Monday.com's 70% Drop: Is the AI Fear Already Priced In?

The market's verdict on Monday.com is stark. The stock is down 70% from its all-time highs and has already slipped 37.3% in 2025. This severe discount is not driven by a collapse in fundamentals, but by a powerful narrative of disruption. The prevailing fear is that new AI tools, like Claude Code, could automate the very low-code/no-code development that forms the core of Monday.com's value proposition. The bear case is straightforward: if anyone can now build custom software tools with a chatbot, the demand for third-party platforms like Monday.com could evaporate.

This fear has priced the stock for perfection. The consensus view is that the company's growth story is now on a knife's edge, with its future entirely contingent on successfully navigating this AI threat.

The market is assigning a massive premium to the idea that Monday.com can prove its platform remains indispensable. This setup leaves almost no room for error. Any stumble in execution, any sign that AI adoption is accelerating faster than the company can adapt, could trigger further downside. The stock's deep discount reflects not current weakness, but a future where the AI disruption thesis either materializes or is definitively proven wrong.

Financial Reality: Growth and Profitability Hold

The market's fear of AI disruption is not reflected in Monday.com's current financials. In fact, the company is executing with remarkable strength. For the third quarter of 2025, revenue grew 26% year-over-year to $316.9 million. More importantly, this growth is translating directly into profitability. The company delivered its highest ever non-GAAP operating profit this quarter, with operating income of $47.5 million and a margin of 15%. This marks a significant improvement from the prior year's 13% margin, demonstrating a disciplined path to scaling efficiently.

The business is also diversifying its revenue base. New products, including the recently launched monday campaigns, now account for more than 10% of total Annual Recurring Revenue (ARR). This expansion into adjacent areas like CRM and development tools shows the platform's ability to innovate and capture value beyond its core offering. Customer health metrics remain robust, with a net dollar retention rate of 111%, indicating existing clients are not only staying but spending more.

So, is the stock's 70% decline justified by deteriorating fundamentals? The evidence says no. The company is growing at a solid pace, moving decisively into profitability, and successfully launching new products. The financial reality is one of strength, not decay. The market's verdict appears to be a classic case of pricing in a future risk-AI disruption-while ignoring the present-day execution. The stock's deep discount now seems to reflect a narrative more than a balance sheet.

Valuation and the Asymmetry of Risk

The stock's deep discount creates a clear asymmetry of risk. On one side, the valuation suggests significant upside if the company can execute. At a share price of $132.81, some models flag a 35.22% intrinsic discount to a narrative fair value of about $235.20. This gap implies the market is pricing in a future where the AI disruption thesis proves correct, leaving little room for the company's current growth and profitability to be rewarded.

The primary risk is that this narrative gains traction. If AI tools like Claude Code accelerate adoption and begin to materially erode demand for third-party platforms, it could trigger a faster-than-expected deceleration in growth or even customer attrition. The company's heavy spending on sales and marketing to win new customers would then become a liability rather than an investment, pressuring margins and delaying the path to even higher profitability.

A secondary, more immediate risk is growth deceleration. Barclays recently cut its expectations, citing softer revenue guidance for late 2025 that indicated slower growth in a volatile tech sector. While the company's Q3 growth was strong, any failure to meet investor patience for a sustained pace could reignite selling pressure. The stock's recent momentum has faded, with a 30-day share price return of 11.54% and a 90-day return of 26.86%, suggesting the easy gains may be behind it.

The bottom line is that the stock is priced for a future of disruption. The current price already reflects a high degree of skepticism about Monday.com's ability to navigate the AI threat. For the bullish case to win, the company must not only hold its ground but demonstrate that its platform's value-its ability to scale and integrate workflows-remains superior to what AI can offer. The risk/reward ratio hinges on this expectation gap.

Catalysts and What to Watch

The stock's deep discount means the next few quarters will be decisive. Investors need to watch for two sets of signals: the company's ability to execute against its own guidance, and the market's reaction to concrete evidence of resilience.

First, the near-term financial reports are critical. The stock's recent pressure followed Barclays cutting its expectations, citing softer revenue guidance for late 2025. This sets a clear benchmark. The upcoming Q4 2025 and Q1 2026 earnings reports will show whether growth holds up against that softer outlook. Any sign of deceleration would reignite fears and likely pressure the stock further. Conversely, beating these lowered expectations would begin to chip away at the consensus view of inevitable disruption.

Second, operational metrics will reveal the health of the business beyond top-line growth. Watch the adoption rate of new products like monday campaigns, which now account for over 10% of ARR. This expansion into CRM and other verticals is key to diversifying away from core task management. More importantly, monitor the company's gross margin of 88.62%. Maintaining this high level of profitability while scaling is a sign of pricing power and operational efficiency. A meaningful margin compression would signal increasing competitive or cost pressures, undermining the bullish case.

The ultimate catalyst, however, will be a shift in market sentiment. The stock is priced for a future where AI disruption is a certainty. For that to change, the market needs to see concrete evidence that Monday.com's platform remains indispensable. This won't come from a single quarter's numbers, but from a sustained pattern of growth, product innovation, and customer retention that directly counters the AI automation narrative. Until then, the stock will remain vulnerable to any news that feeds the fear of obsolescence.