Monday.com's Non-GAAP Margins Masked a Sharp Decline in GAAP Profitability as the Company Increased Spending

Rhea-AI Summary

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News Market Reaction – MNDY

+3.36%

1 alert

+3.36% News Effect

On the day this news was published, MNDY gained 3.36%, reflecting a moderate positive market reaction.

Data tracked by StockTitan Argus on the day of publication.

Key Figures

FY2025 non-GAAP operating income: $175.3M FY2025 non-GAAP operating margin: 14% Q4 non-GAAP net income: $55M +5 more

8 metrics

FY2025 non-GAAP operating income $175.3M Fiscal year 2025, 14% non-GAAP operating margin

FY2025 non-GAAP operating margin 14% Margin based on non-GAAP operating income for 2025

Q4 non-GAAP net income $55M Fourth quarter 2025 non-GAAP net income

Q4 non-GAAP EPS $1.04 Fourth quarter 2025 non-GAAP earnings per share

2026 non-GAAP op income guidance $165–$175M FY2026 guided non-GAAP operating income, 11–12% margin

FY2025 R&D spending $238.5M R&D rose from 17% to 19% of revenue in 2025

Adjusted FCF guidance 2026 $275–$290M Implied 19–20% margin vs 26% in FY2025

Revenue growth deceleration 27% to 18–19% Growth rate from FY2025 actual to FY2026 outlook

Market Reality Check

Price: $76.03 Vol: Volume 2,128,535 is below...

low vol

$76.03 Last Close

Volume Volume 2,128,535 is below the 20-day average of 4,362,641, suggesting muted trading relative to recent activity. low

Technical Shares at $73.56 are trading below the $195.55 200-day moving average and 76.79% below the 52-week high.

Peers on Argus

MNDY is up 3.63% while the momentum scanner flags only DSGX moving down. Broader...

1 Down

MNDY is up 3.63% while the momentum scanner flags only DSGX moving down. Broader software peers listed (PEGA, ESTC, PCTY, DSGX, OTEX) all show positive price changes in the sector snapshot, but momentum data does not confirm a synchronized sector move.

Historical Context

5 past events · Latest: Feb 25 (Negative)

Pattern 5 events

Date	Event	Sentiment	Move	Catalyst
Feb 25	Guidance history review	Negative	-1.4%	Article reviewed prior guidance statements leading to the February reversal.
Feb 18	2026 guidance critique	Negative	+3.6%	Coverage of 2026 revenue guidance set billions below earlier outlook and target withdrawal.
Feb 18	Conference participation	Neutral	+3.6%	Announcement of management’s fireside chat at a major technology conference.
Feb 11	AI cost concerns	Negative	+0.7%	Discussion of AI investment costs and no-touch channel weakness embedded in guidance.
Feb 09	Q4/FY2025 earnings	Positive	-20.8%	Reported strong 2025 growth, non-GAAP profitability, cash flow, and 2026 guidance ranges.

Pattern Detected

Recent news often produced sharp but inconsistent price reactions, with several instances of divergence between headline tone and next-day move.

Recent Company History

Over the last month, monday.com’s news flow centered on 2025 results, 2026 guidance, and investor reaction. The Feb 9, 2026 earnings release showed strong growth but was followed by a -20.79% move as guidance disappointed. Subsequent pieces examined guidance revisions, AI investment costs, and the buildup to that reversal. Conference participation and commentary around non-GAAP metrics frame today’s legal-focused article as part of an ongoing scrutiny of how guidance, investment in AI, and margin trends were communicated.

Market Pulse Summary

This announcement highlights scrutiny of monday.com’s reliance on non-GAAP metrics, especially where...

Analysis

This announcement highlights scrutiny of monday.com’s reliance on non-GAAP metrics, especially where stock-based compensation and rising R&D spending drive a widening gap with GAAP profitability. FY2025 showed a 14% non-GAAP operating margin and strong cash generation, but 2026 guidance points to lower margins and slower growth. Investors may watch how gross margin trends, AI-related infrastructure costs, and future guidance updates reconcile with both GAAP and non-GAAP measures over time.

Key Terms

non-gaap, gaap, stock-based compensation, adjusted free cash flow, +3 more

7 terms

non-gaap financial

"SEC Regulation G and Item 10(e) of Regulation S-K require that companies presenting non-GAAP financial measures reconcile..."

Non-GAAP refers to financial measures that companies use to show their earnings or performance without including certain expenses or income that are often added back to give a different picture. It matters because it can make a company's results look better or more favorable, but it may also hide important costs, so investors need to look at both GAAP (official rules) and non-GAAP numbers to get a full understanding.

gaap financial

"ensure that non-GAAP presentations are not given undue prominence over GAAP results."

GAAP, or Generally Accepted Accounting Principles, are a set of standardized rules and guidelines that companies follow when preparing their financial statements. They ensure consistency, transparency, and comparability across different companies, making it easier for investors to understand and compare financial information accurately. This helps investors make informed decisions based on trustworthy and uniform financial reports.

stock-based compensation financial

"The gap between these two figures is driven primarily by stock-based compensation, which is excluded from the non-GAAP calculation."

Stock-based compensation is when a company pays employees, directors or consultants with shares or the right to buy shares instead of or in addition to cash. It matters to investors because issuing stock or options spreads ownership thinner (like cutting a pie into more slices), which can reduce each existing share’s claim on profits and can also change reported earnings; investors watch it to assess true cost of running the business and how management is incentivized.

adjusted free cash flow financial

"Adjusted free cash flow guidance of $275–$290 million implies a 19–20% margin..."

Adjusted free cash flow is the amount of money a company generates from its operations after accounting for essential expenses and investments, like maintaining or upgrading equipment. It shows how much cash is truly available to grow the business, pay debts, or return to shareholders, helping investors see the company's financial health more clearly.

gross margins financial

"monday.com guided gross margins to decline from 90% in FY2025 to the "mid-to-high 80s" in FY2026..."

Gross margins measure the portion of sales a company keeps after paying the direct costs to make its products or deliver services, expressed as a percentage of revenue. Think of it as the money left from each sale after paying the ingredients — it signals how efficiently a business produces and prices goods, and matters to investors because higher margins generally mean more room to cover other expenses, invest, and generate profit.

regulation g regulatory

"SEC Regulation G and Item 10(e) of Regulation S-K require that companies presenting non-GAAP financial measures..."

Regulation G is a U.S. securities rule that requires companies to show and explain how any highlighted financial numbers that differ from standard accounting figures were calculated, and to provide a clear bridge to the official results. For investors this acts like a recipe card: when a company presents a simplified or adjusted profit number, Regulation G forces them to show the original ingredients and steps so readers can judge whether the adjusted figure gives a clearer or misleading picture of financial health.

regulation s-k regulatory

"SEC Regulation G and Item 10(e) of Regulation S-K require that companies presenting non-GAAP financial measures..."

A set of U.S. Securities and Exchange Commission rules that tell public companies which narrative and qualitative details must be disclosed in filings, such as risk factors, management discussion, executive pay, legal proceedings and business description. Think of it as a standardized checklist or blueprint that ensures investors get the same types of background information from every company so they can compare risks, management quality and strategy before making investment decisions.

AI-generated analysis. Not financial advice.

(NASDAQ: MNDY)

NEW YORK, March 4, 2026 /PRNewswire/ -- Levi & Korsinsky, LLP is investigating monday.com Ltd. (NASDAQ: MNDY) following the company's February 9, 2026 earnings release and the accompanying 20% decline in its share price. Investors who held MNDY shares and incurred losses may obtain more information about their rights.

SEC Regulation G and Item 10(e) of Regulation S-K require that companies presenting non-GAAP financial measures reconcile those figures to the nearest GAAP equivalent and ensure that non-GAAP presentations are not given undue prominence over GAAP results. In monday.com's case, the divergence between its GAAP and non-GAAP profitability metrics warrants scrutiny.

For fiscal year 2025, monday.com reported non-GAAP operating income of $175.3 million, representing a 14% non-GAAP operating margin. However, on a GAAP basis, the company's operating loss narrowed only to near breakeven. The gap between these two figures is driven primarily by stock-based compensation, which is excluded from the non-GAAP calculation. Q4 non-GAAP net income was $55 million ($1.04 per share), while the GAAP figure was materially lower.

The 2026 guidance further illustrates the gap. Management projected non-GAAP operating income of $165–$175 million, representing an 11–12% margin – a decline from the 14% margin achieved in FY2025. At the same time, the company guided for mid-teens percentage headcount growth with "incremental investment primarily directed towards sales and R&D." R&D spending already increased from 17% to 19% of revenue in FY2025, reaching $238.5 million. The combination of rising operating expenses and declining non-GAAP margins raises questions about whether the non-GAAP presentation adequately communicated the trajectory of the company's profitability.

Additionally, monday.com guided gross margins to decline from 90% in FY2025 to the "mid-to-high 80s" in FY2026, a contraction that management attributed to increased investment in AI infrastructure. Adjusted free cash flow guidance of $275–$290 million implies a 19–20% margin, down from the 26% achieved in FY2025. The simultaneous compression of gross margins, operating margins, and free-cash-flow margins – while revenue growth decelerates from 27% to 18–19% – represents a meaningful shift in the company's financial profile that the non-GAAP headline figures may not fully convey.

MNDY shares fell in excess of 20% on February 9, 2026, with analysts citing the guidance disappointment as the primary catalyst.

Shareholders who purchased MNDY stock and want to learn about their legal options may contact Joseph E. Levi, Esq. for further details.

Levi & Korsinsky, LLP is a nationally recognized firm with offices in New York, California, Connecticut, and Washington, D.C. that prosecutes securities, merger, and consumer class actions on behalf of investors and consumers; more information is available at www.zlk.com.

CONTACT:
Joseph E. Levi, Esq.
Levi & Korsinsky, LLP
33 Whitehall Street, 27th Floor
New York, NY 10004
Tel: (212) 363-7500
Fax: (212) 363-7171
Email: jlevi@levikorsinsky.com
www.zlk.com

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SOURCE Levi & Korsinsky, LLP