Monday.com (NASDAQ: MNDY) has
been one of the more volatile software stocks since its IPO in 2021. After
soaring in its early days as a high-growth SaaS favorite, the stock has
significantly corrected, leaving many investors questioning whether the growth
story is over. However, the company’s Q4 2025 earnings tell a very different
story. Revenue continues to expand at a healthy pace, profitability is
improving rapidly with EPS growth of 232%, and free cash flow generation
remains strong. In this article we will dive into Monday.com recent earnings,
stock performance & valuation, growth potential, and the risks investor
should consider.
About Monday.com
Founded in 2012 in Tel Aviv by
Roy Mann and Eran Zinman, Monday.com went public on the NASDAQ in June 2021.
The company provides a cloud-based Work Operating System (Work OS) that allows
organizations to build customized workflows and manage projects in one
centralized platform. Serving industries from marketing to enterprise IT,
Monday.com has expanded into products like monday CRM and monday Dev. Its SaaS
model generates recurring revenue through a flexible, user-friendly platform
with strong integrations.
Monday.com Financial
Performance
Monday.com delivered strong
financial performance in Q4 2025, with quarterly revenue of $333.88 million, up
24.59% from $267.98 million in Q4 2024, while quarterly EPS surged to $1.45
from $0.44, representing a 232.42% increase year over year. On a trailing
twelve-month basis, revenue reached $1.23 billion, rising 26.75% from $972
million, and EPS climbed to $2.24 from $0.62, marking a 261.29% increase. Free
cash flow per share (TTM) improved to $5.90 from $5.68, up 3.87%. The company
maintains strong profitability metrics, including a Gross profit margin of
89.2%, Net profit margin of 9.64%, and Free cash flow margin of 25.43%,
alongside a Return on assets of 5.64% and Return on equity of 10.43%. Its
balance sheet remains conservative with a Debt to equity ratio of 0.14.
Over the past five years,
Monday.com has transitioned from an unprofitable company to a profitable one.
Revenue has grown at a 41.4% CAGR, net income has turned positive with strong
margins, and free cash flow has increased rapidly. The growth story remains
compelling for the coming years.
Monday.com Fiscal 2026
Financial Forecast
Looking ahead, analysts forecast
2026 revenue of $1.46 billion, an 18.36% increase from $1.23 billion in 2025,
while projecting 2026 non-GAAP EPS of $4.06, a 7.64% decrease from $4.40 in
2025. Wall Street analysts assign a Strong Buy rating with an average price
target of $135.16, implying 82.38% upside, and a highest price target of $310,
suggesting 129.37% upside potential from current levels.
MNDY Stock Price Performance
and Valuation
At the time this article was written Monday.com stock was trading at $74.11 per share. The stock has declined 77.3% over the past year, significantly underperforming the S&P 500, which gained 14.4% during the same period. Since its IPO in June 2021, the stock is down 60.8%, while the S&P 500 has risen 63.4%, highlighting a sharp disconnect between market performance and the company’s improving fundamentals.
However, this steep correction has compressed valuation to
attractive levels, with a TTM P/S ratio of 3.24 forward P/S of 2.74, Non-GAAP
P/E (TTM) of 17.68, forward Non-GAAP P/E of 18.57, and a P/FCF (TTM) of 12.2
which all are very low for a high growth SaaS company.
Based on Fiscal.ai data, if we
look at the valuation since 2024, the forward P/S, forward P/E, and P/FCF are
all significantly below historical levels. This indicates potential
undervaluation, as Monday.com is still projected to grow at a double-digit rate
in the coming years. For a SaaS company generating over 20% revenue growth,
nearly 90% gross margins, and strong free cash flow, these multiples appear
compelling and suggest the stock may offer significant long-term upside as
negative sentiment toward SaaS companies normalizes.
Monday.com Growth Potential
Monday.com growth potential
remains strong, driven by several factors.
- Strong Enterprise Momentum and
Future Revenue Visibility
Growth is increasingly driven by larger, stickier enterprise customers, which improves durability of the business. Customers above $50,000 in Annual recurring revenue (ARR) rose to 4,281 and now represent 41% of total ARR, while those above $100,000 in ARR reached 1,756, and customers above $500,000 in ARR grew 74% year over year to 87 logos. Management highlighted that more large organizations are standardizing on Monday.com for complex, mission‑critical workflows, shifting focus from new logos toward expansion in the installed base.
Net dollar retention was 110% overall, and notably higher in larger cohorts, indicating healthy upsell and cross‑sell. Remaining performance obligations (RPO) grew 36–37% to about $839 million, outpacing revenue and signaling strong forward demand. This upmarket mix and RPO strength underpins multi‑year growth visibility despite near‑term macro and Small to medium business (SMB) headwinds. - Product Expansion and AI as Medium
Term Growth Engine
Product breadth and AI are central to Monday’s long‑term growth story. New products contributed 10.7% of ARR in 2025, up roughly 3 percentage points year over year, showing progress in building a multi‑product platform. Monday Vibe became the fastest product in company history to surpass $1 million in ARR, signaling that some AI‑infused modules can scale quickly when they hit a strong use‑case fit. Management is embedding AI agents across the customer journey, from acquisition to adoption and engagement, aiming to improve conversion efficiency and deepen usage inside accounts.
With R&D running near 19–20% of revenue, the company is actively reinvesting to keep its work‑OS differentiated. Execution risk is real, but if AI features materially increase seat expansion and workflow penetration, they can re‑accelerate growth or at least sustain high‑teens to low‑20s expansion for longer. - Profitable Growth and Balance Sheet
Support Optionality
Unlike many SaaS peers at similar growth rates, Monday combines expansion with solid profitability and cash generation, which supports continued investment and strategic flexibility. Non‑GAAP operating margin was about 14% for 2025, with Q4 at 13% despite roughly 180 basis points of FX headwind from shekel appreciation. Adjusted free cash flow reached approximately $322–323 million in 2025, a 26% margin, though Q4 Free cash flow margin dipped to around 17% as investments stepped up.
The company ended the year with roughly $1.5 billion in cash and executed $135 million of share repurchases, leaving substantial capacity under its authorization. This financial profile provides a buffer against macro volatility and room to keep funding AI, enterprise sales, and possible M&A, supporting long‑term business growth even as headline revenue growth moderates.
Risks to Consider
While Monday.com looks like an
attractive opportunity, we should be mindful of potential risks.
- Slowing Growth and Weak
Guidance
After years of hyper-growth, monday.com's revenue expansion is decelerating sharply. While Q4 2025 delivered solid 25% year-over-year growth, the company's full-year 2026 guidance of only 18-19% ($1.45–1.46 billion) fell below analyst expectations, prompting the withdrawal of longer-term 2027 targets. This highlights ongoing challenges in self-serve customer acquisition, raising execution risks and concerns that further softening demand amid economic uncertainty or AI budget shifts could intensify downward pressure on the stock. - Intense Competition and Market
Saturation
The work management/software category is highly competitive, with rivals like Asana, Smartsheet, ClickUp, Notion, and broader platforms (e.g., Microsoft Teams integrations or AI-native tools) vying for share. monday.com relies heavily on its core product, and shifting preferences toward enterprise deals amid weakening SMB growth increases upmarket dependency. Broader risks include economic uncertainty, inflation squeezing IT budgets, and retaining/expanding usage amid evolving privacy, data security, AI regulations. - AI Disruption and Potential
Obsolescence
Monday.com faces intense competitive pressure from AI advancements, including agents and tools that let users build custom workflows or automate tasks without dedicated platforms, potentially slashing demand for traditional SaaS work management, especially in self-serve SMB segments. Analyses warn AI could cannibalize seat-based revenue as fewer users handle more work, eroding the subscription model. Company disclosures flag AI/ML risks, fueling 2025–2026 stock drops amid SaaS disruption fears.
Conclusion
Monday.com combines solid
double-digit revenue growth, rapidly expanding profitability, and strong free
cash flow generation with a significantly compressed valuation. Despite sharp
stock underperformance over the past year, the company’s fundamentals remain
healthy, supported by high margins, low debt, and continued enterprise
adoption. With analysts projecting further revenue growth and substantial
upside potential, the current price presents an attractive risk-reward
opportunity for long-term investors seeking both growth and value in the
software sector.
I am offering a stock investing service at an affordable price to help you navigate the U.S. stock market.
Comments
Post a Comment