people are based in Israel, impacted by strong Israeli shekel.

    Sales and marketing expense as % of revenue
    41%compared to 47% YoY
    Q2 FY26
    General and administrative expense as % of revenue
    8%compared to 9% YoY
    Q2 FY26
    Non-GAAP operating income
    $61.1Mup from $45.1M YoY
    Q2 FY26
    Non-GAAP net income
    $65.5Mcompared to $58.3M YoY
    Q2 FY26
    Non-GAAP EPS
    $1.48
    Q2 FY26
    Total employee count
    3,169decrease of 42 since Q1 FY26
    Q2 FY26
    Cash and investments balance
    $1.07Bcompared to $1.21B at Q1 FY26
    Q2 FY26

    Includes cash, cash equivalents and marketable securities.

    Share repurchase executed
    $182M
    Q2 FY26
    Share repurchase authorization utilized
    $870M
    Q2 FY26

    Entire authorization utilized, no shares available for future repurchase under the program.

    Adjusted free cash flow margin
    14%
    Q2 FY26
    AI ARR growth
    doubled
    Q1 to Q2
    AI ARR as % of net new ARR
    17%
    Q2 FY26
    Gross retention
    historical highs
    Q2 FY26
    Enterprise seat growth
    double-digit
    YoY
    FX impact on Q2 operating margin
    210negative
    Q2 FY26

    Mainly from the appreciation of the Israeli shekel compared to the U.S. dollar.

    FX impact on Q3 revenue guidance
    100 to 110tailwind
    Q3 FY26
    FX impact on Q3/FY26 operating margin guidance
    100 to 200negative
    Q3 FY26, FY26
    FX impact on FY26 FCF margin guidance
    100 to 200negative
    FY26

    Industry KPIs

    8
    MetricValueDetails
    Revenue growth$365MUSD
    Arr net new arr$1.5BUSD
    Pricing model mixnew seat and credit pricing model
    Customer account countrecord net adds of 100,000-plus and 500,000-pluscustomers
    Gross retention renewal ratehistorical highs
    Operating FCF margin rule of 4017%%
    Ai product adoption monetizationdoubled
    Net revenue net dollar retention109%%

    Orderbook & backlog

    2
    Net Dollar Retention (NDR)109%Q2 FY26

    Trailing 4-quarter weighted average calculation.

    Deferred revenuedown sequentiallyQ2 FY26

    Company uses RPO as the primary metric for business strength.

    Product announcements

    4
    ProductTypeDetails
    New seat and credit pricing modellaunch
    monday service and monday CRMupdate
    Work OSupdate
    monday devdiscontinuation

    Risks & headwinds

    6
    Short-term impact from workforce reductionshort-term

    Approximately 20% reduction in global workforce in July

    Mitigation: Most savings will be reinvested in talent, product, and AI; restructuring aims for long-term positioning.

    Modest pressure on Net Dollar Retention (NDR)back half of FY26

    NDR expected to be around 108% for FY26

    Mitigation: Due to lapping prior pricing actions (FY24/FY25) and tier upgrades/multiproduct expansion being slightly below expectations. Offset by historical high gross retention and double-digit enterprise seat growth.

    Elevated R&D expenses as a percentage of revenue

    23% of revenue in Q2 FY26, up from 20% YoY

    Mitigation: Heavy investment in building for the future and platform changes; also impacted by the strong Israeli shekel vs. USD. No meaningful increase expected going forward.

    Volatile top-of-funnel activity and performance marketing

    No rebound assumed in guidance

    Mitigation: Company continues to manage performance marketing cautiously and plans the year based on current conditions.

    Near-term headwinds in Flex 2 dynamicsnear-term

    Softer conditions

    Mitigation: Due to downmarket conditions, concentrated new product adoption, and a shift in go-to-market towards enterprise sales. Management believes these are temporary and part of a strategic pivot.

    Deferred revenue down sequentiallyQ2 FY26

    Down sequentially

    Mitigation: Company focuses on RPO as the key metric for business strength and health.

    What to watch in Q3 FY26

    5

    AI ARR Growth & Monetization

    next quarter
    CurrentDoubled Q1 to Q2, 17% of net new ARR
    TargetContinued acceleration and increasing contribution to total ARR

    Why it matters

    Key indicator of success for the strategic shift to AI and the new pricing model's effectiveness.

    AI ARR doubled from Q1 to Q2. And now represents 17% of net new ARR added in the quarter.

    Q&A highlights

    8

    How would you characterize the current demand environment, especially regarding AI adoption and the performance of downmarket vs. upmarket segments?

    AI adoption is strong across all segments, with very encouraging reception to new features and pricing. The overall demand environment is consistent with expectations from the beginning of the year, with no meaningful change. Upmarket motions continue to show strong growth, with record net adds in 100,000+ and 500,000+ customer cohorts, and gross retention at historical highs.

    “We're seeing record net adds in our 100,000 and 500,000 cohort of customers. So this is an affirming data point that all the things we're doing to move up market is working.”

    asked by Ryan MacWilliams · answered by Eran Zinman

    2 min read5 chapters

    Detailed Narrative

    01

    Strategic Shift to AI and Organizational Restructuring

    monday.com has undergone a significant strategic shift, moving from building work management software to creating an AI-powered workspace where people and AI agents collaborate. This transition led to a difficult but necessary 20% workforce reduction in July, with most savings earmarked for reinvestment in talent, product development, and AI capabilities. The restructuring aims to foster fewer management layers, smaller teams, and more agile decision-making, aligning the company for its AI-centric future.

    02

    Accelerated AI Adoption and Monetization

    The company is seeing strong early validation of its AI strategy, with AI ARR doubling from Q1 to Q2 and now contributing 17% of net new ARR. The new seat and credit pricing model, launched in May, has been well-received, indicating customers are finding sufficient value in AI features to invest beyond default packages. This represents a new vector of growth, as customers are expanding not only on human seats but also on AI consumption.

    03

    Upmarket Focus and Customer Expansion

    monday.com continues to execute strongly in its upmarket motions, achieving record net additions in both the 100,000+ and 500,000+ customer cohorts. This growth is attributed to expansion within existing accounts, vendor rationalization trends, and customers seeking AI solutions on established platforms. The company's gross retention is at historical highs, further affirming the strength of its enterprise strategy.

    04

    Product Portfolio Refinement

    The company is sharpening its focus on monday service and monday CRM, establishing dedicated product development, go-to-market motions, and investment roadmaps for each. This specialization aims to achieve category leadership in these areas. The Work OS product has evolved into the AI Workspace team, while monday dev has received less focus due to changes in the developer environment, prompting a re-evaluation of its future strategy.

    05

    Guidance Philosophy and Financial Outlook

    Management's updated FY26 guidance reflects a responsible and cautious approach, accounting for the short-term impact of the organizational restructuring and the lapping of prior pricing actions. The guidance does not assume a rebound in performance marketing and is based on continued upmarket expansion, AI adoption, and disciplined investment. Despite near-term pressure📎s, the company expects operating margin to expand in FY27 and top-line growth to be positively impacted after the restructuring is complete.

    AI-generated summary of the company’s earnings call. Not investment advice.