monday.com Ltd. (MNDY) Q4 2025 Earnings Call Transcript
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Overview
The earnings call presents a mixed outlook: strong financial metrics and optimistic guidance for FY 2025, but concerns about lower operating margins and conservative free cash flow guidance for 2026. The Q&A reveals challenges in the no-touch business and macroeconomic factors, though AI investments and enterprise strategies are positive. Without market cap data, the stock's reaction is uncertain, leading to a neutral prediction.
Key Financial Performance
Revenue Total revenue in Q4 was $334 million, up 25% from the year-ago quarter. Fiscal year 2025 revenue was $1.232 billion, up 27% from the prior year. The growth was attributed to disciplined execution, a strong go-to-market engine, and scaling profitably while investing in the long term.
Operating Margin Operating margin for fiscal year 2025 was 14%, consistent with the prior year. However, there was an approximately 110 basis points negative impact from foreign exchange (FX).
Net Income Net income for fiscal year 2025 was $233.6 million, up from $183.3 million in fiscal year 2024. The increase reflects sustained profitability and operational efficiency.
Gross Margin Gross margin for fiscal year 2025 was 90%, consistent with the prior year.
Research and Development Expense R&D expense for fiscal year 2025 was $238.5 million, or 19% of revenue, up from 17% in the prior year. The increase was due to continued investment in product innovation.
Sales and Marketing Expense Sales and marketing expense for fiscal year 2025 was $586.8 million, or 48% of revenue, down from 51% in the prior year. This reflects improved efficiency in customer acquisition and retention.
General and Administrative Expense G&A expense for fiscal year 2025 was $106.9 million, or 9% of revenue, up from 8% in the prior year. The increase was attributed to scaling operations.
Adjusted Free Cash Flow Adjusted free cash flow for fiscal year 2025 was $322.7 million, with a margin of 26%. This reflects strong cash generation and operational efficiency.
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Operating Highlights
AI-driven products: monday.com has rearchitected its platform to focus on AI-driven work execution. Key features include AI agents (in beta), Monday Vibe, and AI Sidekick. These tools enable businesses to scale output, automate workflows, and make decisions faster. Monday Vibe has already surpassed $1 million in ARR, becoming the fastest product in the company's history to achieve this milestone.
Upmarket expansion: Larger customers are increasingly adopting monday.com for complex workflows. Customers with over $50,000 in ARR now represent 41% of total ARR. Additionally, customers with over $500,000 in ARR grew by 74%.
Revenue growth: Revenue grew 27% year-over-year, reaching $1.232 billion in fiscal year 2025. Q4 revenue was $334 million, up 25% from the previous year.
Operating margin: Operating margin reached 14% for fiscal year 2025, despite FX impacts.
Free cash flow: Adjusted free cash flow for fiscal year 2025 was $322.7 million, with a margin of 26%.
Shift to AI and upmarket focus: The company is shifting investments to higher ROI opportunities, focusing on larger customers and AI-driven solutions. This includes reducing focus on smaller, self-serve customers due to increased acquisition costs and lower returns.
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Risk or Challenges
Choppy demand environment in no-touch channels: The demand environment in no-touch channels, particularly among smaller customers, remains inconsistent and challenging. This has led to increased costs to acquire and expand self-serve customers, with returns on these investments falling below historical levels. This challenge is expected to persist into 2026.
Foreign exchange (FX) impact: The company experienced a negative FX impact on operating margins, primarily due to the depreciation of the Israeli shekel against the U.S. dollar. This impact is expected to continue affecting financial performance in 2026.
Increased investment in sales and R&D: The company plans to grow headcount in sales and R&D by mid-teens percentage in 2026, which could increase operational costs and pressure margins if revenue growth does not keep pace.
Uncertainty in AI landscape: The evolving nature of the AI landscape introduces uncertainty, making it challenging to provide long-term financial targets beyond 2026. This could impact strategic planning and investor confidence.
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Guidance & Outlook
Revenue Growth for Q1 2026: Expected revenue to be in the range of $338 million to $340 million, representing growth of approximately 20% year-over-year.
Revenue Growth for Full Year 2026: Expected revenue to be in the range of $1.452 billion to $1.462 billion, representing growth of 18% to 19% year-over-year.
Non-GAAP Operating Income for Q1 2026: Expected to be in the range of $37 million to $39 million with an operating margin of 11% to 12%, assuming a negative FX impact of 100 to 200 basis points.
Non-GAAP Operating Income for Full Year 2026: Expected to be in the range of $165 million to $175 million with an operating margin of 11% to 12%, assuming a negative FX impact of 100 to 200 basis points.
Adjusted Free Cash Flow for Full Year 2026: Expected to be in the range of $275 million to $290 million with an adjusted free cash flow margin of 19% to 20%, assuming a negative FX impact of 100 to 200 basis points.
Headcount Growth for 2026: Expected to grow in the mid-teens percentage range, with incremental investment primarily directed towards sales and R&D.
AI as a Growth Driver: AI is expected to become a core driver of customer value and differentiation, with monday.com positioned to lead in this area. The company anticipates durable profitable growth driven by AI advancements.
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Shareholder Return Plan
Share Repurchase: In the fourth quarter of 2025, monday.com executed a share repurchase of $135 million. As of the end of Q4, approximately $735 million remained available under the existing share purchase authorization program.
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Key Q&A
Q:Can you touch on the growth outlook for 2026, including NRR stability, top-line growth deceleration, and customer expansion in the enterprise?
A:Guidance reflects high confidence in execution without assuming a rebound in performance marketing or top-of-funnel activity. Growth is driven by upmarket and enterprise customer expansion, multiproduct adoption, and efficiency improvements. NDR is expected to remain flat at 110% by year-end. Margins are impacted by mid-teens headcount growth and a 100-200 basis point negative effect from the Israeli shekel's appreciation against the U.S. dollar.
Q:What is the monetization strategy for Sidekick, and how do you see it scaling?
A:Sidekick is offered as a paid add-on for Pro and below packages and included in the enterprise package. It integrates AI capabilities, is context-aware, and acts as a business brain for organizations. Future monetization opportunities are being considered.
Q:What is the impact of AI on customer acquisition costs and sales processes, particularly for smaller customers?
A:Performance marketing remains choppy, affecting smaller customers (SMB segment). Budgets are being shifted to higher ROI channels, focusing on larger customers with better retention and ROI. No significant impact is seen on larger customers.
Q:Why is the operating margin guidance for 2026 lower than fiscal 2025 despite slower growth?
A:The lower operating margin is due to the Israeli shekel's appreciation, increased investment in AI and SLG motion, and front-loaded costs with longer payoff times. The guidance reflects achievable numbers given the current macro and demand environment.
Q:Why might it make sense for a monday customer to build agents within monday instead of outside the platform?
A:Building agents within monday leverages existing data, workflows, and processes, providing significant value. The platform is secure, enterprise-grade, and context-aware, offering a competitive advantage for agent-based solutions.
Q:Is there extra conservatism in the free cash flow guidance for 2026?
A:Free cash flow guidance accounts for FX impact, increased AI and SLG investments, lower interest rates, potential tax payments, and opportunistic share buybacks. These factors contribute to a tighter margin compared to previous years.
Q:How are customers evaluating monday among alternatives, and are there changes in sales cycles or customer behaviors?
A:Customers value monday as a trusted partner and platform for deploying technology securely. The company sees strong retention, customer acquisition, and growth in the $50,000+ customer cohort, with no significant changes in sales cycles.
Q:What is the headwind from the no-touch business in 2026, and how does it affect guidance?
A:The no-touch business remains choppy, with no improvement expected from fiscal 2025 levels. This uncertainty is factored into the guidance, but specific headwind quantification is not provided.
Q:What has changed fundamentally to lead to a lower outlook for 2026 compared to previous guidance?
A:The lower outlook reflects macroeconomic noise, continued volatility in the no-touch business, and the time required for business shifts. The guidance now reflects achievable numbers with high confidence.
Q:What is the strategy for the enterprise go-to-market motion, and how is it performing?
A:The enterprise strategy focuses on vendor consolidation, product portfolio expansion, and leveraging AI capabilities. Gross retention in the $50,000+ cohort is at 91%, with high renewal rates and strong momentum.
Q:What is the contribution of core versus new product growth in fiscal 2026?
A:Growth is primarily driven by existing products (monday Work Management, CRM, service, and dev) with some revenue from AI products. New products will become a larger part of the business by 2027.
Q:What are the dynamics impacting the self-serve channel, and how does AI experimentation play a role?
A:The self-serve channel faces choppiness in performance marketing, primarily affecting smaller customers. No significant impact from AI experimentation is observed, and the company is shifting its product to be more AI-native.
Q:What is the progress of monday CRM and monday service, and how do they contribute to growth?
A:Both products performed well in Q4, with work management overperforming due to enterprise deals. CRM and service are expected to become larger revenue contributors in 2026.
Q:What is the decision-making process for choosing a Vibe coding platform, and how does monday differentiate?
A:monday offers Vibe coding within its platform, leveraging existing data and workflows. It is enterprise-grade, secure, and integrates with third-party platforms, differentiating it from consumer-oriented tools.
Q:What is the impact of pricing changes on net retention and customer behavior?
A:Net retention decreased slightly due to lapping a price increase introduced two years ago. The company does not see significant churn due to pricing, with most churn occurring in smaller customers.
Q:What is the free cash flow margin guidance for 2026, and what factors influence it?
A:Free cash flow margin is impacted by FX, lower interest rates, increased AI and SLG investments, potential tax payments, and share buybacks. These factors contribute to a tighter margin compared to previous years.
Q:How are customers responding to AI capabilities, and how does it shape monetization strategy?
A:Customers value AI capabilities embedded in the platform and prefer predictable pricing. Compute-intensive workloads are monetized through credits, and the model is well-received.
Q:Review of Unclear Management Responses
A:Management avoided directly quantifying the headwind from the no-touch business in 2026, stating it remains choppy without providing specific figures. Additionally, they did not provide clarity on the FY '27 revenue target, citing macroeconomic noise and business shifts without detailed explanations.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
AI agent
AI core
AI customer
AI sidekick
AI value
AI workflow
ARR customer
ARR deployment
ARR expansion
CEOs mondaycom
CFO mondaycom
Day shift
Desiree conference
Eran progress
Monday Vibe
Monday block
Sidekick intelligence
Sidekick user
Teams work
Today AI
Vibe driver
Vibe leap
Vibe month
Vibe start
ability term
account gateway
account success
action Sidekick
action workflow
addition customer
confidence
layer
process
touch
vision
workflow demand
MNDY Transcript
monday.com Ltd. (MNDY) Q4 2025 Earnings Call Transcript
Unknown2-9
The earnings call presents a mixed outlook: strong financial metrics and optimistic guidance for FY 2025, but concerns about lower operating margins and conservative free cash flow guidance for 2026. The Q&A reveals challenges in the no-touch business and macroeconomic factors, though AI investments and enterprise strategies are positive. Without market cap data, the stock's reaction is uncertain, leading to a neutral prediction.
monday.com Ltd. (MNDY) Q3 2025 Earnings Call Transcript
Positive11-10
The earnings call summary presents a positive outlook with strong revenue growth projections, stable gross margins, and a strategic focus on AI and upmarket expansion. Despite a cautious Q4 guidance, the company's transition to larger accounts and AI-driven solutions shows promising traction. The Q&A section reveals confidence in meeting long-term targets, with AI products enhancing customer retention. The sentiment is further supported by healthy top-of-funnel activity and multiproduct adoption. Overall, the positive elements outweigh the cautious guidance, indicating a likely positive stock price movement.
Monday.com Ltd. (MNDY) Presents At Goldman Sachs Communacopia + Technology Conference 2025 Transcript
Neutral9-10
monday.com Ltd. (MNDY) Q2 2025 Earnings Call Transcript
Positive8-11
The earnings call summary reflects solid financial performance with 30% YoY revenue growth and optimistic future guidance. Product innovation and enterprise growth are strong, and strategic leadership changes are expected to drive expansion. The Q&A section reveals management's proactive approach to challenges, like Google algorithm changes, and a focus on high-value customers. Despite some unclear responses, the overall sentiment is positive, especially with AI-driven growth and a robust shareholder return plan. The absence of negative factors like margin decline or guidance cuts supports a positive outlook.
MNDY Report
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