monday.com (NASDAQ:MNDY) reported 19% revenue growth and a record non-GAAP operating margin in the third quarter of fiscal 2026, but executives said restructuring disruption, weakness among smaller customers and longer enterprise sales cycles were slowing growth.
Revenue rose to $378 million, while non-GAAP operating income increased to $89.4 million from $47.5 million a year earlier. The non-GAAP operating margin reached 24%, compared with 15% in the prior-year quarter.
The company forecast fourth-quarter revenue of $380 million to $382 million, representing approximately 14% year-over-year growth. CFO Eliran Glazer said the outlook assumes similar trends to those seen in the third quarter, including continued pressure in the smaller-customer market and deliberate buying behavior among larger customers.
“We are probably a few quarters from getting back to something that implies more stability,” Glazer said, adding that the process would likely extend through several quarters of 2027.
Restructuring and Customer Headwinds
Co-CEO Eran Zinman said the workforce restructuring announced in July reduced the company’s staff by roughly 20% during the quarter and caused near-term disruption. monday.com ended the quarter with 2,479 employees, down 690 from the second quarter. It expects year-end headcount to be approximately 20% lower than at the end of 2025.
Zinman also said additions of small and midsize business customers were lower and logo churn was higher as the company shifted its sales focus toward larger enterprises. He said customers were taking longer to make purchasing decisions as they assessed how artificial intelligence fits into their businesses.
Chief Revenue Officer Casey George said the shift upmarket exposed monday.com to buying cycles with more stakeholders. Disruption from the workforce reduction also lingered longer than expected, he said. George added that sales productivity had improved over recent quarters, although he was not ready to say the disruption was completely behind the company.
Overall net dollar retention was 108% in the third quarter. Glazer said the company expects the measure, calculated as a trailing four-quarter weighted average, to decline to 107%.
AI Adoption and Enterprise Focus
monday.com is moving toward a hybrid pricing model that combines seat subscriptions with usage-based AI charges. Co-CEO Roy Mann said the company is also pairing its products with implementation services as it shifts from managing work toward executing it with people and AI agents.
AI annual recurring revenue reached $36 million at quarter-end, led by growing use of AI credits, Zinman said. More than 30% of accounts in the company’s $50,000 customer segment paid for and used AI credits, he said. AI adoption and usage in that group were 4.4 times those of the rest of the customer base.
Zinman said the vast majority of AI credit usage came from monday vibe and monday agents. The company’s agents surpassed 6 million interactions in less than two quarters, he said.
The company recently launched monday Frontier, a service organization that uses forward-deployed engineers and other support to help customers implement AI. Zinman said monday.com plans to hire for the service and expand it among existing and new customers. He said Frontier could pressure margins, but management expects benefits from licenses and AI consumption to outweigh the headcount investment.
monday.com also launched Harmony, a voice AI agent platform for enterprise sales teams. Zinman said it combines voice technology from the company’s OneAI acquisition with monday.com’s own small language models.
Profitability and Outlook
Third-quarter non-GAAP net income was $93.6 million, or $2.14 per diluted share, compared with $61.9 million a year earlier. Non-GAAP gross margin was 88%, down from 90%.
Glazer attributed the quarter’s profitability in part to the workforce reduction, along with lower travel and marketing-event spending and seasonal effects. He said the fourth quarter would provide a more normalized view of costs, including compensation changes and spending on the company’s Elevate event.
Adjusted free cash flow was $63 million, representing a 17% margin. That figure excluded $47.2 million in restructuring-related cash payments. Net cash provided by operating activities was $20.4 million.
For full-year 2026, monday.com forecast revenue of $1.473 billion to $1.475 billion, or approximately 20% growth. It projected non-GAAP operating income of $268 million to $270 million and adjusted free cash flow of $282 million to $288 million. The company expects to provide 2027 guidance at its next earnings report.
About monday.com (NASDAQ:MNDY)
monday.com Ltd. is a software company that provides a cloud-based platform for organizations to plan, manage and track work. Founded in 2012 as dapulse, the company adopted the monday.com name in 2017.
Its products include monday work management, monday CRM, monday dev and monday service. The platform offers tools for project and workflow management, customer relationship management, software development and service operations, with features for collaboration, automation and reporting.
Headquartered in Tel Aviv, Israel, monday.com serves customers across a range of industries and geographies.
