Stock plunge at Monday.com sends shockwaves - here's the troubling reason you need to know

Monday.com stock took a sharp tumble recently, sending ripples across the software industry and raising fresh concerns about how artificial intelligence (AI) is reshaping the sector’s future, as per a report. The project management software company’s stock dropped 26.5% after reporting second-quarter results that beat expectations, but then issuing a cautious revenue forecast that left investors uneasy, according to Stock Story.

Monday.com Revenue Guidance Falls Short of Expectations

The key worry is that Monday.com’s guidance for the third quarter fell short of Wall Street’s anticipation, signaling a possible slowdown in growth, as per the report. The company projected revenue between $311 million and $313 million, just below analysts’ estimates. On top of that, profitability showed signs of strain, with the GAAP operating margin slipping to -3.9% from a positive 0.8% a year earlier, according to Stock Story. Free cash flow margin also declined 20.1% compared to last year, as per the report.

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AI Fears Trigger Major Selloff in Monday.com Shares

This combination of weaker future outlook and shrinking margins spooked investors, despite Monday.com’s solid recent performance, as per the Stock Story report. The steep selloff in its shares reflects broader fears across the software industry about the disruptive power of AI, which many worry could upend traditional business models by enabling faster, cheaper software development, according to Bloomberg.

Monday.com has dropped 21.5% since the beginning of the year, and at $181.31 per share on Monday, it is trading 44.7% below its 52-week high of $327.92 from February 2025, as reported by Stock Story. While Morgan Stanley analyst Josh Baer raised his rating on Monday.com to overweight on Tuesday, highlighting that the stock’s pullback “more than incorporates” risks of AI disrupting search advertising and performance marketing, as reported by Bloomberg.

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Is Artificial Intelligence Disrupting the Software Business Model?

The stock market reaction wasn’t limited to Monday.com alone, even European software giants, including SAP, biggest company by market value, saw its shares fall sharply, as per the Bloomberg report. SAP dropped more than 7% in Frankfurt, wiping out nearly €22 billion ($26 billion) in market value in a single session, according to Bloomberg. Other industry players like Sage Group and Dassault Systemes also slid amid mounting concerns that AI could spell tough competition ahead, as per the report.

RBC Capital Markets analysts led by Matthew Hedberg, said that, “Software valuations remain under pressure from the ‘death of software due to AI’ narrative, which likely drives continued volatility in the short term,” as quoted in the Bloomberg report.

Jefferies analyst Brent Thill pointed out that, “Investors are fearing that AI is going to eat software and multiples are going to fall apart,” adding, “I think the fear is overblown, but nevertheless we are living through a period right now where investors just really don’t care about the group,” as quoted in the report.

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FAQs

Why did Monday.com stock drop?
Because its Q3 revenue forecast fell short of expectations, despite strong Q2 earnings, as per the Stock Story report.

How much has Monday.com stock fallen this year?
It’s down 21.5% in 2025 and about 45% off its February high.