MNDY's Spending Surge Intensifies: Is Margin Expansion at Risk?

Monday.com's MNDY aggressive spending trajectory is creating mounting pressure on profitability metrics, raising concerns about the sustainability of current investment levels. Revenue growth is showing signs of slowing, with sales increasing 27% year over year to $299 million in the second quarter of 2025, compared with a 34% rise in the second quarter of 2024. The Zacks Consensus Estimate for the third-quarter 2025 revenue is pegged at $312.1 million, implying growth of just 24.3% from the year-ago period, suggesting this slowdown will persist and limit MNDY’s ability to offset rising costs.

The expense burden is intensifying across key operational areas. Research and development costs surged to 20% of revenues in the second quarter of 2025, up from 16% a year earlier, reflecting heavier AI-related investment. Sales and marketing expenses consumed 47% of revenue, demonstrating continued reliance on costly customer acquisition. With headcount expected to expand by approximately 30% in fiscal 2025, the elevated expense base shows no signs of moderating. 

These accelerating costs are eroding operational efficiency. Non-GAAP operating margin contracted to 15% in the second quarter from 16% in the comparable prior-year period. Operating income rose 17% to $45.1 million but lagged the 27% revenue increase, pointing to weakening operating leverage as investments fail to translate proportionally into profitability gains.

The combination of slowing revenue growth and sustained expense intensity creates a difficult backdrop for margin stability. Customer acquisition efficiency in the small business segment faces additional headwinds from search algorithm changes, while the company's aggressive hiring plans suggest expense pressures will persist. Extended periods of margin volatility appear likely, keeping profitability under strain in the near term.

MNDY Faces Stiff Competition

Salesforce CRM and Atlassian TEAM compete with monday.com in workflow, collaboration and project management software. Salesforce extends into customer relationship management and enterprise workflows, areas where MNDY is expanding through its CRM module. Atlassian’s Jira and Trello overlap closely with MNDY’s core work management platform. In the second quarter of fiscal 2025, Salesforce posted 11% year-over-year revenue growth while sustaining a non-GAAP operating margin above 30%, demonstrating efficiency alongside expansion. Atlassian delivered 22% revenue growth and a 24.3% non-GAAP operating margin. Both Salesforce and Atlassian highlight how peers can scale profitably, unlike MNDY’s rising cost burden.

MNDY’s Share Price Performance, Valuation and Estimates

MNDY shares have plunged 19% in the year-to-date (YTD) period, underperforming the Zacks  Internet - Software industry and the Zacks Computer and Technology sector’s increase of 15.4% and 20.4%, respectively.

MNDY’s YTD Price Performance

From a valuation standpoint, MNDY stock is currently trading at a forward 12-month Price/Sales ratio of 6.84X compared with the industry’s 5.74X. MNDY has a Value Score of F.

MNDY's Valuation

The Zacks Consensus Estimate for MNDY’s third quarter 2025 earnings is pegged at 88 cents per share, which has been revised upward by 2cents over the past 30 days. The estimate indicates 3.53% year-over-year growth.

monday.com Ltd. Price and Consensus

monday.com Ltd. price-consensus-chart | monday.com Ltd. Quote

monday.com currently carries a Zacks Rank #5 (Strong Sell).

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This article originally published on Zacks Investment Research (zacks.com).

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