Monday.com's Non-GAAP Margins Masked a Sharp Decline in GAAP Profitability as the Company Increased Spending
Monday.com's Non-GAAP Margins Masked a Sharp Decline in GAAP Profitability as the Company Increased Spending |
| [04-March-2026] |
(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. 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:
SOURCE Levi & Korsinsky, LLP | ||
Company Codes: NASDAQ-NMS:MNDY |
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