monday.com (MNDY)

Work management platform monday.com (NASDAQ:MNDY) reported revenue ahead of Wall Streets expectations in Q3 CY2025, with sales up 26.2% year on year to $316.9 million. On the other hand, next quarter’s revenue guidance of $329 million was less impressive, coming in 1.4% below analysts’ estimates. Its non-GAAP profit of $1.16 per share was 32.5% above analysts’ consensus estimates.

Company Overview

With its colorful interface of boards, columns, and automation that replaced the chaos of spreadsheets, monday.com (NASDAQ:MNDY) is a cloud-based work operating system that helps teams manage projects, track tasks, and streamline workflows through customizable interfaces.

The future of work requires teams to collaborate across departments and remote offices. Project management software is both driving this change and benefiting from it. While the trend of collaborative work management has been strong for a while, the Covid pandemic has definitively accelerated the demand for tools that allow work to be done remotely.

monday.com competes with other work management platforms like Asana (NYSE:ASAN), Atlassian's Trello and Jira (NASDAQ:TEAM), Smartsheet (NYSE:SMAR), and privately-held companies like Notion, ClickUp, and Wrike (owned by Citrix).

A company’s long-term sales performance can indicate its overall quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Thankfully, monday.com’s 53.3% annualized revenue growth over the last five years was incredible. Its growth surpassed the average software company and shows its offerings resonate with customers, a great starting point for our analysis.

We at StockStory place the most emphasis on long-term growth, but within software, a half-decade historical view may miss recent innovations or disruptive industry trends. monday.com’s annualized revenue growth of 31.2% over the last two years is below its five-year trend, but we still think the results suggest healthy demand.

This quarter, monday.com reported robust year-on-year revenue growth of 26.2%, and its $316.9 million of revenue topped Wall Street estimates by 1.4%. Company management is currently guiding for a 22.8% year-on-year increase in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to grow 22.6% over the next 12 months, a deceleration versus the last two years. Still, this projection is healthy and suggests the market is baking in success for its products and services.

While reported revenue for a software company can include low-margin items like implementation fees, annual recurring revenue (ARR) is a sum of the next 12 months of contracted revenue purely from software subscriptions, or the high-margin, predictable revenue streams that make SaaS businesses so valuable.

monday.com’s ARR punched in at $1.27 billion in Q3, and over the last four quarters, its growth was fantastic as it averaged 28.8% year-on-year increases. This performance aligned with its total sales growth and shows that customers are willing to take multi-year bets on the company’s technology. Its growth also makes monday.com a more predictable business, a tailwind for its valuation as investors typically prefer businesses with recurring revenue.

This quarter, monday.com reported 3,993 enterprise customers paying more than $50,000 annually, an increase of 291 from the previous quarter. That’s quite a bit more contract wins than last quarter and quite a bit above what we’ve observed over the previous year. Shareholders should take this as an indication that monday.com’s go-to-market strategy is working well.

The customer acquisition cost (CAC) payback period measures the months a company needs to recoup the money spent on acquiring a new customer. This metric helps assess how quickly a business can break even on its sales and marketing investments.

monday.com is quite efficient at acquiring new customers, and its CAC payback period checked in at 29.1 months this quarter. The company’s rapid recovery of its customer acquisition costs indicates it has a strong brand reputation, giving it more resources pursue new product initiatives while maintaining the flexibility to increase its sales and marketing investments.

One of the best parts about the software-as-a-service business model (and a reason why they trade at high valuation multiples) is that customers typically spend more on a company’s products and services over time.

monday.com’s net revenue retention rate, a key performance metric measuring how much money existing customers from a year ago are spending today, was 115% in Q3. This means monday.com would’ve grown its revenue by 15% even if it didn’t win any new customers over the last 12 months.

monday.com has a good net retention rate, proving that customers are satisfied with its software and getting more value from it over time, which is always great to see.

What makes the software-as-a-service model so attractive is that once the software is developed, it usually doesn’t cost much to provide it as an ongoing service. These minimal costs can include servers, licenses, and certain personnel.

monday.com’s gross margin is one of the best in the software sector, an output of its asset-lite business model and strong pricing power. It also enables the company to fund large investments in new products and sales during periods of rapid growth to achieve outsized profits at scale. As you can see below, it averaged an elite 89.2% gross margin over the last year. Said differently, roughly $89.17 was left to spend on selling, marketing, and R&D for every $100 in revenue.

The market not only cares about gross margin levels but also how they change over time because expansion creates firepower for profitability and free cash generation. monday.com has seen gross margins improve by 0.3 percentage points over the last 2 year, which is slightly better than average for software.

monday.com’s gross profit margin came in at 88.7% this quarter, in line with the same quarter last year. Zooming out, the company’s full-year margin has remained steady over the past 12 months, suggesting its input costs have been stable and it isn’t under pressure to lower prices.

monday.com was roughly breakeven when averaging the last year of quarterly operating profits, decent for a software business.

Looking at the trend in its profitability, monday.com’s operating margin rose by 4 percentage points over the last two years, as its sales growth gave it operating leverage.

In Q3, monday.com’s breakeven margin was up 10.2 percentage points year on year. The increase was solid, and because its operating margin rose more than its gross margin, we can infer it was more efficient with expenses such as marketing, R&D, and administrative overhead.

Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.

monday.com has shown robust cash profitability, driven by its attractive business model and cost-effective customer acquisition strategy that enable it to invest in new products and services rather than sales and marketing. The company’s free cash flow margin averaged 28.9% over the last year, quite impressive for a software business.

monday.com’s free cash flow clocked in at $90.22 million in Q3, equivalent to a 28.5% margin. The company’s cash profitability regressed as it was 4.4 percentage points lower than in the same quarter last year, but we wouldn’t read too much into the short term because investment needs can be seasonal, leading to temporary swings. Long-term trends carry greater meaning.

Over the next year, analysts predict monday.com’s cash conversion will fall. Their consensus estimates imply its free cash flow margin of 28.9% for the last 12 months will decrease to 27%.

Businesses that maintain a cash surplus face reduced bankruptcy risk.

monday.com is a profitable, well-capitalized company with $1.74 billion of cash and $119.3 million of debt on its balance sheet. This $1.62 billion net cash position is 18.9% of its market cap and gives it the freedom to borrow money, return capital to shareholders, or invest in growth initiatives. Leverage is not an issue here.

It was good to see monday.com narrowly top analysts’ revenue expectations this quarter. On the other hand, its revenue guidance for next quarter slightly missed. The latter is weighing on shares. The stock traded down 17.4% to $156.89 immediately after reporting.

Updated: December 4, 2025 at 9:10 PM EST

Before making an investment decision, investors should account for monday.com’s business fundamentals and valuation in addition to what happened in the latest quarter.

monday.com is an amazing business ranking highly on our list. For starters, its revenue growth was exceptional over the last five years. And while its expanding operating margin shows it’s becoming more efficient at building and selling its software, its admirable gross margin indicates excellent unit economics. On top of that, monday.com’s surging ARR shows its fundamentals and revenue predictability are improving.

monday.com’s price-to-sales ratio based on the next 12 months is 5.7x. Looking across the spectrum of software businesses, monday.com’s fundamentals clearly illustrate it’s a special business. We like the stock at this price.

Wall Street analysts have a consensus one-year price target of $235.20 on the company (compared to the current share price of $154.78), implying they see 52% upside in buying monday.com in the short term.