monday.com Ltd. (MNDY) Earnings

Management highlights

### Overall Business & Financial Performance - Delivered a strong start to fiscal 2026, with 24% YoY revenue growth driven by sustained enterprise demand for work infrastructure consolidation onto Monday.com's platform - Generated a company record $49 million in non-GAAP operating profit, with expanding adjusted free cash flow margin reaching 29%, demonstrating efficient, financially durable growth - Gross retention hit a company historical high, indicating deep customer embedding of the Monday.com platform - Enterprise momentum continues: a record number of new customers with over $500,000 in ARR, growing average contract values, and 34% of customers with >$50,000 ARR have adopted multiple products (up from 29% in Q4 2025) ### AI Platform Transformation - Completed a fundamental repositioning of the business, shifting from a work management platform to an AI work platform that orchestrates work between humans and AI agents, built on the company's single source of truth MondayDB - Launched MondayDB 3.0, increasing maximum board item scale from 100,000 to over 10 million items with high performance and low latency, designed to support unconstrained AI adoption - Leveraging internal AI to boost operational productivity: since 2025, AI has increased developer output per employee by 32% and reduced product time to market by 38%, allowing engineering teams to ship more features while improving long-term platform maintainability ### Pricing & Strategic Moves - Introduced a new "seats plus credits" consumption-based pricing model for new customers, aligning customer payments with AI value delivered; as AI agents do more work, revenue expands naturally without requiring additional seat purchases. Existing customers can opt-in to the new model, and enterprise customers will receive complementary AI packages to drive large-scale adoption - Announced an agreement to acquire OneAI, a developer of production-ready enterprise voice AI agents, to add native voice capabilities directly to the AI work platform, expanding use cases for AI agents - Total company headcount ended Q1 at 3,211 (a net increase of 56 employees from Q4 2025), and management expects headcount to remain largely flat for the remainder of fiscal 2026, reflecting AI-driven productivity gains across the organization

Guidance

• Full year fiscal 2026 revenue guidance is set to a range of $1.466 billion to $1.474 billion, representing 19% to 20% YoY growth • Full year non-GAAP operating income guidance is $185 million to $191 billion, for an operating margin of approximately 13%, which includes a 100 to 200 basis point negative impact from foreign exchange (FX) • Full year adjusted free cash flow guidance is $280 million to $290 million, for an adjusted free cash flow margin of 19% to 20%, which also includes a 100 to 200 basis point negative FX impact. The accelerated share buyback completed in Q1 is expected to reduce full year 2026 adjusted free cash flow by approximately $20 million • Q2 fiscal 2026 revenue is expected to be $354 million to $356 million, representing 18% to 19% YoY growth; non-GAAP operating income is expected to be $46 million to $48 million, for an operating margin of 13% to 14%, including a 100 to 200 basis point negative FX impact • Management expects full year net dollar retention (NDR) to decline slightly from the Q1 2026 level of 110% due to lapping 2024 pricing actions that temporarily boosted NDR in 2025, and expects 1% to 2% temporary pressure on upmarket NDR for the remainder of the fiscal year • Guidance incorporates inherent uncertainty around AI revenue ramp from the newly launched agent platform, and implies moderate revenue growth in the second half of fiscal 2026 as the company invests in AI product and go-to-market capabilities

Segment performance

Monday.com does not break out financial performance into distinct product segments in this call. The only segment-related metrics provided are: 42% of total Annual Recurring Revenue (ARR) comes from customers with over $50,000 in ARR, and new products (including CRM, Service, and Campaigns) account for over 11% of total ARR. CRM alone has exceeded $100 million in ARR, with strong growth concentrated in the SMB segment. 10% of Q1 2026 net new ARR is directly driven by existing AI offerings (not including the newly launched AI agent platform). Core consolidated Q1 2026 financial results are: total revenue of $351 million (24% YoY growth), non-GAAP operating income of $49 million (up from $40.8 million YoY), non-GAAP operating margin of 14%, gross margin of 89% (down from 90% YoY), adjusted free cash flow of $102.8 million, and adjusted free cash flow margin of 29%.

Risks & headwinds

• Foreign exchange risk from appreciation of the Israeli shekel against the U.S. dollar created a 190 basis point negative impact on Q1 2026 operating margin, and is expected to create a 100 to 200 basis point negative impact on full year 2026 operating and free cash flow margins • Uncertainty around the revenue ramp for the newly launched AI consumption-based pricing model and AI agent platform means revenue contributions from these new offerings cannot be reliably modeled for full year 2026 guidance • AI compute costs are expected to increase as AI adoption grows, which will create downward pressure on gross margins in the near to medium term • The soft top-of-funnel demand environment that management expected at the start of 2026 persists, in line with initial guidance expectations • Lapping 2024 pricing actions that boosted NDR in 2025 will create temporary pressure on full year 2026 NDR, partially offsetting strong underlying retention and expansion trends

Analyst Q&A

• Q: Why is full year NDR expected to decline slightly, and what is the current state of top-of-funnel demand? /

  A: Management noted strong underlying retention trends, with gross retention at historical highs and double-digit expansion growth in mid-market and enterprise segments. The expected NDR decline is entirely due to lapping the 2024 pricing actions that temporarily lifted NDR in 2025, with this rollover effect completing at the end of Q2. Top-of-funnel demand remains soft, consistent with the expectations set at the start of 2026, but average contract value for new deals is increasing across all sales motions, and the company continues to manage performance marketing cautiously. (287 chars)

• Q: How does the new seats plus credits pricing model work, and what impact will it have on 2026 financial results? /

  A: The new model adds a second revenue vector: customers pay for seats for human users as before, plus pay for AI credits based on how much they consume AI agent functionality. Existing customers can opt into the model gradually over the next couple years, with incentives for enterprise customers to move. Management says the new model is still in an early stage, so no significant impact on 2026 financial results is assumed in guidance, with more color to come in future quarters. (351 chars)

• Q: How does Monday.com compete with standalone AI tools like Claude Code/Co-Work, and how do customers interact with these tools alongside your platform? /

  A: Management welcomes broad AI adoption, and has opened the Monday.com platform to support both internal and external AI agents, allowing external agents to get seats and access relevant workflow data. Monday.com's differentiated value is its ability to embed AI agents directly into collaborative, enterprise-grade work workflows built on the company's existing system of record, which standalone point solutions do not offer. This integrated approach is what enterprise customers are actively seeking. (364 chars)

• Q: Does the new consumption-based pricing model align AI revenue with AI compute costs to preserve gross margins over time? /

  A: Management reaffirmed prior investor day guidance that AI compute costs will create near-term downward pressure on gross margins, which were historically in the 90% range and are expected to settle in the mid-80% range for the foreseeable future. As of Q1 2026, the new pricing model has not yet created a significant measurable impact on gross margins, but the consumption-based structure inherently ties revenue growth to the incremental compute costs that come with higher AI adoption. (342 chars)

• Q: What is the 10% AI-driven net new ARR metric counting, and when will we see larger contributions from the new AI agent platform? /

  A: The 10% figure counts only direct revenue from existing AI products, including Vibes, AI Blocks, and Sidekick, and does not include revenue from the newly launched AI agent platform, which was released one week before the call. Agents are expected to drive increases in this AI revenue share over time, but adoption and revenue contributions are still too early to model, so no revenue contribution from agents is assumed in the 2026 full year guidance. (327 chars)