monday.com Q2 2026 revenue was $367.3M, up 19% YoY. Operating income grew 36% to $61.1M, amid AI adoption and workforce reduction.
monday.com Ltd. reported Q2 2026 revenue of $367.3 million, representing a 19% increase year-over-year and slightly above the consensus estimate of $366 million. The performance reflects strong adoption of AI features, although headwinds from a reduced workforce and a cautious market environment created some challenges in the demand landscape.
Key Takeaways
- Revenue reached $367.3 million, up 19% year-over-year, driven by growth in enterprise customers and AI adoption.
- Operating income increased to $61.1 million, resulting in an operating margin of 17%, up from 15% in the prior year.
- Net income rose to $65.5 million, a 12% increase from $58.3 million in Q2 2025, with diluted earnings per share of $1.48, exceeding consensus by $0.03.
- Adjusted free cash flow was reported at $52.3 million, yielding a free cash flow margin of 14%.
- The company expects Q3 2026 revenue between $368 million and $370 million, indicating a year-over-year growth of 16% to 17%.
Revenue Growth Driven by AI Adoption
monday.com's revenue growth is largely attributed to the strong adoption of its AI features across various customer segments, particularly in its upmarket strategy. AI ARR doubled quarter-over-quarter, accounting for 70% of net new ARR. The company has highlighted significant net additions in its higher-tier customer segments, with a 37% increase in customers contributing over $100,000 in annual recurring revenue (ARR) and a 68% rise in those exceeding $500,000 ARR. This indicates that the company is effectively penetrating higher-value customer segments, which is crucial for sustaining growth.
| Metric | Q2 2026 | YoY | QoQ |
|---|---|---|---|
| Revenue | $367.3M | +19% | - |
| Operating Income | $61.1M | +36% | - |
| Net Income | $65.5M | +12% | - |
| Adjusted Free Cash Flow | $52.3M | - | - |
Headcount Reduction and Cost Management
The company’s operating income growth was partly supported by a 20% reduction in workforce, which is expected to generate annualized cost savings of $100 million. Operating margins improved to 17%, despite challenges posed by foreign exchange impacts, primarily from the strengthening Israeli Shekel against the US dollar. Management has indicated that the focus of cost reductions will be on non-quota carrying roles, allowing the company to maintain its investment in sales staff aimed at enterprise customers.
Guidance Reflects Caution Amid Market Conditions
For Q3 2026, management has guided revenue expectations of $368 million to $370 million, reflecting a year-over-year growth of 16% to 17%. For the full fiscal year, the revenue guidance is set between $1.466 billion and $1.474 billion, representing a growth of 19% to 20%. The cautious guidance takes into account the potential impact from reduced sales capacity due to the workforce reduction and ongoing volatility in the demand environment. Management emphasized that while they are optimistic about the upmarket motion and AI adoption, they are being prudent in their outlook to mitigate execution risks.
Analyst Q&A Highlights Insights on Demand Environment
During the analyst Q&A, management was pressed on the softer demand in the downmarket segment and the potential impact of pricing changes. CEO Eran Zinman stated, > “Our guidance does not assume any rebound in performance marketing or top of funnel activity... Growth is primarily driven by upmarket and enterprise customer expansion.”
This indicates that while the company is successfully navigating the upmarket transition, the downmarket demand remains a concern. Analysts also noted a decline in net new ARR in segments like CRM and service, which management attributed to a strategic shift towards focusing resources on higher-value opportunities in the enterprise space.
Frequently Asked Questions
Did monday.com Ltd. Ordinary Shares beat earnings estimates in Q2 2026?
Yes, monday.com reported diluted earnings per share of $1.48, beating the consensus estimate by $0.03.
What is the revenue guidance for Q3 2026?
The company expects Q3 2026 revenue to be between $368 million and $370 million, which reflects a year-over-year growth of 16% to 17%.
How much did operating income increase in Q2 2026?
Operating income for Q2 2026 increased to $61.1 million, up 36% from the previous year.
What are the implications of the headcount reduction on future growth?
The 20% workforce reduction is expected to save $100 million annually, allowing monday.com to reinvest in high-growth areas, particularly in AI and enterprise sales.
The market will be watching closely as the company navigates these changes and aims to capitalize on its AI initiatives while managing the impact of workforce reductions on its overall growth trajectory.
This analysis is based on public earnings call materials and is not investment advice.
