Monday.com's Q3 2025 Earnings Call: Contradictions in Market Demand, Investment Strategy, and AI Monetization

Date of Call: November 10, 2025

Financials Results

• Revenue: $317.0M, up 26% YOY
• EPS: $1.16 per diluted share (record); net income $61.9M vs $45.0M in Q3 '24
• Gross Margin: 90%, with medium-to-long-term expectation in the high-80s
• Operating Margin: 15%, operating income $47.5M, up from $32.2M year-over-year

Guidance:

• Q4 FY25 revenue expected $328M–$330M (growth 22%–23% YOY)
• Q4 FY25 non‑GAAP operating income $36M–$38M; operating margin 11%–12%
• FY25 revenue expected $1.226B–$1.228B (≈26% YOY)
• FY25 non‑GAAP operating income $167M–$169M; operating margin ≈14%
• FY25 adjusted free cash flow $330M–$334M; adjusted FCF margin ≈27%
• NDR expected to remain stable at 111% for FY25

Business Commentary:

* Revenue Growth and Go-To-Market Strategy: - Monday.com reported revenue of $317 million for Q3, up 26% from the year-ago quarter. - This growth was driven by strong net additions among larger customers, improved net dollar retention for accounts over $50,000 in ARR, and accelerating RPO growth, reflecting the effectiveness of their upmarket strategy and disciplined execution.

• AI Product Adoption:
• Monday.com's AI-powered products, such as monday vibe and monday campaigns, showed rapid adoption, with over 60,000 apps created in a short period.

• The adoption of AI features and products was driven by customer demand for integrated and customized workflow solutions, enhancing efficiency and cost savings.

• Challenges in Marketing Channels:

• The company experienced some volatility in paid search performance, impacting new sign-ups and top-of-funnel activity.

• This was attributed to a strategic shift in marketing investment towards higher return on investment channels, including performance marketing, which took longer to see immediate results.

• Multiproduct Strategy Success:

• Monday.com's multiproduct strategy saw new products like monday campaigns surpass 10% of total ARR, surpassing expectations.
• This success was driven by integrating work management with CRM, service, and development products, providing unified solutions and accelerating cross-sell momentum.

Sentiment Analysis:

Overall Tone: Positive

• Management repeatedly cited 'strong results' and 'record' profitability: revenue $317M (+26% YOY), record operating income $47.5M and net income $61.9M; executives emphasized accelerating upmarket expansion, multiproduct adoption (CRM >$100M ARR) and AI traction while reaffirming the $1.8B FY27 target.

Q&A:

• Question from Kasthuri Rangan (Goldman Sachs Group, Inc., Research Division): How should we think about customer spending priorities into calendar 2026 and does the go-to-market transition upmarket constrain the upside you historically delivered?
  Response: Management: Customer demand is healthy across segments with rising interest in AI and multiproduct usage; upmarket GTM is working and may lengthen sales cycles but yields higher-quality, higher-retention deals and underpins confidence in future growth.

• Question from Jackson Ader (KeyBanc Capital Markets Inc., Research Division): Why did deferred revenue/billings come in below revenue despite signing larger, longer-term customers; are billings dynamics masking the move upmarket?
  Response: Eliran: Billings is a cash-based, noisy metric; RPO better reflects upmarket contract value and is accelerating, so timing effects explain billings fluctuations versus recognized revenue.

• Question from Jackson Ader (KeyBanc Capital Markets Inc., Research Division): What should Q4 growth imply for 2026—how should we think about the right growth rate for next year?
  Response: Eliran: Initial FY26 expectations will be provided next quarter; management reiterates commitment to the Investor Day roadmap to $1.8B in FY27 and expects margin expansion alongside revenue growth.

• Question from Arjun Bhatia (William Blair & Company L.L.C., Research Division): Where are you allocating investment to reaccelerate growth in 2026 and how should we think about the headcount plan?
  Response: Eran/Eliran: Investments are focused on product, AI and sales (upmarket reps); headcount to grow ~30% in FY25 concentrated in sales, product and R&D, decelerating toward ~20% next year as much hiring is already behind them.

• Question from Arjun Bhatia (William Blair & Company L.L.C., Research Division): What are customers building with monday vibe and how does usage differ from traditional work management?
  Response: Roy: Vibe enables customers to rapidly build bespoke, enterprise-grade apps that fill workflow gaps and trigger high imagination and adoption, extending platform use beyond classic work management.

• Question from Josh Baer (Morgan Stanley, Research Division): Are the new product bundles primarily product/integration changes or go-to-market/pricing moves, and do they imply effective discounts?
  Response: Casey: Bundles (three launched) package commonly paired products for rapid deployment; they provide commercial advantage and ease-of-use, targeting industries with pervasive use cases and showing early traction.

• Question from Brent Thill (Jefferies LLC, Research Division): Why wasn't Q4 guidance raised and what caused the apparent guidance moderation?
  Response: Eliran: The measured guidance reflects timing as they rebalance spend toward higher-ROI channels and upmarket motions that have longer sales cycles; momentum is positive but conversion timing impacts near-term results.

• Question from Brent Thill (Jefferies LLC, Research Division): How is the upmarket transition progressing?
  Response: Casey: Transition is going exceptionally well—accelerating deals across $50K–$500K cohorts and converting initial $50K relationships into multi-hundred‑thousand and million‑dollar accounts.

• Question from Mark Murphy (JPMorgan Chase & Co, Research Division): How did mid-market and downmarket trends perform versus plans and is there dispersion versus >$100K cohort?
  Response: Eran: Top-of-funnel was choppy early in Q3 (paid search volatility) but stabilized late-quarter; mid-market and bottom-up remain healthy while upmarket shows strong growth and high-quality pipeline.

• Question from Mark Murphy (JPMorgan Chase & Co, Research Division): Can AIO/LLM-driven traffic replace losses from Google search and when might it neutralize the gap?
  Response: Roy: They are shifting marketing toward sales-led and new channels (including AIO); AIO is generating traffic but it's too early to say if it will fully replace Google, though initial signs are positive.

• Question from Scott Berg (Needham & Company, LLC, Research Division): Which internal departments or use cases are showing early traction with AI functionality?
  Response: Casey: Rapid adoption in regulated insurance and retail reporting use cases—customers are building valuable tools in minutes that historically required costly third-party software, demonstrating immediate ROI.

• Question from Scott Berg (Needham & Company, LLC, Research Division): As you pivot channels, should we expect short-term overinvestment in S&M or near-term leverage?
  Response: Eliran: S&M will shift from performance marketing toward headcount (sales, partners, CS); performance marketing share may decline while headcount investment is more moderate and targeted, improving long-term leverage.

• Question from Steven Enders (Citigroup Inc., Research Division): Can you break down paid Google performance through October and how are other channels ramping versus expectations?
  Response: Eran: Google accounts for <10% of new revenue; Q3 saw choppiness but stabilization late-quarter across channels and healthy top-of-funnel/pipeline consistent with plans.

• Question from Steven Enders (Citigroup Inc., Research Division): What gives you confidence in the $1.8B FY27 target given price increases and channel shifts?
  Response: Eliran: Confidence rests on accelerating upmarket demand/expansion, multi-product adoption (CRM >$100M ARR), improving AI engagement, stronger RPO trends and late-quarter top‑of‑funnel stabilization.

• Question from Aleksandr Zukin (Wolfe Research, LLC): What traction did CRM and Service show this quarter and how much are they contributing to net new ARR?
  Response: Casey: CRM surpassed $100M ARR in under two years; Service (nine months old) is accelerating rapidly with larger average customer size (~2x other products) and meaningful contribution to growth.

• Question from Aleksandr Zukin (Wolfe Research, LLC): How should we pace growth given channel shifts and the Q4 guidance change—back‑end loaded or front‑loaded?
  Response: Eliran: They remain confident in FY27 $1.8B target and are comfortable with next‑year consensus; assumptions include cross-sell, new products and some monetization of AI, with details to be provided next quarter.

• Question from David Hynes (Canaccord Genuity Corp., Research Division): Does the new AI pricing and Agent Factory change visibility and forecasting as AI scales?
  Response: Eliran: Early days—there is strong adoption momentum but AI revenue is not expected to be meaningful next year; primary near-term impact is on customer education, adoption and retention rather than material near-term revenue.

• Question from David Hynes (Canaccord Genuity Corp., Research Division): Are you seeing longer contract durations upmarket and is that a tailwind to RPO?
  Response: Casey/Eliran: Yes—term lengths and multiyear contracts are increasing (multiyear ARR rising from ~5% to ~13%), annual+multi-product ARR now >80%, supporting higher RPO.

• Question from Raimo Lenschow (Barclays Bank PLC, Research Division): Why were RPO numbers restated lower after the Investor Day?
  Response: Eliran: RPO is a new metric that was adjusted post‑Investor Day for consistency and accuracy following auditor review; the Q3 RPO data is signed off and reliable.

• Question from James Wood (TD Cowen, Research Division): Is upmarket pipeline tracking ahead of revenue and how is Q4 shaping up given seasonality of larger deals?
  Response: Casey: Pipeline is accelerating upmarket and creates more quarter-to-quarter variability (hockey-stick effect); they are encouraged by the built pipeline and expect cross-sell to add further momentum.

• Question from James Wood (TD Cowen, Research Division): Which AI products (magic, vibe, sidekick, agent builder) show the most near-term adoption potential?
  Response: Casey/Eran: Vibe shows the strongest immediate adoption and monetization opportunity; monday agents also offer significant potential to reach new customer segments.

• Question from Robert Oliver (Robert W. Baird & Co., Research Division): Has anything materially changed in the market causing longer sales cycles, aside from the planned upmarket shift?
  Response: Casey: Nothing materially changed—the company is executing both high-velocity SMB growth and longer upmarket sales simultaneously, as planned; longer cycles are expected and anticipated.

• Question from Robert Oliver (Robert W. Baird & Co., Research Division): How will partners contribute to upmarket growth and account ownership between internal teams and partners?
  Response: Casey: The partner ecosystem remains strategic and is being expanded (including for CRM, Service, AI); partners add depth/regional coverage and will play a growing role, especially in APJ and LatAm.

• Question from Thomas Blakey (Cantor Fitzgerald & Co., Research Division): Any downtick in SMB churn or gross retention concerns as you move upmarket; how should SMB trend into the $1.8B plan?
  Response: Casey/Eliran: SMB remains healthy and consistent, gross retention is historically high (improving since FY23) aided by upmarket mix and price increases; no near-term concern and SMB can be sold the fuller platform including AI.

• Question from Matthew Bullock (BofA Securities, Research Division): Is sales rep productivity tracking to plan and how long to ramp enterprise/upmarket reps?
  Response: Casey: Productivity is improving and aided by internal AI agents; ramp continues positively and AI-driven tools should further boost seller productivity into next year.

• Question from Matthew Bullock (BofA Securities, Research Division): What AI contribution is embedded in the FY27 $1.8B target versus core/multi-product assumptions?
  Response: Eliran: FY27 assumptions principally rely on upmarket expansion, cross-sell and platform stickiness; AI contributes modest revenue near-term but materially aids retention and cross-sell, supporting the $1.8B outlook.

• Question from Taylor McGinnis (UBS Investment Bank, Research Division): Did upmarket strength fail to fully offset softer downmarket trends, causing the Q4 guidance moderation—what got tougher?
  Response: Eran: It wasn't that acquisition became harder—mix shifted to customers sourced via channels with longer conversion times (upmarket), so timing—not deterioration—drove the Q4 moderation.

• Question from Taylor McGinnis (UBS Investment Bank, Research Division): How comfortable are you with Street consensus for next year and are assumptions embedding stabilization in core work management?
  Response: Eliran/Roy: Management is comfortable with consensus and will provide full FY26 details in February; confidence is based on upmarket momentum, product cross-sell, AI adoption and late-quarter stabilization in downmarket acquisition.

Contradiction Point 1

Market Conditions and Demand Environment

It involves differing views on the demand environment and sales cycles, which are crucial for understanding the company's growth trajectory and market position.

How do mid-market and smaller customer trends compare to those of larger customers? - Mark Murphy (JPMorgan Chase & Co)

2025Q3: We expect to see fruits of our investments in R&D and sales in FY'26, with moderated headcount growth. The investment in product and sales is aimed at capturing market opportunities. - Eran Zinman(CEO)

How is the demand environment and the impact of Google's recent algorithm updates affecting performance marketing? - Aleksandr J. Zukin (Wolfe Research, LLC)

2025Q2: We see demand in CRM and mobile areas. Google's impact is limited to new customer acquisition, not affecting high-quality searches. We're optimizing and shifting resources to areas with better returns. - Roy Mann(CEO)

Contradiction Point 2

Investment Strategy and Headcount Growth

It highlights differing approaches to investment and headcount growth, which are critical for future revenue growth and operational efficiency.

Can you outline the 2026 investment plans and goals to drive growth? - Arjun Bhatia (William Blair & Company)

2025Q3: Headcount growth expected to moderate to 20% in 2026, with investments primarily in sales, product, and R&D. - Eliran Glazer(CFO)

As you invest in headcount and innovation, will this drive higher growth or greater operating leverage going forward? - Joshua Phillip Baer (Morgan Stanley, Research Division)

2025Q2: We expect to see fruits of our investments in R&D and sales in FY'26, with moderated headcount growth. The investment in product and sales is aimed at capturing market opportunities. - Eran Zinman(CEO)

Contradiction Point 3

Sales Pipeline and Customer Acquisition Channels

It involves changes in the company's strategy and expectations regarding customer acquisition channels, which could impact revenue growth.

Is there concern regarding stabilization of down-market acquisitions affecting guidance? - Taylor McGinnis (UBS Investment Bank)

2025Q3: The top of the funnel is healthy. It's just a shift in customer acquisition channels. And we are seeing healthy momentum in performance marketing. So we are not concerned at all. We believe the overall strategy is solid, and the momentum is strong. - Eran Zinman(CEO)

Update on Monday Dev's repositioning and impact of market uncertainty? - Jackson Ader (KeyBanc Capital Markets)

2025Q1: We saw strong momentum in Q1 across products. We will continue to invest in performance marketing for monday dev. - Eran Zinman(CEO)

Contradiction Point 4

AI Monetization and Usage

It involves the timeline and expectations of monetizing AI features, which are important for future revenue growth.

How do new AI pricing models and initiatives impact forecasting visibility? - David Hynes (Canaccord Genuity)

2025Q3: The early days of monetization. We are actually building an engine that allows a customer to come in, use the AI blocks for free, and then they get to a point where they actually need to pay for the consumption. - Eran Zinman(CEO)

How is AI feature adoption trending, and is there monetization yet? - Pinjalim Bora (JPMorgan)

2025Q1: The monetization is in early stages, but we're seeing a very strong correlation between usage and monetization. - Roy Mann(CEO)

Contradiction Point 5

Market Demand and Sales Cycle Expectations

It involves mixed signals about market demand and sales cycle expectations, which are critical for forecasting revenue and investor confidence.

Can you discuss the spending environment in calendar year 2026 and Monday's role in it? Also, address the smaller-than-expected beat in the results? - Kasthuri Rangan (Goldman Sachs)

2025Q3: Eran: Demand is strong across all customer segments, with customers buying more products and showing interest in AI features. - Eran Zinman(CEO)

Why is the growth in net new customers slowing compared to previous years? - Arjun Bhatia (William Blair)

2024Q4: Arjun Bhatia (William Blair): Why are net new customer numbers slowing compared to previous years? Eliran Glazer (CFO): The slowdown is due to seasonality in performance marketing spend in Q4. The focus is on expanding within existing customers and increasing ACV. - Eliran Glazer(CFO)