Monday.com's Non-GAAP Margins Masked a Sharp Decline in GAAP Profitability as the Company Increased Spending

Rhea-AI Summary

monday.com (NASDAQ: MNDY) is the subject of an investor investigation by Levi & Korsinsky after a February 9, 2026 earnings release that coincided with a >20% share drop.

Key figures: FY2025 non-GAAP operating income $175.3M (14% margin) vs GAAP near breakeven; Q4 non-GAAP net income $55M; FY2026 non-GAAP operating guidance $165–$175M (11–12%). Management guided mid-to-high-80s gross margins, adjusted FCF $275–$290M (19–20%), R&D at 19% ($238.5M), and revenue growth slowing from 27% to 18–19%.

Positive

• Non-GAAP operating income of $175.3M in FY2025
• Adjusted free cash flow guidance of $275–$290M for FY2026 (19–20% margin)
• R&D investment increased to $238.5M, supporting product development

Negative

• GAAP operating profitability remained near breakeven despite non-GAAP profits
• Gross margin contraction guided from 90% to mid-to-high 80s in FY2026
• Revenue growth deceleration from 27% to 18–19% guidance
• Shares fell more than 20% on February 9, 2026 after guidance

News Market Reaction – MNDY

+3.36%

20 alerts

+3.36% Session close to close

+3.0% Peak in 38 min

$4.22B Market Cap

0.1x Rel. Volume

In the Mar 4 session, MNDY gained 3.36%, reflecting a moderate positive market reaction. Argus tracked a peak move of +3.0% during that session. Our momentum scanner triggered 20 alerts that day, indicating elevated trading interest and price volatility.

Data tracked by StockTitan Argus on the day of publication.

Market Context

This announcement highlights scrutiny of monday.com’s reliance on non-GAAP metrics, especially where...

Analysis

This announcement highlights scrutiny of monday.com’s reliance on non-GAAP metrics, especially where stock-based compensation and rising R&D spending drive a widening gap with GAAP profitability. FY2025 showed a 14% non-GAAP operating margin and strong cash generation, but 2026 guidance points to lower margins and slower growth. Investors may watch how gross margin trends, AI-related infrastructure costs, and future guidance updates reconcile with both GAAP and non-GAAP measures over time.

Key Figures

FY2025 non-GAAP operating income: $175.3M FY2025 non-GAAP operating margin: 14% Q4 non-GAAP net income: $55M +5 more

8 metrics

FY2025 non-GAAP operating income $175.3M Fiscal year 2025, 14% non-GAAP operating margin

FY2025 non-GAAP operating margin 14% Margin based on non-GAAP operating income for 2025

Q4 non-GAAP net income $55M Fourth quarter 2025 non-GAAP net income

Q4 non-GAAP EPS $1.04 Fourth quarter 2025 non-GAAP earnings per share

2026 non-GAAP op income guidance $165–$175M FY2026 guided non-GAAP operating income, 11–12% margin

FY2025 R&D spending $238.5M R&D rose from 17% to 19% of revenue in 2025

Adjusted FCF guidance 2026 $275–$290M Implied 19–20% margin vs 26% in FY2025

Revenue growth deceleration 27% to 18–19% Growth rate from FY2025 actual to FY2026 outlook

Historical Context

5 past events · Latest: Feb 25 (Negative)

Pattern 5 events

Date	Event	Sentiment	24h Move	Catalyst
Feb 25	Guidance history review	Negative	-1.4%	Article reviewed prior guidance statements leading to the February reversal.
Feb 18	2026 guidance critique	Negative	+3.6%	Coverage of 2026 revenue guidance set billions below earlier outlook and target withdrawal.
Feb 18	Conference participation	Neutral	+3.6%	Announcement of management’s fireside chat at a major technology conference.
Feb 11	AI cost concerns	Negative	+0.7%	Discussion of AI investment costs and no-touch channel weakness embedded in guidance.
Feb 09	Q4/FY2025 earnings	Positive	-20.8%	Reported strong 2025 growth, non-GAAP profitability, cash flow, and 2026 guidance ranges.

24h Move is the share-price change in the day after each event; other market factors may also have contributed.

Pattern Detected

Recent news often produced sharp but inconsistent price reactions, with several instances of divergence between headline tone and next-day move.

Recent Company History

Over the last month, monday.com’s news flow centered on 2025 results, 2026 guidance, and investor reaction. The Feb 9, 2026 earnings release showed strong growth but was followed by a -20.79% move as guidance disappointed. Subsequent pieces examined guidance revisions, AI investment costs, and the buildup to that reversal. Conference participation and commentary around non-GAAP metrics frame today’s legal-focused article as part of an ongoing scrutiny of how guidance, investment in AI, and margin trends were communicated.

Key Terms

non-gaap, gaap, stock-based compensation, adjusted free cash flow, +3 more

7 terms

non-gaap financial

"SEC Regulation G and Item 10(e) of Regulation S-K require that companies presenting non-GAAP financial measures reconcile..."

Non-GAAP refers to financial measures that companies use to show their earnings or performance without including certain expenses or income that are often added back to give a different picture. It matters because it can make a company's results look better or more favorable, but it may also hide important costs, so investors need to look at both GAAP (official rules) and non-GAAP numbers to get a full understanding.

View in glossary

gaap financial

"ensure that non-GAAP presentations are not given undue prominence over GAAP results."

GAAP, or Generally Accepted Accounting Principles, are a set of standardized rules and guidelines that companies follow when preparing their financial statements. They ensure consistency, transparency, and comparability across different companies, making it easier for investors to understand and compare financial information accurately. This helps investors make informed decisions based on trustworthy and uniform financial reports.

View in glossary

stock-based compensation financial

"The gap between these two figures is driven primarily by stock-based compensation, which is excluded from the non-GAAP calculation."

Stock-based compensation is when a company pays employees, directors or consultants with shares or the right to buy shares instead of or in addition to cash. It matters to investors because issuing stock or options spreads ownership thinner (like cutting a pie into more slices), which can reduce each existing share’s claim on profits and can also change reported earnings; investors watch it to assess true cost of running the business and how management is incentivized.

View in glossary

adjusted free cash flow financial

"Adjusted free cash flow guidance of $275–$290 million implies a 19–20% margin..."

Adjusted free cash flow is the amount of money a company generates from its operations after accounting for essential expenses and investments, like maintaining or upgrading equipment. It shows how much cash is truly available to grow the business, pay debts, or return to shareholders, helping investors see the company's financial health more clearly.

gross margins financial

"monday.com guided gross margins to decline from 90% in FY2025 to the "mid-to-high 80s" in FY2026..."

Gross margins measure the portion of sales a company keeps after paying the direct costs to make its products or deliver services, expressed as a percentage of revenue. Think of it as the money left from each sale after paying the ingredients — it signals how efficiently a business produces and prices goods, and matters to investors because higher margins generally mean more room to cover other expenses, invest, and generate profit.

regulation g regulatory

"SEC Regulation G and Item 10(e) of Regulation S-K require that companies presenting non-GAAP financial measures..."

Regulation G is a U.S. securities rule that requires companies to show and explain how any highlighted financial numbers that differ from standard accounting figures were calculated, and to provide a clear bridge to the official results. For investors this acts like a recipe card: when a company presents a simplified or adjusted profit number, Regulation G forces them to show the original ingredients and steps so readers can judge whether the adjusted figure gives a clearer or misleading picture of financial health.

regulation s-k regulatory

"SEC Regulation G and Item 10(e) of Regulation S-K require that companies presenting non-GAAP financial measures..."

A set of U.S. Securities and Exchange Commission rules that tell public companies which narrative and qualitative details must be disclosed in filings, such as risk factors, management discussion, executive pay, legal proceedings and business description. Think of it as a standardized checklist or blueprint that ensures investors get the same types of background information from every company so they can compare risks, management quality and strategy before making investment decisions.

AI-generated analysis. How Rhea-AI works. Not financial advice.

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(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.

Shareholders who purchased MNDY stock and want to learn about their legal options may contact Joseph E. Levi, Esq. for further details.

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:
Joseph E. Levi, Esq.
Levi & Korsinsky, LLP
33 Whitehall Street, 27th Floor
New York, NY 10004
Tel: (212) 363-7500
Fax: (212) 363-7171
Email: jlevi@levikorsinsky.com
www.zlk.com

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SOURCE Levi & Korsinsky, LLP

FAQ

Why is Levi & Korsinsky investigating monday.com (MNDY) after February 9, 2026?

The firm opened an inquiry following the February 9, 2026 earnings release and a >20% stock decline. According to Levi & Korsinsky, the probe targets the divergence between the company's GAAP and non-GAAP profitability figures and related disclosures.

How large was monday.com's FY2025 non-GAAP operating income and how does it compare to GAAP (MNDY)?

FY2025 non-GAAP operating income was $175.3M, representing a 14% margin. According to monday.com, GAAP operating profit was near breakeven, with stock-based compensation driving much of the gap.

What guidance did monday.com give for FY2026 margins and growth (MNDY)?

Management guided non-GAAP operating income of $165–$175M, a 11–12% margin, and revenue growth of 18–19%. According to the company, headcount will grow mid-teens percent with higher sales and R&D investment.

How will gross margins and free cash flow change for monday.com in FY2026 (MNDY)?

The company guided gross margins to the mid-to-high 80s from 90% and adjusted FCF to $275–$290M (19–20%). According to monday.com, increased AI infrastructure and investments drove the margin compression.

What caused monday.com's stock to drop over 20% on February 9, 2026 (MNDY)?

Analysts and market reaction pointed to FY2026 guidance that signaled margin compression and slower revenue growth. According to market reports, the guidance disappointment was the primary catalyst for the >20% decline.