Monday: What I got wrong
A big bet that I got really wrong
Monday reported a decent quarter, but the 22% sell off in the company says it all. I’ll briefly touch on the quarter and then touch on how I got this big bet of mine so wrong.
Q4 2025
Revenue of +25% vastly outperforms. Move upmarket is strong.
RPO and cRPO over 30% showing future growth and visibility is intact.
Seems like they're slowing hiring a few percentage points from 20% to mid teens. That's good, but not nearly good enough, so actually a bad!
Issues:
NDR ticked down across the board across all customer cohorts. That's not good. Management says this is because of rolling over of pricing that took place last year.
Growth seems to be predominantly 50k+ customers. The low end is still being missed. This is 59% of ARR.
AI monetization not in the works yet. Different from $TEAM where it seems to be driving things.
Guidance for 2026 sucks. Either this is extreme sandbagging (management always does this) or things are falling off a cliff. Even worse, they withdrew 2027 goals on the call. They JUST set these targets 5 months ago.
To put things in perspective, Q1 guidance for 20% revenue growth and FY 2026 for 18-19%. In light of 25% Q4 growth and FY25 27% growth, this is a very low guide - implies a huge deceleration. In a company where large accounts are now responsible for more and more of revenue, cRPO and RPO are both growing above 30% - this should enable increased visibility, and more accurate forecasting. So why the sandbagging? Or is this actually very bad? Based on management withdrawing guidance and mentioning a ‘choppy’ low end, my guess is that new customer growth in SMB as well as SMB retention is simply put - falling off a cliff. SMB is still 59% of Monday’s ARR and they can’t grow as a company without this segment.
Putting a nail in the coffin is the forecast for FCF decline from 2026 to 2026, despite growing revenue 18%! This is due to increased hiring, gross margin pressure due to AI usage in their products, decreased interest from cash on their balance sheet. Lowering adjusted FCF margin kills the operating leverage thesis that Monday has been about.
All in all, this quarter, forecast and call showed that my Monday thesis is broken.
My assumptions on investing in Monday
I’ve held a position in Monday since around the IPO, and I’ve followed the company from its days as a private startup. My thesis in investing was based on a few things:
Work management is a growing nascent TAM. Most companies STILL don’t use one properly.
Once you onboard a company fully to a work management platform it’s very very sticky.
Monday is a company I’ve followed for a long time and watched execute at a high level. Despite operating in a crowded market they’ve outgrown their many competitors (ClickUp, Notion, Asana, Basecamp, Smartsheet)
While products are not majorly differentiated, Monday has shown they can execute on growth and marketing, both in SMB and the enterprise and partner ecosystem shift.
Management is focused on growth, but also on a shift to profitability. The nature of their gross margin and overall margin profile sets them up for operating leverage and turning into a FCF machine for investors over the coming years.
Even before AI I got two of the above wrong, and that’s what’s killed my thesis.
Monday is has always been at it’s core a SMB focused company. They grew like a weed via performance marketing. They always took great pride in this and their internal data tracking tool, ‘Big Brain’. Their core competency wasn’t GTM execution as a whole. Rather it was performance marketing to SMBs, and arguably now, their shift to enterprise which seems to be going very well. Their performance marketing engine has fallen off a cliff during 2025. At first they attributed this to AI, but over 9 months they haven’t figured out how to fix this. I missread the company here, and attributed their core competency to overall GTM execution whereas in reality it looks like it was a much narrower core competency. Without performance marketing that’s working at the SMB level, 59% of the company seems to be shrinking. Perhaps it’s the price hikes they put into place in 2024-5 that killed their SMB growth. Perhaps it’s AI and LLM based discovery. What’s clear to me now is that their core competency of performance marketing based growth is now no longer relevant.
Operating leverage looks farther away then ever. Despite things going very wrong on the growth lever, management isn’t cutting costs, increasing efficiency or going into a code red mode. No. They’re hiring more people, in an already bloated company. After increasing headcount by 30% in 2025, do they really need to increase headcount another 15% in 2026? With AI efficiency, the answer IMO is a resounding No. If they need different talent, they should cut and reshuffle. Without increasing operating leverage, there is really no reason to own this stock. SBC is still high as a percentage of revenue, so any FCF goes to offset that, leaving even less for shareholders. Essentially the path to shareholder returns are now further out then ever. Even trading at a lowly 8x adjusted FCF (ex cash), this isn’t interesting if they can’t grow FCF.
Based on 2025, management comments and strategy shifts I’m simply more doubtful then ever in their ability to make this huge strategic shift. While I do think that the co founders have set the company on the right strategic path — “doing the work” instead of “managing the work” — it doesn’t seem like they’re in the mindset to drive the urgency for Monday to deliver results FAST. The SaaS world is shaking underneath them and they’re simply to sanguine.
This loss really hurts, as it was a big bet that lost BIG.
However, owning mistakes, learning from them and implementing learnings is part of the game. Looking into my process here are some things I’m learning:
Evaluate the core competency of a company much more specifically. Be on the lookout for threats to this core competency and create scenario analysis for them.
I’d been ‘right’ on Monday for 3 years prior to Q2 2025, and often felt that the market misunderstood them. This made me feel overly confident in myself and in management and their proven track record. This was a big error. It is clear that when things start going badly for a company I HAVE to evaluate this much much much closer.