Wall Street has decided AI is going to eat workflow software alive, and this company got thrown on the plate first.
Meanwhile, its biggest customers keep spending more, its AI products are taking off, and it’s sitting on more than $1 billion in cash with no borrowings. It reports Monday morning, and the stock still trades at less than half its 52-week high.
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Wall Street Wrote This Software Stock’s AI Obituary, but Its Customers Keep Paying
monday.com (NASDAQ: MNDY) is trading at less than half its 52-week high. That’s quite a discount for a company that’s profitable, growing, sitting on more than $1 billion in cash, and has beaten earnings estimates four quarters running.
The fear is simple. AI agents will do the work that tools like monday.com used to organize, so why pay for the tool? It’s a tidy story.
It also skips the part where monday.com is building the agents itself, and its biggest customers are spending more every year.
What Just Happened
A beat the market didn’t want to see
monday.com (NASDAQ: MNDY) crushed its last quarter. Revenue grew 22% and topped forecasts, and adjusted earnings per share came in at $1.48 against a $1.11 consensus. That wasn’t a beat. That was a blowout.
The stock fell anyway, because the guidance was cautious and software sentiment was already in the gutter. Since then, the AI selloff has dragged the whole group lower, and monday.com got tossed in with it.
What management expects next
For the coming report, management guided revenue growth of 16% to 17% and a non-GAAP operating margin of 16%. Two assumptions sit underneath that: no rebound in performance marketing, and net dollar retention of 108%.
Read that again. Management built its forecast assuming the ad-driven sign-up engine stays soft and existing customers expand at a modest pace.
That’s a low bar, deliberately set. The company has beaten estimates in each of its last four quarters, and the report lands Monday morning.
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The AI Threat Is Becoming the AI Product
AI revenue is doubling
monday.com didn’t sit around waiting to be disrupted. It launched an AI Work Platform, where people and AI agents work side by side, and annual recurring revenue from AI products doubled in a single quarter. AI already makes up 17% of new recurring revenue.
So much for the bear case. The company AI is supposed to replace is selling AI to its own customers, and those customers are buying.
Pricing built for the agent era
In the spring, monday.com rolled out a seat-plus-credit pricing model. You pay for users like before, then buy credits as AI agents do more work for you.
That changes the math. If agents end up doing the work instead of people, monday.com still gets paid for every task they complete. Fewer seats doesn’t have to mean less revenue.
Big Customers Are the Growth Engine
The enterprise business keeps compounding
Customers paying more than $100,000 a year grew 37% in the last quarter. Customers paying more than $50,000 grew too, with 287 new ones added in a single quarter.
Large companies don’t rip out the system running their workflows on a whim. Once a big team builds its processes on monday.com, switching becomes a painful, expensive project. That’s the stickiest revenue a software company can own.
Contracted revenue is outrunning sales
Current remaining performance obligations, the revenue customers have already signed up to pay over the next year, grew 27% to $750 million. That’s faster than reported revenue.
When signed contracts grow faster than sales, it’s a preview of the next few quarters. Total annual recurring revenue has already crossed $1.5 billion.
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A Balance Sheet Built for a Storm
Cash, no borrowings, and fat margins
monday.com holds more than $1 billion in cash and short-term investments, and it carries no borrowings. A big chunk of the company’s market value is just sitting in the bank.
The software itself is wildly profitable to deliver, with a gross margin of 89%. Management expects adjusted free cash flow of $280 million to $290 million this year. Companies the market thinks are dying don’t usually throw off cash like that.
Leaner, and buying back stock
monday.com recently cut 20% of its workforce to refocus on its AI platform. That’s expected to save nearly $100 million a year, with most of it reinvested into AI, product, and talent. The restructuring charges are a one-time cost.
The company also burned through its entire $870 million buyback. Every share retired gives you a bigger slice of the profits. That’s management putting its money where its mouth is.
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Priced Below the Industry
Cheaper than its peers on earnings
monday.com trades at a forward earnings multiple below its software industry average. Adjust for growth, and its PEG ratio sits well below the industry’s too.
Put simply, you’re paying less than the average software stock for every dollar of expected earnings growth. For a business with an 89% gross margin, that’s a markdown, not a fair price.
The targets point higher
The average analyst price target sits comfortably above where the stock trades. Guggenheim recently reiterated its Buy rating, and Needham and KeyBanc are also in the bull camp.
Several firms have turned cautious, and TD Cowen recently moved to Hold. But even that firm’s target sits above the current price. When the cautious crowd still sees upside, the selloff has run ahead of the fundamentals.
One Number You Should Treat Carefully
The number to treat carefully is operating margin. It’s guided at 16% for the coming quarter, and margins have been under pressure. On a screener, it looks like profitability is slipping right as growth slows.
Look at what’s driving it. A stronger Israeli shekel is expected to shave 1 to 2 percentage points off the margin, because much of monday.com’s research and development spending happens in Israel.
When the shekel climbs, those costs get pricier in dollar terms. That’s a currency effect, not a business problem.
The rest of the dip comes from management reinvesting its cost savings into AI products. Strip out the currency hit and margins hold up well. The underlying business is more profitable than the headline number suggests.
What Could Trip It Up
The small-customer funnel keeps leaking. monday.com has historically found small customers through online ads. That channel has been volatile, and management isn’t counting on a rebound. If it weakens further, overall growth slows even with enterprise strength.
Monday’s guidance. Growth has stepped down from the low 20s to the mid-teens. If the next forecast shows another big slowdown, the stock can fall further even from these levels.
Enterprise deals take longer. Big customers mean bigger contracts but longer sales cycles. The developer product strategy is also being reworked as AI changes how coders work, which could create a near-term drag.
My Take
The market is pricing monday.com like AI already won and it lost.
What you’re getting is a profitable, cash-rich business with enterprise customers growing fast, AI revenue doubling, contracted revenue outpacing sales, and a valuation below the software industry average.
I’d buy it here. The guide is conservative, the company has a habit of beating, and the stock already reflects a lot of bad news.
What would change my mind is a sharp drop in net dollar retention or a forecast showing growth falling off a cliff. If the stock breaks and holds below $70, step back and reassess.
Entry zone: $82 to $95. Add on weakness toward $75. Target: $125 to $140 over 9 to 15 months. Confidence: high.
Action Recap
Looking to buy? Start a position in the $82 to $95 range before Monday’s report. Leave room to add if a cautious forecast knocks it lower.
Already own it? Hold. In the report, zero in on large-customer growth, AI recurring revenue, net dollar retention, and the next quarter’s guide.
Main risk to respect: If the small-customer slowdown outruns enterprise growth, the rebound takes longer. Size your position so a rough earnings morning doesn’t shake you out.
That's our coverage for today; thanks for reading! Reply to this email with feedback or any value stocks you want me to check out.
Best Regards,
—Noah Zelvis
Undervalued Edge
