Monday.com Underperforming Into Earnings – Could MNDY Turn Corner?

Shares of monday.com Ltd. (NASDAQ: MNDY) are trading around $191 in today's pre-market. Under the surface, however, there is a complex narrative of recent underperformance and looming uncertainty as the company approaches its Q3 2025 earnings release today. The question on everyone's mind: Is this a temporary blip, or are deeper issues at play that could signal a turning point for the work management platform?

Adding to the pressure is the anticipation surrounding the upcoming earnings report. Analysts are projecting earnings per share (EPS) of $0.88 for Q3 2025, a 3.53% increase compared to the $0.85 EPS reported for the same quarter last year.

The seeds of the current uncertainty were sown with the release of monday.com's Q2 2025 financial results on August 11th. While the company reported impressive revenue of $299 million (a 27% year-over-year increase) and a diluted EPS of $1.09 (beating analyst expectations), the devil was in the details. Management's revenue guidance for 2025 projected a growth rate of 26%, a noticeable deceleration from the 33.2% growth in 2024 and the even more impressive 40.7% in 2023. The forecasted adjusted free cash flow margin for 2025, set between 26% and 27%, also represented a step down from the 30% achieved in 2024. This projection led to a significant stock price decline of approximately 27% following the announcement.

Despite the financial headwinds, monday.com has been actively investing in innovation, particularly in the realm of artificial intelligence. The company's Elevate 2025 customer conference in September showcased a suite of new AI-powered features, including “monday agents,” “monday magic,” “monday vibe,” and “monday sidekick.” The introduction of “monday campaigns,” an AI-powered marketing solution within the CRM suite, further underscores the company's commitment to leveraging AI to enhance its platform.

These AI initiatives are designed to transform monday.com from a work management tool into a comprehensive work execution platform, enabling teams to create custom solutions without requiring extensive technical expertise. Early customer successes, such as Pepsi reducing low-impact work by 30% and Five9 reducing time to revenue by 25%, suggest that these AI investments could yield significant benefits.

Analyst sentiment towards monday.com appears cautiously optimistic. Morgan Stanley initiated coverage of the stock on July 30th, with an “Equal Weight” rating and a price target of $330. While acknowledging the company's potential, the firm also highlighted risks associated with its expansion into larger enterprise markets, its multi-product strategy, and the ongoing shift to a sales-led growth model.

Adding another layer of complexity is the recent insider selling activity. A regulatory filing on September 22nd, revealed an insider's intent to sell 7,000 ordinary shares, valued at approximately $1.3 million. This followed the sale of over 30,000 shares in the preceding months, generating gross proceeds exceeding $8.3 million. While insider selling doesn't automatically indicate a negative outlook, it can raise concerns and contribute to downward pressure on the stock price.

While the prevailing narrative suggests potential headwinds for monday.com, a contrarian perspective warrants consideration. The company's investments in AI, while still in their early stages, could prove to be a game-changer, driving future growth and profitability beyond current expectations. The projected decline in EPS for Q3 2025 may be a temporary setback, influenced by macroeconomic factors or increased investments in research and development.

Moreover, the insider selling activity could be motivated by personal financial considerations rather than a lack of confidence in the company's long-term prospects. It's also important to remember that monday.com operates in a rapidly evolving market, and its ability to adapt and innovate could surprise even the most bearish analysts.

The upcoming Q3 2025 earnings release will be a crucial test for monday.com. A strong performance, exceeding analyst expectations, could restore market confidence and provide a much-needed boost to the stock price. However, a disappointing report could exacerbate existing concerns and potentially trigger a further decline.