monday.com Aktie

Welcome, everybody, and thank you for joining us. It's a great pleasure to be with Roy Mann, Co-Founder and Co-CEO of monday.com; and Eliran Glazer, Chief Financial Officer. Roy and Eliran thank you for joining us. For those that aren't familiar, you guys mind doing a quick introduction of yourself and let us know what problems monday.com is solving today?

Yes, sure. So Roy Mann, Founder, CEO of monday.com. So monday have around -- Eliran, our CFO.

Yes.

And monday has around 250,000 paying customers. We have customers for -- across over 200 different business industries, and that's really everything. And what they use us for is to manage workflow and really orchestrate their entire operations. So we have like even manufacturing plants, people manage clinical trial research on monday, manage all kinds of operations. One of our largest deployments is like 80,000 people. So that's like massive company managing their whole complex project management and everything around it across everyone.

So it's like it can go into expansive depth and scale while also being super simple. So like everyone can pick it up, use it, manage their own stuff. And that's why we win because it's like really simple. People love it, employees love it, but you can also get into a massive depth. And recently, we changed the vision of the company from managing work, managing stuff to doing the work, which is doing it with AI. And quite recently, we launched our agent platform. But before that, we also had like a vibe coding on top of that platform, which has like been really successful and was our fastest adopted product and other AI capabilities. And now we've completely changed the vision and the pricing and everything to go AI.

You hit on the exact topic I was going to hit on next, which is you're transforming to an AI work platform, right? It's not work management with AI features, but a redefinition of what your platform is and what it's supposed to be used for. Can you just in your mind, why now, why this magnitude of the rearchitecture? And what are you enabling customers to do that they couldn't do in kind of the previous paradigm that you had?

Yes. So like we call it sprinkling AI on top of your product. That's what everyone has been doing so far. And unless you're like all in there, then it's very hard to also change the go-to-market to go after like the new kind of demand that is coming, okay? Like AI is going to be a way bigger market than software in terms of spend and like the value it brings. And obviously, it's the future. We have to go over it. So no sense of like not going all in. And all-in means, basically, we also changed the pricing model. Like if until now, it was seat-based, now it's also consumption-based. But -- and like new customers have to have AI in there. Why? Because this is who we are.

Like we have agents, it's the base of all stuff, but we enjoy the core offering of monday of being a massively scalable and easy-to-use orchestration system. So essentially, if in the future, everyone will have an agent or 2 or 10 doing work for them, then monday is the best place or we're building everything that is needed for people and agents to work together in large companies, okay? So you have auditing, you have monitoring, you can know that the work has been done, account for it. Also, the pricing is super important and the accountability on the pricing and seeing that you can monitor and perform. So we're really taking the agentic world into what we really know well, large enterprises and like collaborative areas.

Yes. You said that AI is going to be a way bigger market than software. I think there's a lot of people who think that if you look at some of the valuations of these private LLM companies, and you might think that as well. But you -- I think you say from a practical standpoint, you have 250,000 customers, right? What gives you confidence in that statement that AI is going to be such a bigger market? And then as a second piece, when you look at some of your most innovative customers, the ones who are leading in the most, how are they using it? Because I imagine like you said you kind of have to go all in even from the customer perspective.

So I think around 6 months ago, I started the monday agent labs, which is like our initiatives to like be on the frontier of agents. Like I built personally like my background is development. So I'm back to that. And I build the whole agent harness and everything myself to kind of test it and we're testing stuff out. And if you come and work with my teams right now in the labs, it looks like Black Mirror. We have like really -- it's like fun like you have a group of agents and people working together. They have names. They have personalities like we know which one does what and how and whatever.

And they also are part of the conversation, and they're doing a lot of lifting on anything, okay, really. And like we build a lot of them on OpenClaw, which is very cutting edge, very unstable and less reliable. And the idea of the labs is to take the -- first of all, to be in the cutting-edge environment and like to know what to expect, and I can give you some really cool examples of how is it that agents and people work together when it's like really working well, but then also translate it into what people can adopt, because I don't think people can adopt OpenClaw, It's very unstable. It breaks all the time. It's like unpredictable, very hard to like harness to whatever you want to do. So that's the stuff we fixed and brought into the monday agents.

So I can give you like one cool example of like a story sort of.

Go for it.

So in the teams I work with, we developed a lot of like tools and experimental tools and whatever. So I had my agent in the group and someone else has had their agent. And I asked their agent to do something for me. And she said, like, okay, I can't because I don't have that API endpoint to do what you asked. And then my agent on the team who has access to the repository told her like, hey, I can develop that for you. So she went on, developed the API for that agent, gave her the link. She used it and did what I asked her. And then they were high fiving each other in the group. "Oh, thank you. You're amazing." I know, it's great that you're here and like whatever, like it's woah.

Okay. So like I asked for one thing and then another agent listened in, not to what I asked, but what she said and did another thing I didn't intend for like thought about and then they work together to solve the problem and come back to me with what I asked for. So I think this is kind of like a scenario that you would expect to happen for everyone. We're not yet there. People are not yet there. expectations are not there. And it's also hard to harness and adopt.

And that's what we built in monday, and that's the future we're kind of building towards that you'll have those environments where they can talk, that they have the same information, the same infrastructure of connectivity to other platforms and API and everything. And it's out of the box. Like if you need to connect your agent to everything, you're not going to be able to do it.

So think about the IT connecting your data system into monday, which it's already connected, okay? We have the APIs for everything. But now you can make it accessible for agents. So any employee building an agent, boom, it's accessible to all the data that they need from their sales force, from projects, from their financial system, HR system, anything, okay, and is able to do way more stuff out of the box. And I think those kind of stuff is like when you scale those solutions and make them accessible for everyone.

That was a great anecdote, and you weren't joking about the Black Mirror analogy at all there. Hopefully, it ends better than those episodes usually end. I want to turn it over to [ Jaden ], but one quick question for you, Eliran. Q2 guide for -- was at the midpoint of $355 million. I think it's about 1% sequential growth from Q1 to Q2, tighter than you guys have kind of historically guided. creates a little bit of debate. If you're bearish, it's not as good as usual. If you're bullish, it's room for you guys to kind of beat and it's a good conservative guide. How would you frame it? And what do you think is the biggest swing factor in terms of like what the potential outcomes are?

So in terms of how to frame it is last year, just as a reminder, we announced 2 years ago a pricing adjustment. It was in effect last year, contributed around $10 million in average per quarter. This year, we see less of this impact, obviously, because it's lapping at the end of Q2. So this is the main reason why Q2 versus Q1 on a consecutive basis is only 1%. But we also look at a year-over-year basis. In addition to that, the fact that we are -- the business model of monday, we called it out that we are seeing softness in the lower part of the business, the SMBs.

But on the other hand, we see very strong momentum on the enterprise, but there is also timing differences because when you have the SMBs and they swap a credit card at no-touch, you get ARR and revenue immediately. But when you have it as an enterprise business, it's towards the back end of the quarter, and therefore, there is a timing with regards to when the revenue is being recognized from ARR. So these are the main 2 differences.

What we believe to be a potential strong momentum going into the rest of the year and will drive potentially. Positive news is continued success in the AI. AI in Q1 was 10% of net added ARR, which was mainly driven by vibe, which was very successful, monday AI Blocks and sidekick. And in addition to that, the strong momentum that we are seeing within enterprise customers expanding -- continue to expand definitely with the new offering that we have.

Yes. Putting some of those AI products into the broader financial picture of the story. On the Q1 call, Roy, you disclosed that AI was approximately 10% of net new ARR, adding you to a smaller list of software companies that have very much made that AI contribution clear. Where are we on that AI adoption S-curve inside the monday base? Is the typical buyer still experimenting with just a single agent? Or are we looking at production deployments across the broader portfolio?

So I think we're in the early stages of those adoptions. Even with vibe, which is like a vastly popular product, we still see a lot of room to grow. And with agents coming out, like we we're super positive towards the future and hoping it will be like even more faster adopting than other stuff, basically, because the UI is super simple -- sorry, to generate an agent, you just need to -- like if you want an agent to, let's say, go over your e-mails and send you a weekly summary of something, you just -- that's what you ask. Go over my e-mail, create an agent and go over my e-mails and whatever, and then you'll ask you like you want me to connect your Gmail and you'll click a button, that's it, it's done. So it's that simple.

If you wanted to do any kind of other work, that's exactly how simple it is still to create one. And it's inherently connected to everything in Monday. So if you wanted to automate like the stuff you have with us, which is the core work. We already have all the data you have of your operation, your inventory, those kind of stuff. So imagine what you can ask agents to do and automate those stuff. So I think that's where people will start, and it's huge values even for SMBs, mid-market and enterprise, it's like -- I think it's going to bring massive value to customers. So...

I want to add maybe one thing. I think this is probably now we are about completing 12 months, the first cycle of native AI companies versus SaaS companies. There was a FOMO in the market. Everybody was trying to buy consumption-based then people bought a lot of AI and suddenly, the budgets are becoming very significant, and we need to manage the cost. So now experimenting, they would want to see immediate value. They want simplicity. They want to see how it helps them to do what they want to do from doing the work or from managing the work, to doing the work. And I think we're coming at the right time on that front with the S-curve. This is why I think it's the beginning, as what Roy said. And now people or some of the customers are going to be more confident in what they want, and we have the right offering.

And what gates or changes the acceleration of that slope of adoption? Is it the product? Is it feature parity that they need to be there? Or do customers just not really know what they need yet or even how to build what they need?

Yes. So I feel like it's the last thing you said, like basically, everyone was minding their own business while AI came. It's not something that people say, oh, I really need it, and then we invented that technology. So a lot of them are, I think, being forced to kind of deal with it, okay? And if last year, everyone talked about it, this year, they have budget and are testing stuff.

And a lot of them might still get like resistance from the teams, okay, because you'll say, oh, I have an agent to do that. And I'll tell you like it's not doing good enough job because I feel my job is at risk, okay? So -- and I think next year, what I expect customers to be more forced into doing it. Why? Because if you're not, then you're behind professionally. This year, they can still make excuses, okay? And on a positive way of saying it, they still don't really understand what they can do with it. So we see a lot of requests from us for customer success for FDEs, like forward deployed engineers to actually come and help them do those transformation.

So we do see a lot of positive approaches, but I think it's not that easy for them to adopt. I can share that when we released agents, we had Agent Week in monday, inside monday, and we created over 5,000 different agents in 1 week with crazy stuff, and we're going to release all the examples and everything so customers will have ideas of what they can expect and do, but people build amazing stuff that would otherwise would not have been done, like going after all our -- like thousands of web pages and looking for like broken links and broken things, like going and checking our brand across all our assets and that it's aligned. Creating like research on competitors and updating the battle cards for sales agent real time.

Like there is a news in the morning, it's in there, okay? So they're always up to date. That's something that like inherently is not. And like I can go on for like so many different stuff we've built. So I think that's inspiring. That's going to be inspiring for a lot of customers to try stuff out and like really try and get the value out of.

Yes. I mean the agentic opportunity here sort of seems incredible. Eliran, from a modeling perspective, for people who are trying to figure out what that looks like within the monday business, is it right to frame the AI contribution as addition on top of seat growth or seats? Or is this something that eventually sort of rebases the whole book and maybe we remove a seat or 2, but we add 10 or 20 agents on top. Sort of walk us through how that looks.

Yes, sure. So on the short term, definitely, it's an addition. So the pricing model for new customers, it's going to be comprised of seat-based plus tokens. You have to buy credits in order for you to use monday. And we are agnostic on what AI product you're going to use. You have 1,000 credits, use them the way they deem appropriate. This is also important for customers. I mentioned earlier that many of them that only looked at the consumption, suddenly lost track of budgets.

As a CFO, I see now the usage of AI automation. It's becoming meaningful. And I have to tell OE develop less, I'm joking. But this is the idea. So I think in the short term, definitely a combination of the 2. It will give customers predictability, visibility, some control on the budgets. And as we continue to scale, we are going to board onboard gradually the existing customers that have seats. So yes, it's going to be a combination of the 2. And potentially on the longer term, it might be skewed towards consumption because some of the -- you will have the seats number may be going to be steady, but consumption and usage of AI will be more significant. But it will happen, I think, in the mid- to longer term rather than immediate term.

Right. No, that combination that you talked about is actually a great segue into the next question, which is on May 6, you announced something very interesting, the seats-plus-credits hybrid model. We are very much watching this partly because if you can pull it off, it's a great example for what software companies should be doing to sort of help to fight against this "software narrative" going around right now.

You framed the shift on the call, Roy, by saying, as AI takes on more work for our customers, our business grows with it. Can you walk us through the customer side mechanics here? How does the buyer decide what credit pack to commit to? What do true-up cycles look like? And I know it's extremely early here, but like what is early customer feedback on this addition or this new model?

Yes. So I can share anecdotal stuff. It's like you said, really just launched like 2 weeks ago. So I wouldn't draw any lines into the future from this. But like -- we saw a few customers on the self-serve side that like have been with us for 5 years and have not scaled to other products, have not scaled in seats because they're like that size and just now adopted agents and started like digitizing their whole company. And like -- so that's amazing to me, because it looks like something people -- specific people really want everyone wanting on the promise.

Like I personally feel that like in, throughout my years as a geek, I saw all the sci-fi movies and they promised us like AI sidekick, right, like the positive ones, right? You have Jarvis and Cortana and those kind of stuff. And I think we have that now. And I think people want that. It's not by accident that we have that in movies, because you want that site kick that does the work for you, that you ask stuff that is smarter than you, that is like more capable in some ways and, let's say, less -- more socially awkward in other ways and like has less stacked. But like that's exactly what they are. And it's amazing that we have that technology.

And I think like people will find that easier to adopt and ask stuff. And those agents that we have today have 2. And essentially, OpenClaw kind of like introduced that, and we took that and put it in our agents, which is 2 very fundamentally different qualities than what we had until now in AI, which is self-improving and self-reflecting. You can ask the agent, what did you do yesterday, okay? What calls did you answer? What like stuff you did you do? And he'll know what he did and can summarize that, create reports on it, do whatever you want.

But then you can say like, but yes, I see you did this call and it's not good enough, okay, because you didn't do this and that and you say, oh, okay. And look into its own code and see what it can improve and improve it. So it's self-improving. So I think those 2 qualities did not exist like, let's say, 6 months ago. Where you had like agentic systems that are automatic and you needed to -- if you wanted to change the unit, you needed to go into the code and the architecture and figure out what the problem is and change it and then monitor the quality or the output because the agent wouldn't know what it's doing on its own.

So I think that -- those 2 stuff create like a completely different product offering that is way more easier for everyone to like adopt because you talk with the agent, like you talk with the person, you train them for the job, right? Like this is what you need to do to answer, you test it, like you ask questions, see what it answers, and say, why did you not know our pricing, let's say, if you want an agent to answer customer tickets. And he says, because I don't have the information on pricing. And say, okay, so like go into that website, whatever take it and then you ask it again until you are happy. And then you say, okay, how can I connect you to the website that you answer customers. So like you work with the agent on the job that you're training the agent for.

Right. Continuing on this sort of Sci-fi Black Mirror, Jarvis' sort of topic, Agentalent.ai is something -- one of the more exciting things that you've launched this year. For those of you in the audience that don't know, it's a managed marketplace where enterprises can effectively hire AI agents built on AWS, piping into Anthropic and similar models from the other vendors. I've scrolled through it a couple of times and seeing an agent that can basically carry out a task for you, that you would otherwise hire a human to do is incredibly interesting and sort of makes it feel a lot more real. So can you talk about where Agentalent.ai fits into the monday platform? And how customers are adopting things like that?

Yes. So basically, Agentalent is something we launched out of the monday agent labs. So it's an experimental thing that we see across the whole ecosystem and not necessarily the platform. Specifically, what it does is like it's a marketplace. And if we have these type of agents that are self-reflective, self-improving, why not hire them? Because you can ask them for the job. So that's what we did. We -- and what is the easiest thing any company can do to adopt AI is open a job position, right? Like everyone knows how to do that.

So we said, okay, if you have no idea what AI is, you don't want to build your own agents, but you have a job for an agent, list it with us. And then we opened it up for the whole, let's say, open source or agent building community, which a lot of people just like bought OpenClaw and other [ clause ] and whatever that they will apply for the role, and we have some positions already occupied to do social stuff, to do like checks and external stuff. And it's really cool to see companies who have less idea about the technology and having a lot of people with a lot of knowledge about the technology bridge the gap and connect together.

So essentially, you're not -- we built a whole screening process for agents and that we open source. So if you hire an agent to do your social media, you want to test them out and create a test and then like have the best agent pass the test and have scores. So we kind of like give the test out for free as an open source for everyone to build agents that like comply to that. And it's really cool.

And what I expect is that people will also sign up for monday, build agents and be able to apply for their jobs. So that's how we tie it into a whole ecosystem. But again, it's an experimental thing. It's like an idea into how we see the future of agents and people working together.

Anecdotally, I don't know if like half related, but I saw today a tweet, and I think it's real that the big accounting firms -- I did my training at KPMG, are looking for more AI experts than CPAs or potential accountants, which is something that is speaking about talent and developing and everything. It's -- I don't know if I should be scared or worried or...

You're old enough to not be scared.

Turning to more of the human side of the business. Headcount is a big topic in 2026 in this sort of agentic world. How is monday thinking about heading into 2026? Where are you adding people? Where are you holding flat? Where you maybe rethinking, any sort of thoughts there?

Yes. So we said that we are going to be -- in the last earnings call, we said that we are going to be flat as of Q1, so around 3,200 employees by the end of the year, places where we're looking at -- so we are very efficient on the G&A. We don't have -- if you look at the G&A as a percentage of revenue, it's 8% or 9%, depending on the quarter. We're efficient there. So we would probably look at things like sales and marketing. Still, we are above 45% as a percentage of revenue. There are room for us to make some improvements there. For example, SDRs and BDRs rather than having people who are calling customers, we will have -- we already have agents that are doing it. We developed it internally. It's also related to some of the things that with the acquisition of OneAI.

We're looking at product. We're looking at engineering, marketing. These are the places. And obviously, we're looking at the business support function, but the bulk of the adjustment, if required, is going to be around S&M engineering and product. And what we're doing is because we also care a lot about the culture of monday is that in the past, automatically, whenever someone was let go or someone left, we used to replace him. Now we're doing -- we're saying, wait, before we replace someone, let's just look what we can do and potentially have efficiencies with AI. But we do care about having our people -- the people and the person in the loop of the AI. So it's going to be staged.

And we're also making massive changes in how the organization work. We're flattening the R&D team, breaking it out to smaller teams. They work faster and like on a lot more things because of it, we see a lot of efficiency there. And we're also having new roles, which people don't talk about. So like FDEs forward deployed engineers, we didn't have until now, but customers really want them to help them drive adoption of AI and stuff. So that's like a new position that we're scaling on, which is like awesome. So yes.

Is there a tangible way to sort of quantify that return you're seeing on incorporating AI internally?

So it's a really good question because you see some people do what they do best being done like 100x faster, okay, like building a landing page. It's now like instant and doing way more stuff and analyzing things and finding more problems we didn't before, which saves a lot and you do a lot more. So yes, we definitely see it and everyone like using agents are like ecstatic because it's like, wow, I'm like on a different level in my career.

The question is, I feel like the real value is when you remove the person from the loop, meaning that like I'll give an example. If we have a salesperson and he has a document with the customer that they need to go through like a legal doc. And you need a legal person to go over it. And now an agent goes over the doc and like red lines it and stuff. If the legal person needs to approve it, then it's not really AI. Why? Because like the salesperson still needs to wait. If it's completely automatic, then boom. It's like it changes the whole business dynamic because now I can do that on the call with you. Okay. Let's give it to the agent, boom, and like I got a red line back and like this is fine. This is not. Let's continue conversation, you close it in one loop.

So -- and imagine the customer has the same agent on their side, and they like -- you might have a person in the middle, you let the agents talk and close the deal. So I think those kind of stuff we'll start seeing soon where the legal team is in charge of like building the agent that does the red lining rather than have the lawyer empowered by doing instead of like 2 hours work, like 5 seconds. So I think that's like -- it looks like [ 1,000 ], but it's not, if it's in the loop and it's -- so I think also for us, but also for other companies, that's coming for a lot of like nondevelopment areas. In the R&D, we've had like massive changes.

Right. I know we're coming up on time, so I'm going to pass it back off to Arti.

Yes. To close Roy and Eliran, if we're sitting here a year from now at the next conference, what is one thing that you think the audience will come to appreciate that they might not at this current moment? What are you seeing that's going to surprise them?

I think the one thing that I think is -- everyone is talking about it, but it's super not clear is how much organization will resist the change, okay? Because you bring an agent that does something and no one wants to be replaced. And in developers, I saw it that they're hesitant and then they like the technology and they go on top of it and use it. But I think in a lot of positions, they're not able to do it, okay? Because if you're adopting it, then you're being replaced.

And so I think we're going to see a lot of that, and it's interesting to see the future that we envision that like you want the productivity and you don't want the organization to resist. You want to take them along with you to gain the upside of like producing more, selling more and doing more business rather than slowing yourself down and saying, oh, that's not good enough, okay? So I think like there's going to be a lot of adoption challenges that the right products need to solve and also scalability and our ability to like monitor and a lot of those kind of stuff rather than just the technology itself and how good or like cool it is, real-world problems in adopting AI.

Yes. Do you -- how does that friction get resolved? How are people going to adopt this technology if it's going to replace them?

So I think unless you bring them along, they're not -- they're trying to resist as much as they can. I have a lot of stories for like in the past for like companies that could just like not do the change. Like they saw the companies tanking without the change and still couldn't do it because like everyone resisted. So I think that's like, you need to bring people along with you, and I think we're going to introduce a lot of and find good practices of how to do it.

And I think going around seeing ads of like, is your job secure? Why hire people? Hire an agent. I think that's like not the right approach for anyone in this adoption of this technology, okay? You need to bring the people along with you to make the change and like show them that this is the future of their careers. And they need to make it, okay? It's like not everyone can make it. like you need to adapt yourself as a person into this new technology and being able to make the change. But I think employers need to give that option and path for people.

Yes. Awesome. Great note to end on, and thank you very much for your time and insight.

Thank you.

Thank you.

Good day. My name is [ Dedra, ] and I will be your conference operator today. At this time, I would like to welcome everyone to monday.com's First Quarter Fiscal Year 2026 Earnings Conference Call.

I would like to turn the call over to monday.com's Vice President of Investor Relations. Mr. Byron Stephen. Please go ahead.

Hello, everyone, and thank you for joining us on today's conference call to discuss the financial results for monday.com's First quarter Fiscal Year 2026.

Joining me today are Roy Mann and Eran Zinman co-CEO's of monday.com; Eliran Glazer, monday.com's CFO; and Casey George, monday.com's CRO. We released our results for the first quarter of fiscal year 2026 earlier today. You can find our quarterly shareholder letter, along with the investor presentation and a replay of today's webcast under the News and Events section of our IR website at ir.monday.com.

Certain statements made on the call today will be forward-looking statements, which reflect management's best judgment based on currently available information. These statements involve risks and uncertainties that may cause actual results to differ from our expectations. Please refer to our earnings release for more information on the specific factors that could cause actual results to differ materially from our forward-looking statements.

Additionally, non-GAAP financial measures will be discussed on the call. Reconciliations to the most directly comparable GAAP financial measures are available in the earnings release and the earnings presentation for today's call, which are posted on our Investor Relations website.

Now let me turn the call over to Roy.

Thank you, Byron, and thank you, everyone, for joining us today. Monday.com delivered a strong start to 2026. Q1 revenue grew 24% year-over-year reflecting sustained demand for our platform as enterprises consolidate their work infrastructure. We generated a record $49 million in operating profit, demonstrating that our growth is increasingly efficient.

Adjusted free cash flow margin expanded to 29%, underscoring the financial durability of our business model. Gross retention continued to improve in Q1, reaching historical highs for the company, reflecting how deeply monday.com is embedded in how our customers run their businesses.

Enterprise momentum continued to build with 42% of ARR coming from our customers with over $50,000 in ARR. A record number of new customers with over $500,000 in ARR and average contract values continue to expand, reinforcing that the consolidation of work Instructure onto monday.com is a durable enterprise-led trend. The market is also responding to our AI product.

Approximately 3% of our net new ARR in Q1 was driven by AI, a figure we expect to grow as our AI offering expand and mature. We are also seeing the benefits of AI play out in sanmina.com itself. Since 2025, AI has driven a 32% increase in our output per developer and a 38% reduction in product time to market. AI gives our engineers the bandwidth to be more rigorous about the architecture, edge cases and long-term maintainability.

The result is a team that ships more and breaks less. We believe this is an early but meaningful signal of what AI native engineering looks like in practice, and we intend to keep pushing on that frontier.

Now let me turn it over to Eran to walk you through some of the significant progress we've made in our AI-driven products during the quarter.

Thank you, Roy. At our Investor Day last September, we laid out a fundamental shift in how we see monday.com. Not a platform that helps teams manage work, but one that actually does the work for them. Last week, we do the most significant step in that journey, changing our core offering from monday Work Management to monday AI work platform. This is not a feature release or a rebrand.

We have rearchitectured the core of our platform around single belief that work should be orchestrated between humans and AI agents at scale from a single system of records. AI agents that execute work flexible software that adopts to how teams operate and enterprise-grade governance all grounded in monday DV are single source of truth that give AI the context to drive real outcomes.

This quarter, we took that foundation further with Money DB 3.0, delivering 100x increase in scale from 100,000 items for our board to over $10 million with high performance low latency execution designed to accelerate AI adoption rather than constrain it. A stand-alone AI tool that can automate a task, monday can run an entire operation.

And with more than 250,000 customers already running their work in said monday, we have a data advantage that no point solution can replicate. Alongside the platform launch, we're making an equally important change to how customers pay for monday. We recently introduced a new seats credit pricing structure for new customers, moving to consumption-based pricing that aligns what customers pay with the value AI actually delivers.

As AI agent takes on more work across organizations, revenue expands naturally without requiring additional seats purchases. We plan to allow existing customers to opt in to this new model with enterprise customers receiving complementary AI packages to support adoption at scale. In addition to that, we are excited to announce our agreement to acquire One AI.

Their team spending years, solving one of the hardest problems in enterprise AI, making voice agents that actually work in production environments. With this acquisition, we are bringing native voice capabilities directly into the AI work platform, extending the way agents can engage with customers and teams. We're not managing monday.com as a company defending its position.

We are rebuilding it as the company that defines what an AI work platform means for businesses. Q1 was a strong step in that direction. We remain focused on execution, and we look forward to demonstrating continued progress throughout 2026.

With that, I'll turn it over to Eliran to cover our financial and guidance.

Thank you, Eran, and thank you to everyone for joining our call. Today, I'll review our first quarter fiscal year 2026 results in detail and provide updated fiscal year 2026 guidance.

As Roy mentioned, we have had a strong start to 2026. Total revenue in Q1 came in at $351 million, up 24% from the year ago quarter. Our overall NDR was 110% in Q1. we now expect overall NDR to slightly decline by the end of fiscal year 2026. As a reminder, our NDR is a trailing 4 quarter weighted average calculation. For the reminder of the financial metrics disclosed unless otherwise noted, I will be referencing non-GAAP financial measures.

We have provided a reconciliation of GAAP to non-GAAP financials in our earnings release. First quarter gross margin was 89% compared to 90% in the year ago quarter. Research and development expense was $78.4 million in Q1 or 22% of revenue, up from 19% in the year ago quarter. Sales and marketing expense was $158.2 million in Q1 or 45% in revenue compared to 48% in the year ago quarter.

General and administrative expense was $28.6 million in Q1 or 8% of revenue compared to 9% in the year ago quarter. Operating income was $49 million in Q1, up from $40.8 million from the year ago quarter, and operating margin was 14%, similar to the year ago quarter. Operating margin in Q1 had an approximately 190 basis points negative FX impact, mainly from the appreciation of the Israeli shekel compared to the U.S. dollar.

Net income was $56 million in Q1 compared to $58.4 million from the year ago quarter. Diluted net income per share was $1.15 in Q1 based on 48.9 million fully diluted shares outstanding. Total employee head count was 3,211 an increase of 56 employees since Q4 '25. For the remainder of fiscal year 2026, we expect head count to stay largely flat, reflecting the productivity gains AI is already delivering across our organization.

Moving on to the balance sheet and cash flow. We ended the quarter with $1.21 billion in cash, cash equivalents and marketable securities compared to $1.67 billion at the end of Q4 2025, reflecting $553 million of shares repurchase executed during the quarter. As of the end of Q1, approximately $182 million remained available under our existing share repurchase authorization program. Adjusted free cash flow for Q1 was $102.8 million, and adjusted free cash flow margin was 29%.

We now estimate that the accelerated share buyback executed during Q1 will reduce full year 2026 adjusted free cash flow by approximately $20 million. Adjusted free cash flow is defined as net cash from operating activities, less cash used for property and equipment and capitalized software costs, plus costs associated with the build-out and expansion of our corporate headquarters.

Let's now turn to our updated outlook for fiscal year 2026. For the second quarter of fiscal year 2026, we expect our revenue to be in the range of $354 million to $356 million, representing a growth rate of 18% to 19% year-over-year. We expect non-GAAP operating income of $46 million to $48 million with an operating margin of 13% to 14%, which assumes a negative FX impact of 100 to 200 basis points.

For the full year 2026, we expect revenue to be in the range of $1.466 billion to $1.475 billion, representing growth of 19% to 20% year-over-year. We expect full year non-GAAP operating income of $185 million to $191 million, with an operating margin of approximately 13%, which assumes a negative FX impact of 100 to 200 basis points. We expect full year adjusted free cash flow of $280 million to $290 million with adjusted free cash flow margin of 19% to 20%, which assumes a negative FX impact of 100 to 200 basis points.

Let me now turn it over to the operator for your questions.

[Operator Instructions] And our first question comes from the line of Raimo Lenschow with Barclays.

This is Damon Kogan of for Raimo. Can you help us understand the new updated NDR guide. As I think about the Q1 results and the full year guide, it seems like stabilization throughout the business and then I look at the NGR guide and print across your cohorts. It just seems like there's more stability in results than maybe the guide. Any help there would be great.

Ryan, this is Eliran. Thank you for the question. So there is a lot of retention and expansion side that we are very positive on. Gross retention is at historical highs. We're still seeing double-digit fee growth year-over-year in our mid-market and enterprise customers, 34% of our 50,000 customers court has adopted more than one product. It was 29% in Q4. So we're seeing a lot of positive signs.

As a reminder, we are lapping the pricing actions from 2024 2 years ago in 2025. And they increased our NDR by 12%. We're going to lap this at the end of Q2 or during -- sorry, at the end of Q2. And we don't believe that expansion or new adoption will now be enough to offset some of the pricing growth over that we have seen in the past.

Got it. And I guess, can you just provide an update on the top of funnel demand that you're seeing now compared to the end of 2025. I know the initial 2026 guide did imply some degradation to telefunnel. So I guess just what is the updated full year guide now implied maybe compared to Q1.

Yes, this is Eran. So look, we have nothing new to report with Pay Search. Overall, the top of funnel environment remains soft, but it's pretty much in line with our expectations that we gave in the beginning of the year. I would say that on top of that, ACV of new lands is increasing across touch and no touch. So we've seen high-quality leads coming into the platform. And we continue to manage performance marketing cautiously. So pretty much in line with what we expected.

Next question comes from the line of Josh Baer with Morgan Stanley.

Congrats on a good quarter. I wanted to talk a little bit more about the new sets credits pricing model. Maybe to start, like can you just provide a little more context on how exactly that works? And then also wondering what are the impacts in 2026 from the new model?

Yes. Josh, this is EranSo maybe I can start and then hand it over to Casey. So look, we're very excited for this change. It's the biggest change in the company history we're changing the core offering of our products with the new native agents within the platform, customers be able to do the actual work in addition to managing work. Part of that change is that new customers will have 2 vectors of expansion.

One with seats, meaning the more people they add, the more they pay for seats that the same way it used to be. But there's an additional factor on top of that for AI credit. So the more they consume a credit the more they pay, the more they're going to use our agents and other functionality. For existing products, it's going to be gradual.

I'll let Casey kind of cover the change we're going to do with existing ones.

Yes. So we spend a lot of time -- oh, hi, Josh, by the way, we spend a lot of time of getting feedback from our customers. And what we've rolled out is very consistent with how they want to consume value in our platform. As you heard from along with our new customers, it is -- it comes with seeds plus credits. Our existing customers, it's going to be an opt-in motion.

So we'll work with them over the next a couple of years as they look to move into this model. We are going to incentivize those customers to move to the new model, especially with our touch customers, where we spend a lot of time with them building use cases and finding new ways for them to consume our platform leveraging AI.

Got it. And so for -- as far as 2026, are there any assumptions on the impacts from the new model, either from the new customers who are on it? Or I guess also, what are the assumptions as far as the adoption from existing customers? And then just last on this subject...

It's Eliran. So Josh, it's still early stage. -- we will have a much clearer picture in the coming months, and then we can provide update or more color on what we are going to see. For now, we didn't assume any significant impact or any impact on the numbers.

Ader with KeyBank Capital Markets.

I guess if I can just quickly follow up on that pricing model as well. Are you guys actually seeing either slowing in employee head count or seat growth at existing customers? Or are you just kind of making this change in anticipation just to decouple yourselves from being so dependent on seats. I'm curious whether it's forward-looking or you're actually seeing it today?

Yes. Thank you for the question. We have not seen any degradation in demand relative to seats. We have seen those customers looking to use our platform leveraging AI. And that's why we've launched this new platform.

So overall, the demand continues to be strong for new seats, and we actually see acceleration in some of the emerging markets where we've invested. So upmarket is strong. Seat demand continues to be very solid, and they're taking on new workloads, leveraging AI.

Great. Okay. Actually, if we -- I'll stick with you. The larger lands from the direct sales motion with larger trying to land a little bit more upmarket. Curious how that's trended? I know the 50,000, 500,000 seats, but curious whether that's driven by new lands or are people kind of graduating up into that segment of the customer base.

Yes. And it's both. We saw double-digit growth for both mid-market and enterprise segments relative to seats. -- our ACV grew 22% year-to-year. Gross retention at historical highs. And obviously, with RPO, we see some seasonal decline in which we're anticipating. It's pretty much in line with what we've seen in prior Q1 performance. Pipeline is very strong. As a matter of fact, our March was 1 of the strongest months we've ever had.

So as we move upmarket, as we've talked about before, we get exposed to the buying cycles of those larger customers. So we see less linearity in the quarter, but we're delivering in the last month of every quarter seems to be consistent.

Next question comes from the line of Mark Murphy with JPMorgan.

And I'll add my congrats on a very nice performance. So with the understanding you had a solid quarter and the gross revenue retention improved. Could you share what you are observing within the customer base in the last several months as Claude code and Claude cowork have proliferated glue pretty rapidly.

In other words, I'm just curious what are your customer conversations like regarding those products, they do bring forward some advancements in cogeneration, no, low code, agentic. Wondering if some of your customers are maybe using them in conjunction with monday or maybe something that you just don't see popping up too much?

Yes. It's Roy. So yes, we see a lot of comers having purchased Claude. And what our vision is, is having agents and people work together on the same platform, and that also includes external agents. So if you noticed, we opened up the platform completely to have any agent that is even external to monday sign up on itself and get an account a seat. .

And so that touches what Eran said on the hybrid model of having agents, whether they are external, they will have seats and our internal agents, which work really well within the monday platform and also external with other platforms. So this is the future we see, and that's like perfectly aligned, and it's great to see adoption of AI.

Maybe I'll just add on top of that. I think there's a big difference between people using blood or equivalent products on their own and using that around work with other people in cooperation -- and we see a lot of customers.

I think agents essentially -- it's an amazing technology, it can be used in different ways. But I think where we shine is exactly how customers want to adopt it in a way that's kind of integrating their work, working with other people and native agents built within a work platform. So I think a lot of our customers are looking for a solution like that. We're going to can leverage AI and put out into their existing workflows.

Okay. And then as a quick follow-up, the stat that shows 10% of new ARR in Q1 was driven by AI. It's pretty impressive. Could you drill down into the stats so we just understand how are you driving that? What are you counting in there? Is it monday vibe? Is it the agent for AI workflow? is it the AI credit pack, if someone grades to Pro or enterprise and you deem that to be AI influenced or relating to some project, would you count something like that in there, et cetera?

Yes. This is Eran. So when we say AI contribution, we mean direct contribution, not contribution made possible by AI. Currently, it doesn't include an agent's product because it was just released about a week ago.

Currently, what drives the AI revenue is our existing offering, including 5 AI blocks psychic and so on. Obviously, with agents, we have expectations for this going forward, but it's still early days.

Next question comes from the line of Howard Ma with Guggenheim Securities.

I want to add my congratulations on a strong quarter as well. I want to ask about pricing and packaging. If we look 6 months from now, so heading into 2027, how much of your customer base do you think will be on this new seat base plus usage-based pricing model. And do you expect different adoption trends between mid-market versus large enterprise? And one more part to is, where does 1 AI fit into pricing, it will be a separate add-on.

Yes. So this is Eran. So look, as I said, we're opening up the ability to purchase agents from new customers. We feel the adoption for these ones is going to be very gradual. So it's hard to estimate that right now. I think we'll be able to provide more color going forward. New customers will buy both seats and AI credits. But again, it's really hard to give any more information about this right now. I would say that we're very excited for the Wana acquisition. It's a very strong team with a lot of special knowledge about those agents.

We plan to integrate that deeply into our AI work platform also into our CRM. In terms of the commercial side, we're still working through the precise package in passing. But definitely, it's going to be part of our AI credit consumption model. So overall, I think it's a great addition to the team. They bring a lot of knowledge and expertise. I think overall voice we need to separate the technology from the adoption.

Adoption is very complex among every customer. And I think they bring a lot of knowledge and expertise to help drive more adoption within our existing customer base.

Okay. Got it. And a follow-up for Eliran, I want to ask about the -- your expectation for head count being flattish this year. I think last quarter, you had called out headwinds from the Israeli shekel appreciation -- foregone interest payments due to share buybacks and cash taxes. I think those are the 3 items. I think the head count being flat should give you a lot of cushion relative to those headwinds unless there are any other headwinds that we should consider.

So with regards to head count being flat, this is being staged throughout the year. So there is still the impact of the hiring that we have done in prior years and the fact that the shekel is strong versus the dollar. So there is going to be some benefit from that, but we're going to see it more into -- going into next year rather than this year.

Next question comes from the line of Steve Enders with Citi. Okay.

Great. Maybe just following up on some of the guide philosophy. And I think trying to understand a little bit better just the upside that you saw this quarter. I guess, a, like what was the kind of key factors that drove the revenue upside?

And then I guess, the kind of moving forward, how should we think about, I guess, the kind of what's kind of assumed there and maybe what's different in the guide velocity versus what we saw in 1Q?

Steve, this is Eliran. So nothing has changed since what we have provided in Q1, but what we have seen is the outperformance was broad-based. It wasn't driven by any single segment and core to region, it was broad-based. Of course, [indiscernible] momentum remains strong, as Casey spoke about.

We have record net adds of 500,000, and we continue to grow upmarket. And obviously, the air contribution. As we mentioned, 10% of the net new ARR approximately is coming from -- so this is encouraging drivers that kind of drove the results and the bid for this quarter.

Okay. Okay. That makes sense. And then on -- I guess I want to follow up on some of the agents' discussion. And just kind of curious to how you're kind of viewing the monetization angle for both first-party agents and also for a third party? And I guess, kind of where you kind of feel like you have the right to win on using monday homegrown agents versus where it makes sense for third-party agents to be utilized instead?

Yes, it's Roy. So we see that agents are going to be everywhere. Like really, people will have them for many different things like personal assistance, and maybe other different agents. And those, we want to allow them to monday to help people manage whatever they want to manage, whether it's even to know what's going on.

Monday's own agents are really, really good at execution and analyzing and executing work and doing that together with other people. So the collaboration part being built on top of monday give them access to all the data seamlessly and they're out of the box, working really well, while people can customize them to do any kind of work and also connect them to other platforms.

So we feel, as part of the future vision we have of doing the work and not only managing the work, those agents are going to be the best collaborative agents between people and agents together.

Next question comes from the line of Brent Thill with Jefferies.

This is John on for Brent Thill. Two questions. On the credit pricing, the table has a lot of parameters depending on what type of usage there is. But -- and even at $0.01 per credit, I mean that could balloon of for customers. So I'm wondering how customers will measure what's been the customer reception on that new pricing table?

And then second question, I don't know if you can talk a little bit about the in-quarter NDR since, I guess, thousand-plus has come down a little bit. And you did a little bit pricing lapping defacto.

This is Casey George. So as it relates to the pricing model for AI credit, so it's been clear from our customers that they want transparency and control and governance of those credits. So we're giving them that as part of the platform, right? So they can see exactly who's using the credits. What is it used for?

They can scope out the work that's being done that they can plan accordingly for their AI credit usage. So we're seeing that as a big driver for our platform. We continue to get feedback from customers that, that's what they want to see. So we're giving that power to the customers so that they can cover their credits.

I'll hand it back to Eliran to answer the follow-on question.

This is Eliran. John, I will answer the question on the MDR. So John, to your question, so first of all, lending expand dynamics. So we are seeing recent enterprise deals, they are landing bigger but larger customers typically commit to a multiyear agreement with more tractor expansion. So if you think about the 100,000 customers, they are lending and taking multiyear deals. .

So this is 1 of the reasons why we are saying that 100,000 NDR is slightly below the 501. It's not related to churn. Actually, our growth retention is at all-time high. And we expect -- and it's important to that we expect 1% or 2% of temporary pressure for the upmarket and the metrics for the remainder of fiscal year 2026 as well have the pricing benefit that we spoke about.

Next question comes from the line of DJ Hynes with Canaccord.

Eliran, does the addition of usage-based elements into the model more effectively match your revenue with your costs tied to AI so that we could see better gross margin preservation over time?

So as I said, when we were in the Investor Day, we said that we expect gross margin to be mid-80s. We were used to 90%, but because of the computing cost of AI, we said that we are expecting for the short term or for the foreseen future to have some impact. Overall, again, we're not seeing yet a significant impact on our gross margin. but we believe there is going to be additional cost regarding computing costs related to AI.

Okay. And then, Eran, maybe following up with you 1 on the product side. Does the addition of voice capabilities with 1 AI push you any closer to turning service into more of a customer-facing application over time?

Yes. So I think currently, we're going to focus mostly on the integration into CR M&A work platform going forward. It's definitely also an opportunity for the service team. But overall, I think voice capabilities are important almost in any product right now.

And like I said, the hardest part is not using technology, but actually customize it to your own needs. And I think both with agents and voice, this is exactly where we can shine. I think people are amazed at the technology where it's very hard to use it, especially when it's used through a prompt or a very hard-to-use user interface. And I think a monday really can help customers adopt agents and also voice agents in a very easy and intuitive way.

Next question comes from the line of Zukin with Wolfe Research.

Maybe the first one on new product ARR. It was north of 11% now, it continues to grow nicely. But maybe just -- can you dig in a little bit on the interplay between CRM and service, maybe share some details on that progress in the quarter.

Yes. So this is Eran. So I'll just give a kind of high-level numbers. So as we said, new products account for over 11% of our ARR. We see significant opportunity to accelerate a cross-sell presentation, especially in mid-market segments. We see more and more customers adopting more than 2 products and even more. CRM, as we said, we suppressed $100 million. We continue to grow very nicely, mostly in the SMB segment. And the new product campaigns is off to a strong start as well.

In regards to service, we still see 70% of our ARR coming from mid-market and enterprise. So the ACV is the highest across all products. Most of the growth with service is driven by seat expansion and cross-sell with customer support workflows. So overall, we continue to see good demand across the [indiscernible] service. We continue to see acceleration -- not acceleration, but expansion of seats and usage. And we're very happy with the adoption so far.

Okay. Perfect. And then maybe just a second one. The the comment on maybe why the 50,000 and 100,000 ARR sequential adds were a bit lower. I realize some of that is seasonality, but I think in the last 6, 9 months, you talked about shifting performance marketing from lower end resources towards the upmarket, higher end.

Maybe just comment on the performance of that shift. Is that driving out performance? Is that something we'll see later this year as seasonality improves?

Alex, this is Eliran. So we said that there is some seasonality usually with Q4 and Q2 are the strongest stock market performance. We saw record net adds of $100,000 in Q4 of last year. So there was possibly some pull forward. And when we look at the mid and upmarket metrics, we look at them as a whole.

So if you think about the 50,000 and the 500,000 customers, they were very healthy with 500,000 net adds at historical highs. So we look at them all together, and this is what kind of the way we view it.

Next question comes from the line of Taylor McGinnis with UBS.

So you mentioned that the strength in the quarter was broad-based, but it did seem like a bit of a turnaround from the trends that we saw last quarter and the upside was higher. So I guess anything surprised you in the quarter in terms of areas that were stronger than expected?

And then when you think about some of those trends, maybe you could unpack what you're seeing at the start of 2Q as well. And then not to throw too many questions in there, but just a housekeeping item. Do you mind impacting FX impact to revenue in the quarter and what's being expected for the full year guide?

Taylor, this is Eliran. So as we said, I think the positive surprise was a contribution with ARR growing to almost 10% of net add ARR coming from the AI product, and this is something that we are very pleased with. .

Other than that, we continue to see the upmarket momentum that we have seen in the past and enterprise customers continue to grow with the 500,000 net adds and numbers. With regards to FX, we did see small tailwinds from FX in Q1, but it didn't impact the overall reported growth rate. So it was very small.

Next question comes from the line of Allan Verkhovski with BTIG.

Congrats on the strong quarter here. Can you talk about the level of engagement you've seen with your MCP? What types of customers you've seen use it more? Are there any trends you've seen thus far in terms of expansion activity of customers that have used MCP. And then I've got a quick follow-up.

Yes. This is Eran. So yes, we see some usage through the MCP protocol. And overall, like we see more and more agents signing up to the platform. We actually did invest a lot of work making monday accessible to agents and make it easy to agents to use the platform and sign up, but it's still not very significant numbers.

Yes. It's small numbers, but like the ones who use it have a way stronger retention profile.

Got it. And then maybe just as a follow-up to an earlier one about your guidance. It looks like the Q2 revenue guide implies lower sequential growth in Q1 despite being a seasonally stronger quarter. So can you just unpack like what are you factoring in there? How much of it is prudent versus maybe potential impacts from any new dynamics you're seeing there?

This is Eliran. So what we said is basically that we provided our guidance based on everything that we know today. And we believe that with the investment that we are doing on AI and the fact that we're going to see the impact throughout the year. We remain focused basically on managing your expectation rather than looking at just the next quarter.

So on the cost side, we are investing in our product and GTM capabilities. The potential increase of expenses from AI, as I mentioned earlier, compute. We are expecting this to be increasing throughout the year. And there is an inherent uncertainty on how that revenue ramps when we are thinking about throughout the rest of the year. So when we take all of this together into account, our guidance does imply some moderation in H2.

And our next question comes from the line of Matt Bullock with Bank of America.

I wanted to follow up on the 10% of net new ARR comes from AI products. It seems like it was one of the sources of upside in the first quarter. So maybe it would be helpful if you could help us think through the assumptions for consumption-based revenue or AI product revenue for the 2026 guide and how to think about that as a potential upside lever as we move throughout the year.

Yes. Matt, this is Eran. So look, as I said, all the revenue that we got this quarter was not from agents and consumption, mostly driven by in NAA blocks and sake. We still don't know how to model and expect revenue coming from agents and token-based usage. Happy to give some more color next quarter, but it's really hard to kind of model it out right now.

Understood. And then just 1 quick follow-up, if I could, as well. Can you just help me think through some of the incentives you're going to be providing the enterprise customers to migrate them over to the new sees usage model?

Yes, happy to. So our customers today are buying AI capabilities a la carte. We'll continue to make that offer available to them, but we're also looking at ways for where they can buy just like our new customers where they get incentives for buying AI packages along with their products. So that's how we're looking at it. That has not been announced yet. We'll look to do that.

And again, it's an opt-in policy for our existing customers, we are not forcing any of our existing customers to move. But again, we're going to make it highly incentivized for them to do that.

Yes. And just to add to that is it's not a migration. It's like very -- it's like a click the switch kind of thing. There's nothing they really need to do other than agree to it. So there's no sort of migrating anything.

Ladies and gentlemen, that concludes the question-and-answer session. Thank you all for joining. You may now disconnect.

Good day. My name is Deere, and I will be your conference operator today. At this time, I would like to welcome everyone to monday.com's Fourth Quarter and Fiscal Year 2025 Earnings Conference Call. I would like to turn the call over to monday.com's Vice President of Investor Relations, Mr. Byron Stephen. Please go ahead.

Hello, everyone, and thank you for joining us on today's conference call to discuss the financial results for monday.com's Fourth Quarter and Fiscal year 2025. The -- joining me today are Roy Manan, Eran Zinman, Co-Chief monday's com; Elara Laser, mondaycom CFO; and Casey George, monday.com's CRO. We released our results for the fourth quarter of fiscal year 2025 earlier today.

You can find our quarterly shareholder letter along with our investor presentation and a replay of today's webcast under the News & Events section of our IR website at ir.monday.com. Certain statements made on the call today will be forward-looking statements, which reflect management's best judgment based on the currently available information. These statements involve risks and uncertainties that may cause actual results to differ from our expectations.

Please refer to our earnings release for more information on the specific factors that could cause actual results to differ materially from our forward-looking statements. Additionally, non-GAAP financial measures will be discussed on the call. Reconciliations to the most directly comparable GAAP financial measures are available in the earnings release and the earnings presentation for today's call, which are posted on our Investor Relations website. Now let me turn the call over to Roy.

Thank you, Byron, and thank you, everyone, for joining us today. As we reflect on the past year, we are proud of the progress monday.com has made across every dimension of the business. We delivered another year of strong disciplined execution with revenue growing 27% year-over-year an operating margin reaching 14%. These results underscore the durability of our model, the strength of our go-to-market engine and our ability to scale profitably while continuing to invest in the long term. .

In 2025, we continue to make meaningful progress winning further upmarket. Larger customers are increasingly standardizing on monday.com to support more complex critical workflows across their organizations. Customers with more than 50,000 in ARR now represents 41% of total IRR, reflecting strong expansion within existing accounts and success in landing larger, more strategic customers. At the high end, we delivered a record net adds of customers with over 100,000 plus in ARR.

And customers with over $500,000 in ARR grew 74% year-over-year. underscoring our ability to support enterprise-scale deployments. At the same time, no-touch channels continue to operate in a choppy demand environment, particularly among the smaller customers, which we expect to persist in 2026. We -- what this means in practical terms is that the cost to acquire and expand self-serve customers have increased over the past year, and the returns on those investments have been below historical levels.

We do not see the same dynamic in our touch business, which have continued to accelerate in this past year. In response, we continued to shift investment to higher ROI opportunities that drive demand and success for larger customers. In addition, we continue to meaningfully improve the entire customer buying process, leveraging AI agents to improve conversion, adoption and engagement of all our customers. Now let me turn it over to Eran to walk you through some of the significant progress we've made in our AI-driven products during the quarter.

Thank you, Roy. During our Investor Day in September 2025, we showed the fundamental shift in monday.com vision from helping customers manage work to actually doing the work for them. Over the last 5 months, we've executed relentlessly against that vision. This was not an incremental change. We've meaningfully rearchitected the core of our platform. and redefine what our products do for customers.

Today, monday.com is evolving into an AI-powered work execution platform built around 3 distant layers of AI value. First, AI agent, which is now in beta and AR workflows. These allow customers to create an on-demand workforce of AI agents that can reason, act and execute across their workflow effectively enabling businesses to scale output without scale and headcount. Second is Monday 5. Over the past few months, Vie has taken a major leap forward. customers can now build full applications rely on top of their Monday data and workflows and consolidate additional business processes into a single intelligent platform.

And third, AI psyche Sahas evolved into the central intelligence layer of every account, the gateway and the brain of the system, enabling customers to ask questions, surface insights and take action across all the data and workflows. We've seen very strong demand and accelerating adoption of Monday AI across our customer base. Mine blocks have already powered more than 77 million actions.

Sika has processed over 0.5 million user messages and early beta users of AI agents are blown away from its capabilities. Teams are increasingly reliant on monday.com not just to organize work, but to make decisions, automate outcomes and execute faster with confidence. Monday Vibe is also off to an exceptional start. It is the fastest product in Monday's history to surpass $1 million of ARR, highlighting customer willingness to pay for its value and signaling meaningful revenue potential ahead.

The pace of adoption reinforce our confidence that vibe can become a significant growth driver as we scale. We are proud of the progress we made in 2025 and encouraged by the momentum we've seen across the business. Looking ahead to 2026, we believe we are still early in this transition. As AI becomes a core driver of customer value and differentiation, monday.com is uniquely positioned to lead with the powerful platform, a clear upmarket strategy and a global team focused on embedding intelligence deeply across workflows, we believe monday.com is well positioned to deliver durable profitable growth in the years ahead. With that, I'll turn it over to Eliran to cover our financial guidance.

Thank you, Evan, and thank you to everyone for joining our call. Today, I'll review our fourth quarter and fiscal year 2025 results, in detail and provide initial fiscal year 2026 guidance. As Roy mentioned, we are very pleased with our results in 2025. Total revenue in Q4 came in at $334 million up 25% from the year ago quarter and $1.32 billion in fiscal year 2025, up 27% from the prior year. Our overall NDR was 110% in Q4. .

We expect overall NDR to be stable at 110% in fiscal year 2026. As a reminder, our NDR is trailing fourth quarter weighted average calculation. For the reminder of the financial metrics disclosed unless otherwise noted, I will be referencing non-GAAP financial measures. We have provided a reconciliation of GAAP to non-GAAP financials in our earnings release. Fourth quarter gross margin was 89% and 90% for the fiscal year 2025. We Research and development expense was $67.7 million in Q4 or 20% of revenue, up from 18% in the year ago quarter and $238.5 million in fiscal year 2025 or 19% of revenue, up from 17% in the prior year.

Sales and marketing expense was $159.9 million in Q4 or 48% of revenue compared to 48% of revenue in the year ago quarter and $586.8 million in fiscal year 2025 or 48% of revenue, down from 51% in the prior year. General and administrative expense was $29.2 million in Q4 or 9% of revenue compared to 9% in the year ago quarter and $106.9 million in fiscal year 2025 and or 9% of revenue, up from 8% in the prior year.

Operating income was $41.9 million in Q4, up from $40.3 million from the year ago quarter and operating margin was 13%. Operating margin in Q4 had an approximately 180 basis point negative FX impact mainly from the depreciation of the Israeli shekel compared to the U.S. dollar. For fiscal year 2025, operating income was $175.3 million or 14% of revenue compared to 14% of revenue in the prior year, reflecting an approximately 110 basis points impact from FX. Net income was $55 million in Q4 '25 compared to $57.3 million in Q4 '24. For fiscal year 2021, net income was $233.6 million up from $183.3 million in fiscal year '24.

Diluted net income per share was $1.04 in Q4 and $4.40 in fiscal year 2025 based on $52.9 million and $53.1 million fully diluted shares outstanding, respectively. In the fourth quarter of 2025, we recognized a $61.2 million noncash income tax benefit related to deferred tax assets, reflecting our sustained profitability. Because this is a discrete nonoperational item, it is excluded from non-GAAP net income. Looking ahead, we may begin paying cash taxes in the near future.

Total employee headcount was 3,155, an increase of 137 employees since Q3. Looking ahead to fiscal year 2026, we expect headcount growth in the mid-teens percentage range with incremental investment primarily directed our sales and R&D. Moving on to the balance sheet and cash flow. We ended the quarter with $1.5 billion in cash and cash equivalents compared to $1.53 billion at the end of Q3, reflecting $135 million of share repurchases executed during the quarter.

As of the end of Q4, approximately $735 million remained available under our existing share purchase authorization program. Adjusted free cash flow for Q4 was $56.7 million, and adjusted free cash flow margin was 17%. In fiscal year 2025, adjusted free cash flow was $322.7 million and adjusted free cash flow margin was 26%. Adjusted free cash flow is defined as net cash from operating activities, less cash used for property and equipment and capitalized software costs, plus costs associated with the build-out and expansion of our corporate headquarters.

Before I discuss guidance for fiscal year 2026, I did want to touch on our approach to guidance moving forward. Our confidence in the underlying fundamentals of the business and our long-term financial trajectory remains unchanged since our Investor Day in September. Given the evolving nature of the AI landscape, and the choppiness in the no-touch demand environment, we believe it is responsible to keep our near-term communication focused on what we can execute and deliver with high confidence.

As a result, we will no longer be discussing our previously provided 2027 targets, but we'll be centering our discussion on our 2026 outlook, which reflects the continued momentum we see across our AI work platform, new product introductions and upmarket sales motion. We remain committed to disciplined execution, which is consistent with our track record, and we will revisit long-term targets when there is a greater visibility and it's appropriate to do so.

Let's now turn to our outlook for fiscal year 2026. For the first quarter of fiscal year 2026, we expect our revenue to be in the range of $338 million to $340 million, representing growth of approximately 20% year-over-year. We expect non-GAAP operating income of $37 million to $39 million, with an operating margin of 11% to 12%, which assumes a negative FX impact of 100 to 200 basis points. For the full year of 2026, we expect revenue to be in the range of $1.452 billion to $1.462 billion, representing growth of 18% to 19% year-over-year. We expect full year non-GAAP operating income of $165 million to $175 million, with an operating margin of 11% to 12%, which assumes a negative FX impact of 100 to 200 basis points.

We expect full year adjusted free cash flow of $275 million to $290 million with adjusted free cash flow margin of 19% to 20%, which assumes a negative FX impact of 100 to 200 basis points. Let me now turn it over to the operator for your questions.

[Operator Instructions] And our first question comes from the line of Arjun Bhatia with William Blair..

Perfect. Appreciate it. Can you maybe just touch on the growth outlook a little bit for 2026. I think I heard that NRR might be stable in the year, but the guidance is calling for a decel and overall top line growth from 27% to 18%. So it's remarkable that the guide kind of that you can still grow at that high-teens range even when NRR is $110 million. So maybe just touch on the different pieces of what you're expecting from customers expanding, especially in the enterprise, how much of a headwind the no touch is? And maybe when we can start to see that turnaround. Is that late '26? Or is that 2027 dynamic?

Arjun, it's Eliran. So thank you for the questions. Guidance for now reflects what we believe we can execute against with high confidence. It doesn't assume many reports in performance marketing or top of funnel activity. And it's based on current condition with growth driven primarily by the following: upmarket and enterprise customer expansion, multiproduct adoption and disciplined investment and improving efficiency across the go-to-market model that we have.

As you rightfully stated, NDR to remain flat at 110%, sorry, by the end of the year. With regards to maybe the margins, we assume that we are going to go in terms of headcount growth of mid-teens, and there is also a significant impact of the Israeli appreciation of the -- sorry, appreciation of the Israeli shekel versus the U.S. dollar that is contributing 100 to 200 basis points negative on our margins. So these are the things that we took into account when we build the budget -- the guidance, sorry.

Okay. Perfect. And then just 1 on sidekick. It looks like you started the monetization strategy. You have a price in place and you're going to turn that on in 2026. I'm just curious how you think about customers' propensity to pay for that solution? What incremental capabilities that you've included in the paid additions of [indiscernible] and how you think that monetization might scale throughout the year? .

Yes. Arjun, this is Eran. So -- we're very excited from the latest release of TICC, basically psychic offer our customers not just to use AI capabilities within their account, but also they kind of access the brain of the accounts. He knows everything about the work, about who you are, you place an organization. It's also a context where of every data and content [indiscernible] within your monday.com. .

And we're also planning to integrate with third-party tools, so essentially it becomes like a business brand of the company. We're already seeing great momentum. Sidekick now available to all customers it basically offers the paid add-on for Pro and below packages and as far as the enterprise package. Going forward, we might have additional monetization for psychic but it's a very interesting product that gives a lot of value to our customers because of its capabilities.

Next question comes from the line of Scott Berg with Needham. .

Hi, everyone. I guess wanted to start probably with the question for Roy because I think you mentioned high level, some impact, obviously, on the cost of customer acquisition and AI in the space. I just wanted to if you can clarify that comment. I guess what is the impact like? My guess is that's just in the -- through the sales process, customers evaluate different technologies and functionalities. But are you seeing that impact more on those self-serve low-touch smaller customers? Or are you also seeing some impact negatively from maybe your larger customer opportunities as well?

Thank you. So what we see right now in performance marketing is the same things we called out before, it just continues meaning we see headwind in our ability to buy media and the ROI is the same as we saw before and remains choppy. So what we're doing is moving -- shifting budgets to higher ROI channels and media, which means we're focusing more on the higher customers, the better customers with better ROI. So essentially, we're driving -- we're leaving the smaller ones and focusing on the better ones with higher ROI, bigger retention. So -- and that is successful.

Maybe this is Eliran, add to what Roy said to your question about the bigger customers, we don't see this impact on the bigger customer. We have a strong momentum with the upmarket motion, and we only see it in the SMB segment, namely of the .

Very helpful. And then my follow-up would be for Eliran. If I look at your guidance for the year, your operating margin, non-GAAP operating margins implies about 11.6% for the full year. And I understand there's a 100 to 200 basis point headwind due to FX. But that operating margin is actually lower than what you reported in fiscal '25 and the growth is as Arjun mentioned, 8, 9, 10 points lower. Why shouldn't we see margins kind of inflect a little bit more over the next year if this kind of high teens 20% growth rate is likely the -- probably what the right growth rate for the company is over the next year or 2?

Scott, thanks. So just to reiterate, maybe that given the current macro and demand environment, we believe that we are putting numbers that are achievable and doable. And the biggest change in recent appreciation of the Israeli shekel happened in the last few months. We have 55% of our headcount in Israel, and this is a very concentrated primarily contributing to the impact of FX.

We also prioritize investment in the SLG motion and AI, as you heard in the prepared remarks. And this is front-loaded cost that basically takes a bit longer for the payoff time. And this is the impact on margins.

Next question comes from the line of Ryan Mcilliams with Wells Fargo. .

So investors are clearly worried about the threat of AIA sulfur here, but I think there's a fair case to be made that not every workflow needs to be generative and that it can make more sense to build agents off your already established workflows that work 100% of the time. So with that in mind, we'd love to hear some of the attributes about why it might make the most sense for a Monday customer to build agents within Monday itself instead of outside the platform.

Yes. Ryan, this is Eliran. So this is exactly how we think about things. I think people aren't the estimate how is important is when you have all your data and processes and workflows inside the platform and then the ability to create agents on top of it and get significant value because of that is exactly what we're aiming for.

We've done the same with sidekick, -- the fact sidekick knows everything about the organization really helps our customers kind of figure out everything about their account. And the same goes for our AH agents offering. With the agents offering, not only you can scale your business based on agents, but also it knows everything about your workflows, your data, your history, -- it's also secured enterprise grade.

So given all of that, we see a lot of potential in our new agent offering, and we see a lot of excitement for our products. I think we all agree that the future of software will change over time with agents. But I think the way the transition will go is very different than how we manage it. And I think we have significant advantage once we introduce these capabilities to capture significant value of those agents.

Appreciate the color there. And then Eliran, just on the free cash flow guidance for this year, is there any extra conservatism baked into that number? And then anything to call out on the differences between the initial starting point between the op margin and the free cash flow margin, they just look a little tighter than a year's past.

Thanks, Ryan, everyone. So a few things impacted our free cash flow forecast for 2026 1 is the FX impact. Israeli shekel, as I mentioned, is very strong versus the U.S. dollar, and it happened really fast in Q4 of last year going into this year. Obviously, we said that we are increasing investment in AI and SLG motion. There is also the lower interest rate environment. And as we move to profitability, we might be paying taxes. And the last thing is the share buyback as we continue to prioritize opportunistic share buyback, obviously, taking into account the current level of the share price. The reasons that I mentioned, all of the above is impacting our free cash flow guidance for 2026 .

Our next question comes from the line of Josh Baer with Morgan Stanley.

Just wondering with all the rapid pace of innovation, new technologies across the workforce, how are your customers or potential customers evaluating Monday among all the alternatives out there. Are you seeing any shifts in sales cycles as you're moving upmarket or any changes to customer behaviors? .

Josh, this is Casey. So a couple of things. One, obviously, by the numbers, we're very encouraged that the progress we're making upmarket. So we're showing up in different ways with these customers, especially with AI and as I speak to customers, they're not necessarily looking for a science project, and Ryan touched on this a little bit. They're interested in having a trusted partner and a trusted platform so that they can deploy this technology in a trusted way.

So for that, we are -- it's showing up in our retention numbers. It's showing up in our customer acquisition and obviously the cohort of customers that are $50,000 or greater. So with that, this is truly a differentiator for us. We're not running away from AI. We're embracing this and leading the market with it. So -- that's what I see. That's what we see when we engage with customers, and it's being validated in the numbers as well as we move upmarket.

Okay. That's helpful, Casey. And just a quick follow-up on the margin topic. Any sense for gross margins in 2026?

Yes. Eliran. What we said is in our recent Investor Day that we are expecting gross margin to be mid to high 80s, and we believe this is going to be the case for 2026. .

Next question comes from the line of Jackson Ader with KeyBanc Capital Markets. .

This is Nate Reis on for Jackson Ader. So I was wondering how much core versus new product growth is baked in for fiscal year 2026. .

This is Eliran. So maybe just to expect when we took -- what we took into account is the continuous of the business that we currently see meaning the 4 product lines that we have in Monday, Monday Work Management, Monday, CRM, Monday Service and Monday dev, continue also to see some revenue coming from the AI product that we have. So we believe this is going to be the trajectory for fiscal year 2026, mostly focusing on the existing products. And the new products will continue to become a larger part of our business as we move forward to 2027.

Next question comes from the line of Mark Murphy with JPMorgan. .

Can you please quantify the headwind from the no touch business in 2026 or the segment in general? In other words, is it a 5-point headwind? Is it a 10-point headwind, et cetera? And then I have a quick follow-up. .

It's Roy. So the situation is that it's a bit choppy, okay, like we mentioned. So we don't -- I can't predict the future on what performance marketing will do. I'll tell you that like we looked into the year in a way that it will continue to be choppy and that's like how we would be great.

Okay. But -- so it could be -- you're baking in something like a 5-point headwind there maybe? .

Again, we don't know how to predict what it will do. .

Yes. Okay. And then, Eliran, just thinking back to the last earnings cycle, you did bless the $1.5 billion revenue consensus for 2026. I don't think anyone really put any faith in that comment. But just irrespective, could you explain what changed fundamentally that leads to the lower outlook today? And I'm just trying to understand the -- I think you said you're no longer discussing the FY '27 revenue target, but you said somehow the fundamentals are unchanged. I think we could just use a little bit of straight talk. I'm just trying to understand what has changed here.

Mark, it's Eliran. So it's a fair question. But as we said the last time we gave guidance, we felt -- and we believe based on the feasibility that we had at the time that the 1.5 number is a number that we are going to achieve, it looks reasonable to us. Since then, there is a lot of noise in the market in terms of macro economy, as we said, our no-touch business continued to be choppy and volatile.

We didn't see the improvement that we expected to see. And we see shift in the business and shifting the business takes time. So this is why we thought, based on what we know today, that it would be prudent to reset the guidance that we are giving. And we -- given the current market, as I mentioned, and the environment, we believe that it's appropriate to put numbers that reflect what we can execute again. Again, sorry, with high confidence and this is the reason why we did this adjustment.

Okay. So it's noise in the market, low touch being volatile, there's a shift in the business, but we don't know what you're embedding for the low touch piece of it? Is that -- we're going to kind of leave it at that?

Yes. We are expecting it not to get any better from what we have seen in fiscal year 2025. We didn't see the improvement that we hope for or we believe that we are going to see. So we believe it might be choppy. It might be. It will be choppy throughout 2020. .

Next question comes from the line of Brent Thill with Jefferies.

When you think about the enterprise go-to-market motion, I think there's been a lot of pent-up concern about what's happening there and the strategy. Can you just maybe walk through what you're seeing at the higher end of the market. .

Yes. So we're seeing a couple of things. One, we continue to accelerate up market on the back of a couple of things. One, obviously, our clients like our products, they really do. One, that's the first one. Second 1 is they look to vendor consolidation, right? They're looking to rationalize their vendor suite, and we have a very healthy portfolio that we can offer to our clients, so they continue to consume more of our products.

And then the expansion piece since it's early days of us moving upmarket, the ground is very fertile. And so when they're looking to consolidate, we're well positioned to take advantage of that. So those are 3 of the key factors for us and then I would say it's early days again, but the acceleration of AI. We're engaging in different conversations than we were before because of the technology we have embedded in our platform. So we're pretty bullish on the move-up market and looking forward to another good year.

Yes. Just wanted to add 1 more thing on top of what Casey said is that we actually see price levels of gross retention across our 50,000 cohort now at 91%. This number has been growing quarter after quarter for the past 2 years. And also, we see renewal rates in the high 90s. So I would say that this segment of the business is doing performing really well. We have a high degree of confidence, not just for the execution so far, but also forward-looking.

And just a quick follow-up, Casey here. Are you still hiring pretty aggressively on enterprise reps? Or has that slowed down? .

We're growing our head count in the organization by -- in the mid-teens especially around our AI specialists.

Next question comes from the line of Howard Ma with Guggenheim Securities.

Great. I have 2. I'll just ask them together. The first for Eliran, a lot of effort was put into building the FY '27 target. So I just want to be sure, is it off the table altogether? Or is that still a possible scenario, but maybe it's more of a high-end scenario? And then for either Roy or for Eliran, what indications have your customers given you that they want to standardize on monday.com's both a provider of agents or sales and service agents and also in a genetic workflow orchestration platform because as they evaluate other HNT tools that are offered by the Frontier lives and per I imagine there's a lot of choice out there. So what gives you the confidence that you will retain and expand this usage on monday.com. .

Howard, this is Eliran. To your first question, and then I will defer to Roy Elon as I said, due to the macroeconomy and the choppiness that we have seen, this is the 2027 number is currently off the table, and we are focusing on fiscal year 2026 execution. .

Yes. And maybe or than the second part of the question about AI. I think most -- look, I feel the whole industry is living and breathing AI where all the changes and improvement. But most of our customers, and I don't think we're in a unique position, I'm still trying to figure out what's the best way to leverage that technology. And for them, the best way to lever that technology is used or the systems they're using before where they have most of the data in the context and the workflows.

And with that, the triad a vendor that they trust and love to use, and on that, they're trying to leverage the ability. They're more coming from a place of curiosity and trying to understand what's the best way to technology. And because of the relations that we've built and the way to use the product, they look to us as the vendor of choice. So we see the interest, we see the engagement with the customers. We see the excitement on any new AI feature that we introduce. That gives a lot of confidence that Monday can offer significant value with our AI offering.

Yes. This is Roy. I can add that we also have Monday Vibe, which is basically the only Vibe tool out there that is like enterprise grade and like to the level that companies would adopt internally, and we've built it that way. So there's a lot of interest in that, and it just blows their mind what they can build with it and joining to what Casey said about consolidation, that's like 1 of the main drivers, if you can take all those small ones, small application and merge them, it's very interesting for all our customers. .

Next question comes from the line of Steve Enders with Citibank.

[indiscernible] this morning. Maybe just starting on Monday vibe. I guess what are maybe like the main use cases that you're seeing customers build with that? And then how do you kind of view the learnings that you've had so far to potentially drive those kind of incremental use cases or kind of broader them out across the rest of the customer base and drive incremental ARR from here?

Thank you. So it's Roy. So we see really wide variance in what customers do with Vibes essentially, they can do anything they want and it's connected to their existing data platform users. So we see things from very small stuff like rating dashboards and presentation of data and reports; two, the higher end of building complete really meaningful large applications on top of it that they couldn't do before.

And a lot of the great stuff we see is that in some areas where we were -- maybe it was a vertical or those type areas that we were not going to develop specific features for vibe completes the gap and it's like an amazing solution together with the other offering we have on the platform. And regarding monetization, this is like a super we shared the numbers. And for us, it's like the beginning, and we're going to see where it evolves.

Okay. Great to hear. And then maybe just on the performance marketing dynamics. Does -- I just want to clarify, it seems like you're assuming that's not getting better this -- for '26 was kind of like baked into the guide. I guess I just want to clarify that point. And then I guess, secondly, just in terms of those dollars shifting to other channels? Just what kind of like ROI are you seeing? And just how are you kind of viewing I guess, improvement or time line in terms of those other channels beginning to drive, I guess, incremental performance from here.

Yes. Thank you. So yes, we expect 26% to not be different than what we've seen so far with the choppiness in the performance marketing. And it mainly affects the small businesses, like Eliran said, in the smaller area. And -- we run a lot of campaigns and we're shifting the budget to the ones who bring us larger customers. They have larger landing and they have like more expansion opportunity and higher retention. So essentially, we're making that shift and driving more and more into those areas because they have a much higher ROI for us, okay? .

Next question comes from the line of David Hynes with Canaccord. .

So maybe just going back to the Vibe coating. Can you talk a bit about what you're seeing -- what you're seeing in terms of the decisioning process around choosing a vibe quoting platform. I realize it's early. But as best as you can tell, like are customers piloting multiple biocoatingtools and I'm settling on one? Is it going to be coexistence of all these different platforms inside the same organization.

I'm just trying to get a better sense for competitive dynamics here and kind of how those decisions are being made.

Yes. Vijay, this is Ron. So I think we need to distinguish between 2 different things. One is that we added the ability to live code on top of the platform. So an existing Monday customer and by the way, we're 1 of the only only a few enterprise companies that offer currently vibe coating within their platform. So our customers basically can leverage their existing data, workflows and processes and basically vibe code on top of that, almost anything they want in our platform.

And our customers are building unbelievable things. This is part of the momentum that we see, the excitement that we see from our customers. And -- for me, I think vibe code is an ability that may be going forward, a lot of the software vendors will, at some point, embrace. In addition to that, in addition to the ability to vibe code within the platform, we also created a new go-to-market that allow customers looking for a new vibe coating solution to fund Monday as 1 of the alternatives.

The thing is that we're very focused around work an enterprise-grade solution. So unlike the tools that exist today, which are more kind of consumer SMB oriented. The way we built it is that we build it on top of the monday.com platform. So basically, all the databases, all the data structure are based within Monday. So you enjoy all the security, you can afterwards integrate it with third-party platforms. And it's a different kind of tool with a different kind of offering compared to what exists in the market today.

Yes. Yes. Okay. That's helpful context. And then Eliran, follow-up for you. So 91% gross retention in that 50,000 plus cohort -- is that the right level? Are you happy with that? Or do you see potential to drive gross retention gains over time? And I guess the second part of that question like those that are churning off the platform, are they consolidating to other packaged work management vendors? Or are you seeing firms trying to build -- bring some of that functionality in-house and kind of build it themselves?

It's Eliran. So in terms of gross retention, not only that this is historical highs in Q4 of 2025. But this is the cadence that we have seen -- we have seen over the past few quarters. So we have reasons to believe that once we continue to offer the additional product and we continue to extract more revenue from existing customer base with AI products that are providing a stickiness and retention.

This number will continue to go up. With regards to the -- and by the way, and I don't know to what level, but we saw an improvement. So we believe this is something that we will continue. With regards to the churn, I don't want to tell you that any 1 of the customers who churned is going to consolidate products on other platforms. On the contrary, I think that what we offer on Monday, on the platform, the multi-product, the AI product that are levered within our platform allows customers to actually consolidate on us while it's still early days, and we see mostly AI adoption and engagement that is significant, the churn is probably the lower end customers on the S mostly that potentially either turning due to price or other reasons.

But we don't see a churn of customers who want to consolidate on the platform.

Next question comes from the line of Raimo Lenshow with Barclays.

This is Damon Cogen on for Raimo. It looks like net retention may have fell slightly short of our expectation in the fourth quarter. Was this primarily driven by pressure down market? Or was there anything else that drove this?

This is Eliran. The reduction in net retention, the 100 basis points is mostly due to pricing that we are starting to lap. As a reminder, we introduced the pricing increase or price adjustment 2 years ago. And after the round of all of our customers, 250,000 customers completed this. So this is what we assume to be the main reason going from 100 and to 110 million. And I just want to mention that overall trailing 12 months ND was trailing, sorry, NDR was stable from Q3 to Q4. And just as a reminder, our NDR is a weighted average of the last 4 quarters. So this is important that we have seen stabilization within the quarters and linearity.

Next question comes from the line of Derek Wood with TD Cowen.

Great. This is Cole on for Derek. Can you just walk through what's embedded in the guide for next year across customer growth, see growth and cross-sell versus upsell. I think there was a comment earlier that the genetic offerings could increase productivity while head count stays flat. So just think about that and squaring it with seat growth assumptions for next year?

Yes. It's Eliran. So what we baked into guidance for next year is up market and enterprise customer expansion, continued the multiproduct adoption, we also said that we are going to be disciplined of the level of investment, and we are going to improve efficiency as we continue to reshape our go-to-market model. We mentioned that NDR is going to remain at 110% flat.

We're not expecting to see a significant increase in number of customers. We said that in the past, we have more than 250,000 customers and we would like to extract our revenue within these customers. And we see this by our ACV actually growing, and we see bigger and more significant customers replacing the smaller customers. And the last thing is we also took into account a negative FX impact on margins between 100 and 200 basis points, due -- mostly due to the appreciation of the Israeli shekel.

Next question comes from the line of Alex Zukin with Wolfe Research.

Maybe just 1 quick follow-up for me. Can you maybe give us a bit of an update on Monday CRM and Monday service, kind of how did they perform versus expectations in the quarter in terms of their contribution to net new ARR today and how we should think about those, particularly as you're moving upmarket for next year. .

Yes. This is Eran. So Overall, we're very happy with the progress of both CRM and service in Q4. Q4 was a little bit tend to benefit work management. Q4 was more enterprise deals oriented. So work management is kind of our more mature enterprise products. So it's not that the products underperform just work management overperforming in Q4. It's more of a seasonal thing. And overall, we're very happy with the progress so far with CRM, the new Monday campaign product, Monday Service performs very well. And as we've mentioned throughout the call, we expect the products to continue to be a larger and larger part of our revenue going forward. Momentum is strong, and this is how we see it going to 2026.

Next question comes from the line of Billy Fitz Simon with Piper Sandler. .

Can we maybe dig a little deeper in terms of some of the dynamic impact in sort of channel? And I know this is tough to do, but help separate a little bit what you contribute to macro? And what if anything you attribute to maybe potential AI experimentation headwinds if you're seeing anything there? Because 1 of the debates that came up for the last week, generally across all software that maybe SMB customers are more willing to expert plug-ins or by coding or SMB customers are maybe being some more sensitive breadth right now around pricing or price increases. So I know it's tough to comment on in terms of direct anecdotes because they're some of your smallest customers and bigger to self-serve channel. But any color in terms of what you're seeing in ring in wheel eye would be helpful. .

Yes. Bill, this is Eran. So also I got your question right. You broke up a little bit, but Overall, in terms of the top of funnel activity, we don't see any change in terms of the competition dynamics. We see that Roy talked about choppiness that we see. And we see that, that choppiness contributed to the impact we've seen in the top of funnel. We didn't see anything else. We didn't see anything new in sales calls or when customers compare us to other vendors. So we don't see any material impact from anything.

And on the contrary, we offer a lot of new AI capabilities within the platform, not just for existing users, but also to new users. We changed our messaging around our ads. We changed our message around the homepage to be more AI-oriented. So again, to summarize, we don't see any impact currently from an AI company, and we're shifting our product regardless to be more native.

Next question comes from the line of Allan Verkhovski with BTIG.

Thanks, guys. I wanted to just ask on pricing here. What drove the decision to raise price on service? And how are you thinking about potentially raising price on other products within the portfolio?

Yes. I'm not sure which price raise you referred to. So we did increase pricing recently on any of our products. We introduced a price increase about 1.5 years ago, and it's been that onetime price increase that we introduced, we didn't change pricing to our existing products. Maybe .

Other than the pricing lift that we have then, we move more customers .

Next question comes from the line of Matt Bullock with Bank of America.

I wanted to ask a follow-up on the free cash flow margin guidance. I understand there's some FX in there, you're growing headcount, investing in sales-led growth. But -- maybe if you could clarify what's baked in, in terms of incremental cash taxes, lower interest income. And then I wanted to ask the fall because I think you mentioned something about the buyback program relative to free cash flow. So I just wanted to clarify there. .

Yes, sure. It's Eliran. So I will repeat what I said earlier. So the biggest impact is the appreciation of the Israeli shekel on the free cash flow, 55% of the head count is based in Israel. We have seen, over the past year, a reduction of more than 20% in the US dollar versus the Israeli shekel. We have an hedging strategy. So we were able to defend some of it. We are doing a rolling forecast of 12 months. But still, the decline was so sharp, Israel recovered really significantly. So it's obviously impacted our cost in our free cash flow numbers. .

In addition to that, we are looking at a reduction of around 1% in the interest rate environment, and we have significant amount of cash. Obviously, this impacts our return in terms of the interest that we are getting share buyback. We said that we are going to be opportunistic. At the end of last year, we already acquired 100 -- in [indiscernible] million, $135 million in 2026.

We will continue with the same program, but we're going to be opportunistic having in mind the current level of the share price. So we obviously also took it into account because if we buy shares, then the cash is not used to get interest, and as I mentioned, as we become more profitable, there is a potential or we may be paying taxes throughout the year depending on our progress. So these are the reasons for the adjustment of the free cash flow.

Next question comes from the line of Taylor McGinnis with UBS.

The first 1 is, so even if we adjust for the FX headwind, it still looks like operating income and free cash flow margins are down a bit on a year-over-year basis. So could you just unpack the drivers of that more specifically. So when you talk about investment with AI, does that mean we could see gross margin pressure as we head into this year, does that mean you need to make bigger platform architecture changes for an AI world? Is it really just a function of this continued shift up market? Like I guess, where in the line items could we see it? And then what are these investments actually going towards?

Hi, Telo, it's Eliran. So to your point, first of all, you're accurate with regards to gross margin. If we're going to invest as we -- with AI, we said that we are going to see gross margin mid-80s to high 80s, and we used to have 90%. So this is something that we took into account. In addition to that, last year or in 2025, we increased our headcount significantly, mostly around SOG motion and R&D and product people. This is also going to be the area of investment this year, much less than last year, but still, this is the best way we're going to invest. .

And because we had significant hiring at Q4 last year, we are seeing now the impact in terms of cost. We're going to prioritize investment in AI where we see the opportunity based on the returns as well. So it's mostly to summarize. It's mostly head count around SLG and AI. We might see investment that is taking into account some adjustment to the gross margin in the -- where we said we're going to be mid-80s to high 80s and the FX impact, which is significant, unfortunately, but this is it.

Just to add to what an said. Sorry, here. Just wanted to comment on the previously asked question, not yours Taylor, but I think with Eliran who asked about it, the price increase for servers. So just ask the team to double check. And it seems like there's an 18% increase to a subset of cohort of customers, the joint mines of service. So it's not a significant amount. It's a small amount of customers, but just wanted to point it out and give some more color on that.

And our last question comes from the line of Mark Schappel with Loop Capital Markets.

Eliran, could you just discuss to what extent customers are expecting your new AI capabilities to be bundled into, say, existing subscriptions versus paying for them as a premium add-on. And maybe also talk about how that's either shaping or not shaping your packaging and monetization strategy in the coming year. .

Hi, Teliran. I think, Casey, probably better for you to take it. .

Yes. Happy to. So thank you for the question. So our AI capabilities are foundational in our platform. They're embedded in our workflows and based on the feedback we've gotten from customers, they really enjoy the predictability of PPU pricing, and they like to consume those capabilities that way. With that said, some of the more compute-intensive workloads that drive outputs with these workloads. We are charging and monetizing that through credit and our customers like the mix of both of those. So it's -- again, it's early, and we're very encouraged that this model is going to be.

Ladies and gentlemen, that concludes the question-and-answer session. Thank you all for joining in. You may now disconnect. Everyone, have a great day.

Good day. My name is Eric, and I'll be your conference operator today. At this time, I would like to welcome everyone to Monday.com's Third Quarter Fiscal Year 2025 Earnings Conference Call. I would like to turn the call over to Monday.com, Vice President of Investor Relations, Mr. Byron Stephen. Please go ahead.

Hello, everyone, and thank you for joining us on today's conference call to discuss the financial results for monday.com's third quarter fiscal year 2025. Joining me today are Roy Mann and Eran Zinman Co-CEOs of monday.com. Eliran Glazer, monday.com CFO; and Casey George, monday.com CRO. We released our results for the third quarter fiscal year 2025 earlier today. You can find our quarterly shareholder letter along with our investor presentation and a replay of today's webcast under the News and Events section of our IR website at ir.monday.com.

Certain statements made on the call today will be forward-looking statements. which reflect management's best judgment based on currently available information. These statements involve risks and uncertainties that may cause actual results to differ from our expectations. Please refer to our earnings release for more information on the specific factors that could cause actual results to differ materially from our forward-looking statements. Additionally, non-GAAP financial measures will be discussed on the call. Reconciliations to our most directly comparable GAAP financial measures are available in the earnings release and the earnings presentation for today's call, which are posted on our Investor Relations website.

Now let me turn the call over to Roy.

Thank you, Byron, and thank you, everyone, for joining us today. In Q3, we delivered another quarter of strong results and disciplined execution, putting us firmly on track towards our Investor Day revenue target of $1.8 billion of FY '27. We saw robust net additions of over 100,000 plus and 500,000-plus paying customers, reflecting the strength of our go-to-market engine and the expanding demand of our platform. We also reported our largest ever non-GAAP operating profit, reinforcing our ability to scale efficiently while continuing to invest in innovation.

The combination of accelerating customer expansion, record profitability and surging engagement with our AI offering, positioned monday.com strongly for its next phase of growth. Our Q3 results follow a highly successful Investor Day where we showcased our evolution into multiproduct and AI-powered platform. The event grew nearly 1,000 online participants over 4x the viewership from 2023, reinforcing investor confidence in our vision and the significant opportunity ahead as we execute towards our FY '27 goals.

Additionally, our Elevate user conference in New York City and London reach new heights in both scale and impact. Attendance more than doubled year-over-year, reflecting our growing excitement around our platform and the new AI capabilities. These events not only amplified customer enthusiasm and engagement, but also generated record engagement and strong pipeline heading into 2026, setting the stage for continued customer expansion and growth.

Let me now turn it over to Eran to walk you through some of our business highlights for the quarter.

Thank you, Roy. The investments we've made in our sales organization over the past year continues to drive strong results. We delivered solid net additions among larger customers, improved net dollar retention for accounts over $50,000 in ARR and achieve accelerating RPO growth, all reinforcing the effectiveness of our upmarket strategy and disciplined execution.

We continue to rebalance our go-to-market investment towards mid-funnel channels to target larger opportunities. While these motions come with longer sales cycles, they are yielding high-quality pipeline and position us well for sustainable growth. Moving on, our multiproduct strategy is delivering strong results. expanding Money.com reach across more teams and use cases. New products now account for over 10% of total ARR, surpassing our 2025 goal ahead of schedule. New bundle offering combining work management with CRM, service and Dev provide a unified, cost-efficient experience while accelerating cross-sell momentum. And within CRM, our new AI powered money campaigns product has seen rapid adoption since September launch, reinforcing our vision of a connected sales and marketing suite. Since this gradual release in July, Monday Vibe has seen rapid adoption with customers creating more than 60,000 apps to part of their unique workflows built directly on money.com enterprise-grade infrastructure. These apps are secure, scalable and fully integrated with granular permissions and theme contacts.

To better reflect the value customers are realizing, we introduced a new pricing model that lets users select a tier aligned with their AI needs from unlimited free access to build and test apps to pay tiers that scale as the usage grows. We also recently introduced Agent factory, a new AI product that lets anyone design and manage intelligent agents to automate complex workflows.

Operating as a stand-alone solution with flexible consumption-based pricing, these agents function as integrated team members, penduling tasks like updated CRM records, sending e-mails and scheduling full ups. And to simplify the AI experience, we're rolling out a new AI credit system in Q4, shaped by extensive customer feedback, providing a more transparent and intuitive way to scale AI usage and measure impact across organizations. This quarter results reflect the incredible dedication of our teams and the trust our customers place in monday.com every day with accelerating customer expansion, record profitability and growing enthusiasm for our AI power platform, we're entering the next phase of durable profitable growth that will create meaningful long-term value for shareholders.

With that, I'll now turn it over to Eliran to cover our financial and guidance.

Thank you, Eran, and thank you to everyone for joining our call. Q3 was another strong quarter for monday.com, highlighted by solid revenue growth, supported by our success with larger customers and continued improvement in operational efficiency. Total revenue came in at $317 million, up 26% from the year ago quarter.

Our overall NDR was 111% in Q3. We continue to expect overall NDR to be stable at 111% for fiscal year '25. As a reminder, our MDR is trailing 4 quarters weighted average calculation. For the reminder of the financial metrics disclosed unless otherwise noted, I will be referencing non-GAAP financial measures. We have provided a reconciliation of GAAP to non-GAAP financials in our earnings release.

Third quarter gross margin was 90%. In the medium to long term, we continue to expect gross margin to be in the high 80s range. Research and development expense was $57.8 million in Q3 or 18% of revenue, up from 17% in the year ago quarter. Sales and marketing expense was $151.8 million in Q3 or 48% of revenue compared to 52% in the year-ago quarter. General and administrative expense was $27 million in Q3 or 9% of revenue compared to 9% in the year ago quarter.

Operating income was a record $47.5 million in Q3, up from $32.2 million from the year ago quarter, and operating margin was 15%. Net income was a record of $61.9 million in Q3 '25, up from $45 million in Q3 '24. Diluted net income per share was record $1.16 in Q3, based on 53.3 million fully diluted shares outstanding. Total employee head count was 3,018 employees, an increase of 151 employees since Q2. We continue to expect to grow head count by approximately 30% in fiscal year '25.

Moving on to the balance sheet and cash flow. We ended the quarter with $1.53 billion in cash and cash equivalents down from $1.59 billion at the end of Q2. Marketable securities were $211.7 million at the end of Q3, up from $60.1 million at the end of Q2. Adjusted free cash flow for Q3 was $92.3 million, and adjusted free cash flow margin was 29%.

Adjusted free cash flow margin is defined as adjusted free cash flow as a percentage of revenue. Adjusted free cash flow is defined as net cash from operating activities, less cash used for property and equipment and capitalized software costs, plus costs associated with the build-out and expansion of our corporate headquarters.

Now let's turn to our updated outlook for fiscal year 2025. For the fourth quarter of fiscal year 2025, we expect our revenue to be in the range of $328 million to $330 million, representing growth of 22% to 23% year-over-year. We expect non-GAAP operating income of $36 million to $38 million and an operating margin of 11% to 12%. For the full year of 2025, we expect revenue to be in the range of $1.226 billion to $1.228 billion, representing growth of approximately 26% year-over-year. We expect full year non-GAAP operating income of $167 million to $169 million and an operating margin of approximately 14%. We expect full year adjusted free cash flow of $330 million to $334 million and adjusted free cash flow margin of approximately 27%.

Let me now turn it over to the operator for your questions.

[Operator Instructions] Your first question comes from the line of Kash Rangan with Goldman Sachs.

Good to see the quarterly results. I'm also curious to get your perspective on 2 things. One is as you look at the spending environment on the next calendar year down to '26, what is top of mind for your customers? And where does monday stand in terms of spending priority. Also secondly, when you look at the results, this looked like a smaller magnitude of beat relative to what we've come to expect on monday in the past prior quarter. So if you could talk about what might be behind the numbers that is the go-to-market transition, et cetera, that hopefully will set you up for a very good success in the years ahead. But I wonder if the go-to-market transition, the pivot towards larger deals also cost us the kind of upside that we've company expect in the results and the guidance looking forward into the fourth quarter and the year ahead.

If there's any go-to-market transition that we should be thinking about as you work through these numbers.

Kash, this is Eran. Maybe just to start before I sort answering your question, I know this is your last earning call [indiscernible]. I just want to say thank you for the whole period and the coverage throughout the years. Just to your first part of the question, and then I can defer to add on about guidance and Casey.

So in terms of customer demand, like you mentioned, we see a transition in the business basically across all customer segments, the 50,000, 100k, 0.5 million, we see acceleration. Our go-to-market strategy in terms of any bigger accounts is working really well, and we see accelerating on all fronts. In terms of what customers are asking for. So definitely, we see an increase in terms of our profitability.

More customers are buying more products. Definitely, more and more customers are interested in AI features and our products. And I think a lot of the new announcements and new features that we launched really resonates with customers. So overall, we see a very healthy demand across all customer segments. We see healthy demand with our existing products and specifically with the new air features that we offered, and we announced during the Investor Day.

Thanks, Eran. Kash, it's Eliran. With regards to the guidance in Q3 and what we've provided. So the more measurable bet is mostly due to timing effect as we rebalance investments or the higher ROI area, and it relates to your question, so we see the direct sales motion, the new products like monday Service, CRM and per channel such as video and social media actually providing higher ROI. And they tend to have a longer sales cycle, but we see a very positive momentum when you look at the 50,000 customers, 100,000 customers, 500,000 customers, they're all accelerated in this quarter going into next year.

So this provides us a lot of confidence with regards to our next year assumptions. And maybe, Casey, you can add what are top of mind of customers next year.

Yes. We just finished up our world tour with Elevate. So tens of thousands of customers and partners came out to hear everything we had to offer, especially around our AI offerings. The consensus back was I'm not taking full advantage of Monday. And obviously, when we only have 6% of our customers consuming more than one product, the opportunity for us is significant. And so as we start this multiproduct journey, which obviously has just begun, all indications are we're going to have a much more material impact on the revenue associated with customers consuming more than one product. So at this point, it's early, but all signs and indications are that this is going to be a significant contribution for us going forward.

Your next question comes from the line of Jackson Ader with KeyBanc Capital Markets.

The first one that I had was on the move-up market and its impact on deferred revenue or billings as you guys keep signing kind of long -- or larger customers and maybe longer-term contracts, more heavily weighted toward annual and even multiyear. I would expect deferred revenue to outgrow recognized revenue. And so I'm just curious what the dynamics are there that are causing deferred revenue to come in below revenue.

Jackson, it's Eliran. Just as a reminder, when you -- with regards to billings, we said it in the past, this is not the perfect measurement of our business because it's based on a cash basis, not accrual basis.

As a reminder, we tend to be more conservative on that. So therefore, there are some fluctuations with regard to that. And we think a better measurement of this, this is an RPO. RPO is a new metric for us that we disclosed in the Investor Day. And as you can see, it's accelerating quarter-over-quarter and it also reflects the full contract value that we see going up market. So we think there is going to be some timing of the billings. This is why it's not perfect measurement.

Therefore, we intend to see the ARPU is a better measurement going into next year.

Okay. All right. Great. That's fair. And then what should we take from -- the implied growth rate here for the fourth quarter is like 22.5%, 23% or so year-over-year growth. What should we take a signal for the right level to be thinking about 2026?

So we are going to provide our initial expectation for fiscal year 2026 and our next quarter earnings. And I think in the Investor Day, we provided good outline. We said that we are going to be $1.8 billion by fiscal year '27 and we are committed to achieving this number and to the guidance we have provided during the Investor Day. So -- and this is something that not only we are growing on the revenue but also expecting operating and free cash flow margin to expand.

Next question comes from the line of Arun Bhatia with William Blair.

Yes, perfect. I want to maybe just go back to the fact that '26 might see some improvement given that you're rebalancing investment. Can you just maybe elaborate a little bit on where the investment is going, what you might expect your kind of goals are for 2026 to either reaccelerate growth? And then I think Eliran, I heard you say 30% increase in head count this year? I'm curious how your plans are shaping up for 2026 within that investment framework.

Yes, this is Eran. So I can start. So look, we feel very confident on the strategy and how it's going so far, specifically, I can point out, are going upmarket worked really well. Just as a reminder, just 3 years ago, it seems like a big stretch. But right now, the majority of the business is based on $50,000-$100,000, $0.5 million accounts. We see those accounts as much better retention, much more expansion, much more stability, definitely changes the nature of the business, and we see some of that as for the results, but we're very confident on where we're heading with those customers. We feel the potential to do more cross-sell, more expansion over time will really pay off.

In addition, as we mentioned during the Investor Day, we -- a lot of investment in terms of product. We're executing in the last 3 or 4 quarters like never before, adding a lot of AI features, functionality, those are really well received with our customer base. There's a lot of excitement. Casey mentioned, Elevate. We've got great feedback from customers across the board. So all in all, looking at all the investments we've made and all the innovation in the product, we feel very confident in where we had it and how our customers are using products.

Arjun, this is Eliran. Just to answer your question on head count. So as we said, we expect hiring to remain focused on sales, product and R&D this year. we estimate it to be around 30% growth in head count by the end of the year. And we think that as for [indiscernible], and we already said it in the Investor Day that we believe the numbers are going to be closer to 20% in terms of adding additional headcount. It's going to start to decelerate already in H2 of this year going into next year. And we think that most of the investment already is behind us. So we're going to see less investment in head count next year.

Okay. Understood. Very helpful. And then 1 just on vibe because it seems like it's getting very good adoption, 60,000 apps, I think, in a number of months, what are customers building on monday value? I mean is that different from what you see the -- how you've seen them historically use sort of the money work management platform?

Yes. It's Roy here. So Vibe is amazing, like we see that customers are really leaning into it and it's filling up a lot of gaps. And I feel like as a product, it triggers their imagination. Like whatever they want out of software. They just like put in there and they built like stuff we wouldn't have imagined like some of them we shared in the investor letter, fill gaps, build like the software or [indiscernible] and it's all built on top of the monthly infrastructure, meaning it's like enterprise grade. The data is everything they expect from the platform itself, they get into vibe and some of them are leaning really hard into it.

Your next question comes from the line of Josh Baer with Morgan Stanley.

I wanted to ask on the product bundles that you're starting to introduce this quarter in Q4. I guess, first, is there a change on the product side from a capabilities or an integration perspective? Or is it more about the go-to-market and pricing? And I guess the follow-up is like what what is the change or here? Is it effective discounts? Like what's the goal here? And which parts of the market are you trying to target with this.

Yes, Casey George here. I'll take this one. So we just launched bundles. We launched 3 bundles here this last month, so this quarter. We obviously have a lot of visibility on how can customers use our products. And what we saw in the market, there were 3 in particular that stood out where there was pretty consistent use cases with work management and service CRM and work management and around our CRM and service and so what we did was we put those into the market, and there is some commercial advantage for the customer to consume those, but it's also ease of use because these are ready built bundles that they can deploy very quickly and get value from them. immediately.

And again, we saw in particular industries where these were pretty pervasively used. And therefore, we bundled them up, made them available to the market and our sales team in early days, but we are seeing very good traction with these bundles here in the first quarter since they've been launched.

Your next question comes from the line of Brent Thill with Jefferies.

Just going back to the guidance. I don't think there's a time in a model where you didn't raise guidance on the quarter out. So I think many are asking what's happening? What are the causes for this? Obviously, you see your stock premarket and what's happening? So I think a little more explanation is needed to better understand what happened there?

Brent, it's Eliran. So maybe as a reminder, we keep saying it every quarter, it's important. Our guidance approach is consistent with prior quarters. It hasn't changed and we didn't change the philosophy. As we said in prior quarter, the more measured it reflects timing effects as we rebalance investments towards ROI areas.

So we are investing in performance marketing where we see the return on investment. And due to our big brand capabilities, when we see high returns, we are investing in performance marketing, and we see [indiscernible] dollars. As we started to shift our upmarket, obviously, there is a timing effect because the investment is taking longer to see the results. However, the momentum and the trends are very positive. So there is a timing effect, as I mentioned, that's flowing into the next quarters and is impacting the numbers that we are seeing this year in terms of revenue and [indiscernible]

Okay. And from Casey's approach, I know it's still early in his journey, but I think many are asking how that transition is going upmarket, what's still needed to go? What's going well? everyone loved to hear his thoughts.

Yes. No, thank you. It is going exceptionally well. If I point you back to the key metrics that we follow around moving upmarket, the $50,000, $100,000, $250,000 and $500,000. We accelerated on all of those. And you may ask yourself why is that important? If you understand that the first deal is typically a $50,000 deal, not a $1 million deal and it starts at the 50 goes to $250 and then accelerates into hopefully a 7-figure deal.

We're seeing that trend continue. I'll point to 3 big wins we had in the quarter, all over $1 million. All 3 of those started 3 or 4 years ago at probably around $50,000 and they accelerated over the course of the 3, 4 years. Love to talk about a couple of those opportunities and particularly one of the largest logistics company in Europe that is consuming 5,000 seats, 1,500 of those are CRM. We obviously have work management and then there's service fees associated with that win.

So here's a large logistics company that's consuming 5000 seats across 3 of our products that was over $1 million this quarter. We had a large tech company that uses our product across about 10 different departments. Most importantly, they use it to manage all of their M&A, and that's another company that started with us 3, 4 years ago around 50,000. So all of the metrics that we follow are accelerating and obviously, encouraging signs for our ability to move upmarket.

Next question comes from the line of Mark Murphy with JPMorgan.

The metrics are clearly strong with your larger customers. Can you speak to what you saw in mid-market and below, for instance, how did the downmarket business trend versus internal plans? Or is there much of a spread in the growth rate there if we compare it to that over 100,000 cohort?

Yes. Mark, this is Eran. I can start. So Look, looking at Q3, a couple of [indiscernible] trends were choppy overall. We saw some continued volatility in Phase II performance. However, the good news are that towards the end of the quarter, we saw encouraging stabilization in new sign-up and top of funnel -- so overall, I would say, going forward, the pipeline remains healthy. A lot of it is based on upmarket, but also the bottom-up mid-market part also is healthy going forward. So we saw a solid growth in large and high-quality opportunities, both touch and no touch. And overall, I'd say we're really confident that all the actions that we've done in terms of top of the funnel, how we replace our acquisition channels and all the investments we've made in the last quarter, we paid off going forward.

Okay. And as a follow-up, at what point would you think the traffic buildup that you're seeing from LLM, I think you referred to that as AIO and some of the other channels would be able to make up for what you're losing on the Google search side? Is it conceivable to get back to a net neutral position coming out of Q4 or maybe sometime in the first half of '26?

Yes. It's Roy. So what we see is that we are able to shift the budget of our marketing towards like more sales-led sources and rebalance them and get an ROI. And like Eliran mentioned, these channels take a bit longer to mature, and that's what we see now. We also are getting a lot of traffic from an increasing amount of traffic from AIO, it's too soon to tell if it will fill that gap, but we are already feeling it with a different strategy.

Next question comes from the line of Scott Berg with Needham.

I think it was Eran earlier talked about some early traction with some of the functionality that your customers are using. I just wanted to see if you had some -- maybe any specific use cases or maybe internal corporate departments that you willing to call out that you're seeing maybe the most early traction from some of the AI use cases.

Yes, Casey George here. It's actually been pretty fascinating. We launched a lot of these offerings that Elevate and I had the opportunity to spend some time with some pretty significant customers at Elevate and the resounding feedback was this is a very powerful tool and could solve a lot of problems in our organization. But specifically, we had a large highly regulated insurance company in Europe who needed to solve a reporting issue, right? And typically, they had to acquire some software to go do that at roughly 150,000 that they really didn't want to spend. They didn't get a ton of value out of this -- out of this software. And so they went home that night or to their hotel. And in 20 minutes, they built a better tool that they could use that would effectively get far more value out of. And obviously, they didn't have to spend $150,000. There was another large retailer I spent time with who pretty much did the same thing that a reporting gap in their organization. They've been trying to solve it for an entire year. They're on the spot with some help from our team developed a reporting tool in a matter of less than 30 minutes and effectively solve the problem, as I said, that they've been trying to solve for a year.

So it's a super powerful tool. And as Roy mentioned, it's on a platform or an enterprise platform that's already integrated in their organization. So their ability to deploy that and get value from it instantaneously is super powerful for them. So we continue to see use cases like that pop up all over the place. So obviously, we're pretty encouraged with early signs.

Understood. Helpful. And then maybe a modeling question for Eliran. As you pivot to some of these other channels that you guys started last quarter from a sales and marketing go-to-market kind of perspective is, how should we think about leverage of sales and marketing kind of in the near term? Do those channels still require I guess, some overinvestment here in the short term to effectively turn them on? Or would we -- or do you expect to still see some leverage there, given that you're not spending and maybe that Google channel as much.

Scott, Eliran here. So as a reminder, we have a hybrid model, which is a combination of PLG, the performance marketing spend that we already mentioned, we are shifting to other channels as well as the head count that quota carrying around partners, sales channels and customer success.

So overall, when we are thinking about going into the investment, we believe that the share of the performance marketing as a percentage of total S&M is going to decline, potentially in total dollar value, it may stay flat or slightly below, but we are going to see the investment mostly in headcount. It's going to be more moderate than what we have seen in the past. And the momentum, as we said, continues to be very strong. We are expanding within existing customer base. You can see it with the MDR or 50,000 customers, 100,000 customers an upmarket motion, ACV is going up, lending is bigger. So this would be an area of investment, but more moderate to what we have seen in the past.

Your next question comes from the line of Steve Enders with Citi.

I guess I just want to dig a little bit more into just the performance marketing channel, specifically? And just I guess it would be great to kind of get a breakdown for kind of what you saw within the paid Google channel, I guess, hopefully through October, if you have that? And then I guess, secondarily, just how the kind of the ramp in the other channels is working and how that's kind of, I guess, trending versus your expectations there?

Yes. Steven, this is Eran again. So look, as I mentioned, we talked briefly about the [indiscernible] in the Investor Day. Our Google AdWords channel accounts for less than 10% of new revenue and overall, like I mentioned, we saw some choppiness Q3, but towards the end of the quarter, we saw a stabilization. And that's across Google AdWords and across all other channels, we see very healthy double funnel activity. Also, the pipeline looks very healthy. It's growing according to our plans.

So look, I think overall, we feel confident going forward with our acquisition strategy. And also we also mentioned during the Investor Day, the quality of the quantity. We continue to see a trend of this, our equality customers, bigger land, more expansion, high retention. So overall, we feel confident about the strategy and confidence about our ability to continue to acquire new top-of-funnel activity.

Okay. All right. Great. That makes sense. And then I guess on the guidance, again, just -- I understand Q4 is coming down a little bit. I guess on the back of that, I guess, what maybe gives the confidence as we think through '26 and '27 that you still feel good about that $1.8 billion number, especially as we think about lapping some of the price increases going into next year.

Just yes -- how should we think through those factors and what gives you all the confidence behind those numbers?

So when we think about a few reasons why we are confident in next year numbers. First, demand and expansion from our larger customers. So we're accelerating year-over-year growth for all upmarket customers.

So you have seen $50,000, $100,000 and $500,000 I mentioned earlier. We're accelerating year-over-year growth of RPO and we are improving 50,000 NDR. In addition to that, we have the multiproduct adoption that continues to trend positively. CRM is becoming very significant with more than $100 million in and we are seeing customers increasingly adopting multiple solutions. We are only in the early innings of customers that are adopting more than one product. And only, I think it was 6% that we said in Investor Day, and now we're doing much, much better. AI Product engagement is accelerating. We were focused on educating, and we are focused on adoption of customers in the market, and we see a very healthy adoption of AI products that we believe are going to monetize next year in a more significant way. And as Eran mentioned, we have signs of stabilization in top of funnel at the end of the quarter that we are encouraged by that going into the fourth quarter and into next year.

Next question comes from the line of Alex Zukin with Wolf Research.

Maybe just since we're bundling kind of all the new products into one category. Now maybe what's the latest on Monday CRM service products in terms of traction in the quarter? how much they're contributing to net new ARR today? And then I've got a quick follow-up question on the model.

Yes, Casey, I'll take this one. So CRM, as we just mentioned, eclipsed the $100 million this year in a very short amount of time, I think, less than 2 years. We continue to see traction, of course, across SMB and mid-market and particularly, with service, this has really been a great story for us. It's only 9 months in, but we continue to see even more significant contribution coming from service. I believe our size of service customers is 2x that of other products.

So service continues to accelerate. Obviously, 9 months in. We don't have a year-to-year compare, but we're very bullish on both of those products going into next year.

Got it. And then maybe Eliran, and just for you, if you've had a couple of questions regarding how you feel maybe about next year specifically. I think it's just given some of the changing dynamics that you're mentioning around channels and how you're going to market and shifting spend what seemingly is a little bit of a change in terms of your guidance for Q4 versus previous years and periods in terms of passing through the beat and this timing adjustment.

Maybe just help us pace how we should think about the growth? Are you comfortable with where consensus is for next year? Is it something where it may be a little bit more back-end loaded, and you could actually see acceleration in '27 because of some of these timing adjustments that you're calling out, I think it would be really helpful for us to just understand the pacing of growth given some of these evolving dynamics.

Alex, Eliran here. So I think I mentioned it earlier, but if you think about where we're going to be in fiscal year '27, we said that we are going to achieve $1.8 billion in revenue we feel very confident with that. We feel very confident with the number based on everything that we see today. And this is something that we -- when we made the assumptions we took into account the trends that we see today we made some assumptions about the cross-sell motion, the new products that we are launching to the market. The fact that AI is going to be monetized to a certain extent, and the fact that we are going to expand within existing customer base.

So having all of this into -- taking all of this into account, we feel that the $1.8 billion in fiscal year '27 is achievable in the interim, we are confident with the consensus number for next year as well.

Your next question comes from the line of DJ Hynes with Canaccord.

Eliran, the new AI pricing model and the introduction of agent factory, feel like it gives you more or less visibility into the model? I'm just trying to think about how these changes may impact the ability to forecast the business if AI becomes a more meaningful driver going forward?

It's Eliran. So with regards to visibility, it's early days. As I said earlier, we are focused on education and adoption within our customer base. it gives us confidence that we see that there is a strong momentum. However, it's not something that is going to be very meaningful in the -- in terms of revenue next year. So we take it into account, but it's not very meaningful.

And maybe I can go back to Jackson's question. I mean, obviously, we saw the acceleration in the RPO metrics that you're sharing. Are you seeing changes in contract duration as you go further up market? Is that a tailwind to that RPO metric.

Yes, this is Casey. For sure. Obviously, as you move up market, we would like longer-term contracts and obviously, our customers as well. So we are seeing an acceleration on the term length for our contracts as we move upmarket.

Yes. Maybe to Casey -- just to add to Casey, kind of what we see is basically that the percentage of AR in terms of contract duration. So multi is becoming more meaningful in terms of the numbers coming from 5% 5 years ago to now around 13%. And -- we see the annual contracts are going from 65% to 70%. So altogether, when you combine the annual plus the multi-product, you're getting more than of ARR coming from annual plus multiproduct. And this is something that the trend continues.

Your next question comes from the line of Raimo Lenschow with Barclays.

Perfect. Can I stay on RPO? Like, if I look at the old deck and the new numbers, it looks like you restated it and the numbers came down a little bit. Can you just explain what was going on there?

Yes, sure. It's Eliran. So when we presented the numbers in the Investor Day, it was during mid-August, and the ARPU is a new metric for us and upon further review post Investor Day, we made some adjustment to ensure consistency in accuracy Prospera. This was part of our auditors review of Q3 and the signed off the RPO data presented in our Q3 earnings -- and we are confident that these metrics, as I said earlier, to check some questions, provide a clear and reliable view in terms of our contracted revenue based and future growth visibility going into next year.

Okay. Perfect. Okay. So then we should be clean on RPO going here? Or it's just a change in accounting basically?

Yes, correct.

Your next question comes from the line of Derrick Wood with TD Cowen.

So you mentioned that upmarket motions carry longer sales cycles, but you did see really strong growth in upmarket KPIs, new customers accelerating RPO accelerating -- so are you seeing upmarket pipelines tracking even higher than your revenue growth? And if not for longer sales cycles, you could be even stronger. And I guess, given Q4 tends to be when larger deals have seasonal flush dynamics, how do you think Q4 is setting up? And any kind of share with how the quarter is tracking to date?

We do continue to see an acceleration in our pipeline as we move upmarket. As it relates to the quarter. All I would say is that when you move up market, obviously, you create somewhat of a hockey stick in the quarter and in the year, as we progress upmarket, we continue to see that phenomenon play out. But we're very encouraged with the pipeline that we've built up market. And again, we haven't really even started with the cross-sell motion. So we're bullish that, that will only add additional pipeline for the year.

Got it. And on the AI side, I mean, when you look at Magic side tick agent builder, what would you call out as getting the most traction or how would you rank this group in terms of potential adoption over the next year or 2?

[indiscernible] has definitely taken off. That is -- there's been a resounding excitement around that offering. Obviously, we just announced that that I had the opportunity, as I mentioned, pension customers that elevate -- there was a ton of excitement around that. And as I mentioned, a couple of use cases, there's a dozen more that I could speak to where customers are literally using it that day and getting value from it.

So we're obviously, as I mentioned, very early on, but we're super excited about the prospects of Vibe. Most particularly because we're in the market to absorb that. So we're the work management company. We're in a perfect spot for customers to change how they work and actually do work for them instead of just managing it. And these offerings do absolutely that, whether it's our agents or Vibe. So again, pretty excited where we are. looking forward to next year and seeing how that develops as we go.

Maybe just to add to what Casey mentioned, this is Eran. So I 100% agree right now presents the best opportunity for monetization, and we see the most momentum with. I would say in addition to that, we feel that money agents can also unlock new go-to-market, a new type of customer that we didn't have before. So we excited about this one, both for our existing customer base, but also our ability to step into new type of customer audiences.

[Operator Instructions] Next question comes from the line of Rob Oliver with Baird.

My question is for Casey. So Casey, obviously, a lot of changes going on on your side. On the comment relative to sales cycles, I just -- the first part of my question is on the longer sales cycles. Obviously, those are going to lengthen as you move up market, but it does sound like that comment is a bit of a change from when you were on stage a few months ago.

So I just wanted to understand putting aside the obvious change in sales cycles as you move up market, which is clearly having success kind of what changed in the market? And then I had a quick follow-up.

Yes, I don't think there's really been a whole lot of change. What I would say is we have to do 2 things at once, and we are -- we still have our high velocity business in SMB. That continues to pace at a healthy rate. And then we layered in the upmarket motion, which I'm stating the obvious, which those sales cycles are typically a little bit longer. But again, we have to do 2 things at once, and we are. So still very encouraged. My strategy hasn't changed, and it's consistent with what I mentioned at Investor Day.

Got it. Helpful. And then as you think about the move up market, obviously, you guys have a very powerful partner network, the low to mid-range and I know you're thinking a lot about partners moving up market as well -- is there a way for us to think about how partner contribution may play a role and perhaps as a percentage of new business or how you're thinking about those partner relationships and also ownership of those accounts in terms of internal versus a partner basis?

Yes. The ecosystem has always been very strategic to us and will continue to be. We continue to grow our partner ecosystem almost daily, especially as it relates to some of our new offerings. We have new partners coming on board that want to take advantage of our CRM offering, our service offerings and obviously, now our AI offering. So it's not just about the existing ecosystem we have today. It's about recruiting the right partners to give us depth and breadth across the different regions. Obviously, depending on the region, they pay you a more significant role, especially as you look at some of the emerging markets in APJ and LatAm, they play a very significant role, and we are really growing in those regions on the back of that partner ecosystem.

So I'm super excited about where we are with the ecosystem, even more excited about where it's going.

Your next question comes from the line of Tom Blakey with Cantor.

Just 2 for me. On the sales cycles and the move up market. I don't think that's necessarily new you've been very articulate in terms of laying that out even before Analyst Day. Just wondering if anything maybe kind of like a downtick in terms of expectations there in the most recent couple of months. Things are just maybe taking a little longer. The deals are getting more complicated, as they become more penetrated a victim of success, so to speak. And then secondly, double clicking on the SMB.

You're doing so well in these metrics that you're talking about with regard to NRR and RPO at the high end and the decel that's kind of implied into this $1.8 billion estimate for calendar '27. Has anything changed in terms of -- I know you've been asked a couple of times on the call about gross churn on the SMB side near term? And what are your expectations? You did a good job articulating what the calendar '27 estimates of kind of a bridge there? What are you expecting in terms of SMB with regard to that $1.8 billion. So near term and long term on SMB.

Yes. So this is Casey. I'll answer the first part, and I'll hand it to Eliran. So -- if you understand, when we talk about moving upmarket, it doesn't necessarily mean we're talking about the Fortune 100, right? We're moving up through mid-market. And quite honestly, the larger accounts are coming to us. So as it relates to some of the sales cycle, it's just the natural sales cycles we see as we move up market. That has not changed. That's consistent. We planned for that, and that's played out in a very healthy way in the numbers, right?

On the SMB side, that has been a very consistent business for us. It continues to be -- we see acceleration, especially with the opportunity to sell a full platform. Because we can sell the full platform into those -- that customer set, including our AI offerings.

So really no change. I wouldn't highlight any concern whatsoever. It's playing out exactly as I expected. In some instances, it's actually playing out better.

But I'll hand it to Eliran for some of the guidance on the SMB

Tom, it's Eliran, to your question on gross retention. So gross retention is now historically high, and we see this improvement going from fiscal year '23. This is a result of the fact that we are growing our market, but also as part of the price increase that we have done and the quality of the customers that are joining the platform has been better. With regards to your question about sales cycle, I just want to give kind of a more of a macro overview. I think that over the past few quarters, not only for Monday, but in general, there is some choppiness in the market with some uncertainties. And therefore, customers with regards to all businesses are making probably decisions. It takes them longer with everything that is going on. And I would say it's more from a macro team, but we are seeing a positive momentum as part of our parents with KC.

Your next question comes from the line of Matt Bullock with Bank of America.

I wanted to ask about sales force productivity. Obviously, you're adding quite a few quota-carrying reps on the managed sales side. Is sales productivity tracking in line with expectations? Maybe remind us how long it takes a typical enterprise or upmarket sales rep to ramp? And then should we start to see more of those benefits in '26 as we get more maturity in that sales force.

Yes. We're seeing productivity move in the right direction in a very healthy direction. I would tell you this is the part I'm most excited about, right? If you think about all the offerings we have available to the market. We're going to be our best reference. And when I say that, we're using the technology that we're taking to market to effectively make our sellers more productive.

So we have our AI agents. We have our customer success customer success AI agents. We have a number of internal processes that we're leveraging -- so it's not just about us going to market with these offerings. It's about making our sellers more productive and AI is playing a huge role in that. So our productivity continues to improve. I do expect an even greater improvement next year because of some of the changes we're making with our AI agents.

Fantastic. And then 1 quick follow-up, if I could. It sounds like maybe the embedded contribution for 2026 from AI products is expected to be a little bit more measured, but -- maybe if you could help us think about what's embedded in terms of the assumptions for the 2027 $1.8 billion revenue target. Is there anything you can give us in terms of the embedded product contribution? Or if not, maybe just the core versus the multi products, that would be helpful.

It's Eliran. So as I mentioned earlier, there are not going to be any new products other than the air products that we introduced to the market. As a reminder, we have more than 250,000 customers and very few of them are using a very low percentage of them are using more than 1 product. So the cross-sell motion is going to be very strong between, for example, service and work management, CRM will continue to be strong with monday [indiscernible] that we introduced just recently. We are expecting some revenue from AI product. But as you said, it's going to be more moderate. But the impact of that can be on the retention of our existing customer base. It's not directly revenue, but the fact that our growth retention is better, the fact that we have more stickiness on the platform is generating more revenue opportunities that are going to impact other products as well.

So taking all of this into account, provide us with the confidence on going into $1.8 billion in fiscal year '27.

Your last question comes from the line of Taylor McGinnis with UBS.

Maybe just the first one, I know you guys have gotten [indiscernible] question in a number of ways, but just to be a little bit clear. So if it's my understanding, it sounds like the success that you guys are seeing up market maybe isn't just yet offset some of the choppiness or sepsis down market. And so maybe that is what led to the 4Q guidance cut. So can you just talk through and give a little bit more clarity on like what got tougher? Is it that you thought upmarket would have been growing faster to offset this lower growth down market? Or did something within SMB and down market gets softer than before?

Tyler, this is Eran. So I don't think it's a matter of something that's got harder in terms of acquisition, just a shift in the type of customer that we acquired during this quarter. So as we've said, we've pivoted some of the budget to different channels, we saw those bringing great pipeline. Just this pipeline takes a little bit longer to convert. So it's not at 1 of the expense of the other, it just different types of customers. But overall, this serves our strategy, going up market, higher quality of customers and if anything, just accelerate the motion that we already started.

Perfect. And then just my last one is, Eliran, you talked earlier about comfort in the Street numbers for next year. So just curious, in order to like hit those numbers, do we need to start to see like stabilization in the core work management business, maybe adjusted for some of the bigger changes in price? And then if so, could you just speak to when it sounds like there's still choppiness in some trends out there.

Is that something that's embedded in the outlook for next year? Maybe you could just speak to your comfort in the assumptions and how we're thinking about that number going forward?

Taylor. So with regards to numbers for next year, as I said, we are going to present them in our next earnings release in February. We're going to provide you full visibility and [indiscernible] with regard to the assumptions that we are taking into account. I did say that we have some confidence in next year numbers as a fact of everything that all the trends that we are seeing now, the momentum that we are seeing up market as well as the fact that we are starting to see stabilization in our downmarket top of funnel activity.

These are the things that makes us feel comfortable about consensus for next year.

And it's Roy, I can add that like work management is our leading product, and we see that we are succeeding with our upmarket strategy mainly through work management. So it's like we're leading that market, and we feel like great potential going forward and growing with it as well.

There are no further questions at this time. Ladies and gentlemen, this concludes today's call. Thank you all for joining, and you may now disconnect.

Please welcome to the stage Vice President of Investor Relations, Byron Stephen.

Thank you. Thank you. Good morning, everyone. Welcome to monday.com's 2025 Investor Day. We're delighted to have so many of you with us here in New York. We also want to extend a warm welcome to those of you joining us virtually. We're thrilled to see such a strong interest in this year's Investor Day. In fact, we have 3x as many registrants for this Investor Day compared to 2023, which I think is a clear reflection of the growing excitement around the monday story and the opportunities ahead for us.

Today, you'll hear about from our leadership team about the next chapter of growth at monday.com. We'll begin with our co-founders and co-CEOs, Roy Mann and Eran Zinman. They'll share their vision on how AI is reshaping work and why monday.com is uniquely positioned to lead in this new era. From there Daniel Lereya, our Chief Product and Technology Officer, will focus on how AI is embedded across our entire platform and across all our products and has helped accelerate adoption of monday. It also helped accelerating innovation and value for our customers as well. Then we'll turn it over to our Chief Revenue Officer, Casey George, who will outline our go-to-market model and how it continues to evolve as we expand upmarket and scale multiproduct adoption.

And last, but of course, not least, our Chief Financial Officer, Eliran Glazer, will provide a closer look at our financial strategy and how we balance our strong top line growth with continued improvements in profitability and cash generation. All right. The fun part before we begin, I'll remind you today's presentation includes forward-looking statements, which are subject to risks and uncertainties as outlined in our SEC filings. We'll also be discussing some non-GAAP financial measures. Those will be reconciled to our most comparable GAAP financial measures in our materials.

Now with that said, let's get started.

[Presentation]

Please join me in welcoming co-founders and co-CEOs of monday.com, Roy Mann and Eran Zinman.

Everyone, good morning, and welcome to 2025 Investor Day. I want to join Byron and say how much we appreciate all of you for coming here and joining us on this exciting day. So let's get started. Definitely, AI is a transformative technology. It changes almost anything for our customers, the way they perceive value they can get from software. It changes how companies go to market. It changes how company scales. It touches almost any aspect of our customers and ourselves as a company. And we at monday, we embrace that, and we want to go all in on AI. This is exactly what you're going to hear today. You're going to hear about big bets that we're making as a company, changes to our products, new products that we're going to launch.

And we see this as one of the most amazing opportunities we have as a company going forward. We just don't want to just add AI layer on top of our product. We want to make significant changes to our road map and to our existing products. When we look at the three main guidelines that guide us through this journey, we are going to go through each one of them. We see one of the main guidelines is the fact that companies now have the ability to have almost infinite workforce. Essentially, what this means is that AI is one of the biggest leverages that software can offer today in terms of skilling customers and scaling businesses.

We feel that with AI, you can do so much more with the same headcount and even the existing headcount can become much more efficient. And this is one of the big bets and guidelines that guide us through this journey and the road map that we're going to have. The second one is the fact that software in a way become more accessible, not just for developers, but almost for anybody in the organization. You no longer have to be a tech person or to know how to code in order to build software. And in a way, this is our vision on steroids. We always aim to have the most flexible software for our customers.

And with this vibe code in motion, we can give them even more freedom to our customers. And again, like the first one, the second principle, we're going all in. You're going to hear today exactly how we're going to leverage live coding with our existing platform and how those two things come together and offer a solution that's not only customizable and flexible but also is enterprise ready and ready to scale. And the third part of the principles that got us forward is the adoption. We feel with AI, technology is moving very fast. But when it comes to actually adopting the technology, I think ourselves and also our customers are way behind. And this is one of the things we're aiming for.

With monday, it was always important for us to aim for tech and non-tech customers and for all segments. And we are exactly positioned to bridge that gap between technology and actually usage. Given all that, we're amplifying and changing our company North Star, and this is a big deal. For years, since we started the company, our mission was to manage the core work for our customers. And with AI, this vision is amplified. Our vision now with AI is to manage to do the core work for our customers. Not just manage work but actually doing the work for our customers. And you will see throughout the day how this impacts our road map and exciting new features we're going to announce.

Already, we've seen amazing traction with AI features that we've launched. Up to date, there's already over 67 million AI actions on our platform. In addition to that, in the past 9 months, we've been very busy, the busiest we've ever been as a company, working very hard to create new products and add add-ons to our existing products. We launched magic and sidekick, which Daniel is going to present today, already 45,000 actions in monday sidekick alone. We launched monday vibe, which is essentially a vibe coding platform on top of our platform. Already 7,000 apps were built in just 2 months. And with monday magic, which helps you build solutions, 2,000 solutions were built in less than 3 months. We've never seen traction like this in any feature we've released. Our customers are thirsty for AI usage and the adoption is off the charts.

We're going to address each one of those guidelines today. We're going to talk about the unlimited workforce. We're going to announce monday agents, which is a new product. We're going to talk about monday sidekick and show it to you. I've already seen amazing usage. We're going to show you how we're tackling that ability to build software with monday magic that helps you build solution on top of monday and monday vibe that helps you live code on top of monday. And we'll walk you through each one of our products and show you how we're going to bridge that gap between AI capabilities and the adoption of those AI features. It's going to be very exciting. And again, thank you for being here.

Before we talk about all those new features, we want to take a step back and talk about the company and our growth for the upcoming years.

Thank you, Eran. And I'm joining Eran saying thank you for coming here today. We're super excited about this. And I want to walk you through some of the numbers we've seen and where we are as a company right now. So in the first half of '25, we made tremendous growth. We're now at $1.2 billion of ARR and we also have a massive number of customers. We have like 250,000 paying companies, paying customers. And that's a huge base. We're going to build on in our next chapter. And all that growth we've done with extreme efficiency, okay? It's not something that was by accident, like the efficiency part. It's something very intentional. It's how we build the company. It's how we want to build things and go towards growth.

And it chose like in the rule of 60 or rule of 40, which we are in 60. So again, that's like something we put a lot of emphasis on in our execution in our -- it's very deliberate. Currently, we have with our multiproduct strategy, we sit in 4 different growing markets and it's an amazing base to keep moving forward as we see those markets evolve and grow with us. And talking about multiproduct. This is a super interesting graph. I love it. So this is like when you see the purple line is monday's growth when it was in the beginning, okay, since we started when we launched, and you see the ARR growth we had back then in the day. And we kind of aligned every other product to that time line, okay, from launch to how it's scaled.

And last Investor Day, we showed you CRM, and we showed it was like 5x faster than our initial growth. So look at it now, how it broke out and like continue to scale amazingly well. Service is behaving very much like CRM, okay? We see that same growth trajectory and scale and our -- and the demand from the market. with a completely different go to market, by the way, which is also interesting. And they've had very healthy growth as well. When we talk about our existing customer base, we see a huge opportunity in scaling them into the multiproduct strategy.

So currently, we only -- we have like only 6% penetration within our customer base that use multiple products. We have a huge potential going forward, and Casey is going to talk with you about the things we're actively doing to go after that potential. And I want to talk about the new side of things, like the new customer, how we acquire new customers and even going deep a little bit into our marketing engines.

So on the graph, you see our performance marketing engine part of the engine. And you see that the spend, the purple bars are the spend. So you can see that it changes over time, okay? And it goes up, it goes down and we deliberately do that. Like we tweak our spend into areas that we know will work efficiently. We do that as we said before with BigBrain, it's all automatically, and we know how to move budget so it will be done efficiently.

And the white line shows the percent of performance marketing from our entire S&M budget. So you can see it's going down over time, meaning we add more capabilities to our go-to-market engine and performance marketing is becoming a smaller percentage of that greater whole and how we go after new customers. And we currently have over 55 different acquisition channels, okay, like different channels. And we wanted to highlight one of them, Google Search, which with AI, there is some uncertainty on that engine.

So Google Search is only 10% of our new ARR. That's like its part. I know we talked in the past about the sign-ups that it's like 30%, around 30%. So in ARR, in new ARR, it's only 10%. And when we talk about AI and marketing, so one interesting thing is the AIO. It's a new field that when customers search for solutions within like a ChatGPT or other such apps -- AI apps and they come to us. So we see the traffic, so they get a result with monday.com, they click it, they come to us. So we see the traffic that we get from AIO growing bigger and bigger. It's exponential. It's still fairly small, okay? But it's growing steadily. And we put a lot of emphasis into making this work.

With BigBrain, we are working hard to build the systems that will help us monitor, optimize and like also succeed in this area, adding to our entire marketing machine. So let's dive into a new aspect of the new engine still in the new customers. So as a trend, we are moving from quantity to quality. Okay? We are looking for the better customers all the time in our new marketing engine. So you can see over time that the new land, meaning like the initial payment we got from customers has grown over the years. And also larger and larger percent of them is choosing our enterprise tier, our highest tier as the first tier that they choose. This is a clear indication that we acquire better customers, let's say, larger companies, higher ACV customers. And that's, again, it's a trend. It's a deliberate one, okay? That's like something we optimize for. We did it with the price increase and a lot of other stuff we do to optimize for that. Yes.

So apart from having a very powerful acquisition engine, another big focus for us as a company is going upmarket. But this is an interesting chart that shows how many accounts or customers we have with ARR of over $0.5 million. And you can see just 4 years ago in 2025, we have -- with 2021, sorry, we had only 5 accounts, over $0.5 million, and that's been exponentially growing now over 68 accounts, over $0.5 million. We see these accounts continue to expand with very healthy NDR. The average contract value is $900,000. And I think the more interesting part is that on average, each one of those customers have about 15 use cases, meaning different departments, they use monday for different things.

This just goes to show you how sticky the product is how versatile it is and how many usages we usually have with one customer. It's not just one champion or one use cases. The product is very sticky across the whole company. And going forward, obviously, we'll continue to invest in that motion of going off market, and Casey will talk more about this going forward. Roy mentioned ACV going up in terms of new customers. But we have a broader look across our whole customer base looking back even a decade long. You can see that our ACV on average throughout our entire customer base at 5x.

With all those new features we introduced the new products, mondayDB, platform capabilities, the share -- the value of our customers and the value they get from monday dramatically increase. And we plan to increase this going forward. It means that today, every customer is 5x more valuable than what it was just 7 or 8 years ago. And going forward, we're confident that this trend will continue. And we'll continue to increase the ACV and the footprint we have with our existing customer base. I want to talk about our internal growth and efficiency going forward. We talk a lot about the product and our customers but also we, as a company, like Roy mentioned in the beginning, aim for very healthy growth and healthy efficiency.

In 2026, we plan to scale our head count by only 20% after 30% in 2025. And we do that by leveraging AI and just increasing efficiency overall. So you can see here a few examples. Casey and Daniel will cover that in their own section. But basically, we're leveraging AI internally to make our sales team more efficient, to make our customer support more efficient and to make our R&D more efficient. And I think that going forward, '27, '28, we'll be able to scale the company even more while increasing their head count in even a less significant way in 2026. So we talk a little bit about our business model and about our AI vision.

Let's talk a little bit about become more concrete about the future of monday.com.

Cool. So Eran talked about our transformation of our vision, okay? And that's like the first time we've done that. The first time we've changed the vision of the company from managing work to doing the work and that's very significant. It's very inherent in everything we do in the company. Daniel will talk about that, the transformation we've done because we do see AI as a transformative technology. It enables us to do something we never could have done before. And Obviously, you're going to hear a lot about it. I'm going to walk you through some of the highlight changes that we're making within the products suite themselves. But we have also new products that you'll hear about during the day.

And we're making massive bets into that space, and we're going to see some of them today. So work management. We are the leader of work management or like one point, like we have 80,000 seats for one large customer. And like Eran showed there a lot of other large customers, and we are becoming better and better at managing at scale with work management going deep and leading that category. And with that, we are transforming the visions for work management for managing work to actually doing the work. So we know what customers are doing. It's in there, right? The project that has everything. And we are launching sidekick that it's a personal agent that actually does the work for you, and it's just one click. You'll see it, it's amazing. In CRM, we reached $100 million of ARR. You saw the growth.

And from managing sales, managing sales pipelines, workflows, processes, we are now making a massive bet and going also into actually doing the sales, making the phone calls, closing deals, prepping everyone, like a lot of like AI stack to really transform CRM into AI and really looking deep into the future and making the best of where this market is going to go to. monday dev, so monday dev is about managing sprint, managing building software. We manage like the whole aspect of it, not just the development cycle, but also product and design and everyone around it. And in dev, we are adding or transforming to not only manage those projects, but also to orchestrate all the AI software creation, meaning if you orchestrate everything on monday, if you manage everything, you can also manage how AI is involved in that process and executing your software creation.

And in service, we've closed like over 1 million tickets by now, but it is about managing requests and information, portals and knowledge. And the future of that field is not only managing the tickets and the service, but also doing it, solving the tickets or even solving the problems before they are tickets. So also in that area, we're making great bets into actually solving the problems that arise instead of just managing tickets.

Yes. In addition to those changes we're making to the products, we'll also keep investing into our platform. It's one of our biggest assets and one of the things we're going to leverage for AI usage and AI capabilities. So in terms of the platform, we have mondayDB, which is the most flexible database that we've created a few years ago. We successfully launched mondayDB 2.0, and we're now starting to gradually release mondayDB 3.0. mondayDB is the most flexible database that was ever created for our customers. And with AI and vibe coding, this is the perfect recipe for success and offering even more flexibility going forward. And Daniel will talk about it.

In addition to mondayDB, we're adding a lot of capabilities to the platform itself, and we feel all those things are going to help us achieve that vision even more successful. Let's talk a little bit about monetization of our product. So definitely, AI changed a lot of things. When we look at our current products, they're currently seat-based work management, CRM, Dev and service. Those products are going to move to become hybrid pricing, meaning you're going to pay for seats. But all the capabilities we're going to add on top of it, for example, monday sidekick and live on top of it. Another AI capabilities that we added like AI blocks, it's going to be based on consumption. So eventually, as a customer, you're going to pay a hybrid model of seats and AI usage when you use those products.

And when we think about those new products we're launching and announcing today, like monday vibe as a stand-alone product and also monday agents, they're going to be 100% based on consumption, meaning you're not going to pay for seats, but you're going to be paying on usage. And we feel this is a transition they're going to go throughout the industry over time. We feel the hybrid approach is right for existing customers and existing products and the consumption approach is right for the new products and the new go-to-market that we're going to introduce.

Maybe it's worth adding that like monday sidekick, vibe and magic are available now, but we didn't -- it's in beta, like we didn't release the pricing yet, okay, but it's coming.

To summarize everything we've talked about now. I think what we're showing here now is, one, we're going all in on AI. We're making changes to our products. We're building new products and we're making big bets on the future of where this is going. And we feel we have everything in place. We're going to chase that vision and to have an amazing opportunity for future growth. We continue with a very durable business model going forward. We build great engines like the acquisition engine and the enterprise engine that we built, and we're going to continue to scale them as you're going to hear today. We continue with our multiproduct strategy.

We feel that in each one of those products, CRM, Dev, service. And obviously, work management, we have the biggest opportunity ever to achieve success and scale. Everything changed, and we feel it's a clean slate. There's a lot of opportunity for growth and expansion. We're going to double down on cross-sell of our products with our existing customer base. It has a huge opportunity and continue to scale our acquisition machine and adjust it for the new AI era. So a lot of exciting stuff coming up. Just to summarize what are you going to hear today? Byron mentioned this, right after us, we have Daniel, who's going to show you all those new products.

I'm sure you'd be excited. We have some great videos to show you. And then Casey is going to talk about go-to-market strategy, going to the enterprise, but also serve in mid-market and how we're going to scale this organization. And finally, Eliran is going to walk you through our plans and our financial profile for the next few years. I want to say that we're personally very excited. We feel this is an important milestone in the lifetime of the company and excited for the future and the opportunity we have. And also I want to say that today and tomorrow, we have Elevate and you're all welcome to join. We have a lot of demos and things we want to show, and we'll be happy to host you as far available as well. So again, thank you for coming and hope you enjoy the rest of the day. Thank you.

Thank you, Roy and Eran. What amazing execution we've had over the past couple of years and what amazing opportunity we have ahead of us. Let's continue with the product team. We're going to bring our Chief Product and Technology Officer out, Daniel Lereya. If you recall with Roy and Eran, they walked through all the stuff we've really built out over the past 5 years. Daniel has been with this for 9 years now. So all the multiproduct, the 3 new products, the whole new database, mondayDB architecture, the apps marketplace, all the new AI offerings, it's all Daniel and his team. I would put Daniel's team up against any of our peers when it comes to rapid product innovation. So let's bring out Daniel right now. Thank you, Daniel.

Hi, everyone, and good morning. My name is Daniel, and I'm the Chief Product and Technology Officer at monday.com. I'm very excited to be here today, and thank you for joining us. AI is such a transformative technology and with AI, it's a new world of work. It's a world when you can have the perfect solution for any need in seconds. It's a world when you can have infinite agents actually doing the work for you, and this presents a huge opportunity. Businesses can now be infinite times more powerful regardless to the size they can push for unprecedented efficiency. They can provide service with superior quality.

And all of these changes dramatically the expectations people have from work software, basically from managing the work to doing the work for you. And we're at monday are betting on this future of work. And that's why we've been extremely busy over the last few months and over the last year, building towards this future. But before we dive into our strategy, let's take a look back for a moment. 2 years ago, I shared our culture of speed and execution sets us apart. That culture is exactly why we could move so fast in this new AI era. Our entire R&D team has gone all in on AI, changing how we work accelerating innovation and all of this in order to lean into this massive opportunity ahead.

Now I want to take you through the outcomes of this major shift that we did. So AI is fundamentally changing a lot of things, but it also changes the way people adopt onboard and enhance work solutions. Now the barrier for having the perfectly tailored solution for every need is lower than ever. The time to value can be near immediate. And that's why we built a new AI product. It's called monday magic, translating user intent in plain English to a full monday solution in minutes. Let's see it in action.

[Presentation]

monday magic, as you seen earlier, is already live with over 2,000 work solutions already built on top of it. And these solutions actually spans across almost every industry and use case. From a concert venue, asking a solution to manage events, artists, partners and guests all the way to agile managers building a solution to track and manage the employee life cycle. Moving forward, we are going to continue and elaborate magic, making it an integral part of how we acquire, on board and support our customers.

Moving forward to vibe coding. Vibe coding is actually transforming how software is being created. It's so exciting to see that by leveraging the constantly improving power of large language models, people can now create software with just plain English. And looking into the future, the potential for it is endless. This is why we created monday vibe, monday's vibe coding tool. It's a new separate product for leveraging the power of vibe coding, but this time for walk, let's see it in action.

[Presentation]

This is a huge opportunity. But for businesses to adopt vibe by coding for work, they need to be able to trust it. They need to know it's reliable that it will work at scale with full governance and control and all with the highest standards. In monda vibe, we leverage the most powerful LLMs for software creation, like all other vibe coding tools. But to make it suitable for work, we built monday vibe on top of mondayDB, our unique flexible, scalable and reliable data infrastructure.

With mondayDB, every app you build on vibe gets the full power of the monday's platform. It's natively connected to your data, workflows, integrations ecosystem making sure all of these apps doesn't create an organizational silos. It has robust permissions, role management, governance capabilities, and most importantly, enterprise-grade security and compliance are already baked in, taking the vibe coding power and unleashing it for work. monday vibe is generally available since last week, but even prior to its official GA, we see a very high engagement with it, with over 17,000 apps already built on top of it. And here is just a small taste of what our users are building.

What you see here is that once you give the power to people to build anything, it empowers them in a way like never before. Now last but definitely not least, I want to introduce you to our newest AI product, monday agents, taking our vision of doing the work for you into the day-to-day reality of every organization. This new product coming in H1 2026 will allow everyone to leverage the power of agents, all with simple and intuitive experience, no code needed, unlocking the huge potential of agents for everyone across the organization. Let's see how it looks like.

[Presentation]

With these new free AI products, all by the way, developed in the last few months, we're unlocking the future of work with AI to our customers. but we are not stopping there. In the next few minutes, I'll walk you through each and every one of our core products and how it looks like in the world where AI is actually doing the work for you. And let's start with work management, our flagship product. The last year was simply phenomenal for work management. We continue to invest in the scale and depth of our offering. And we managed to push the bar and create a very strong momentum with larger accounts. We were also the only work management platform recognized by Gartner as leaders in 3 different categories. At the beginning of this year, we've released a set of capabilities aimed directly to our largest customers, managing projects from all types at scale. We saw a great adoption, fueling our upmarket momentum.

Going forward, we'll continue to elaborate these cases these capabilities and also keep pushing the bar in terms of scale with mondayDB 3.0. But that's not all. We're taking a bold step into the future of doing the work for you, introducing monday sidekick, a personal AI agent for every monday user. It knows the full work context. The user role, its company, all best tasks and projects, which makes it best in doing the actual work for you. Let's see how it looks like.

[Presentation]

So sidekick is already gaining momentum across a wide variety of use cases, roles and departments. This is why it played such an important part in how we see the future of work management. But with that, it's important to say that sidekick is going to be available across all of monday's products.

Now let's move to monday CRM, monday CRM is growing extremely fast, reaching $100 million in just 3 years. Its flexibility empowers our customers to adopt it their specific way of working with an unparalleled time to value, solving such a big pain in the CRM market. Going forward, we want to continue our focus in SMBs while pushing for larger customers in the mid-market. I'm happy to announce that today, we are launching a new product in the CRM suite, monday campaigns.

This is an AI-powered product for marketing with a single aim of generating leads for you. With monday campaigns, our offering becomes more holistic, answering the most requested need of larger CRM customers. Together with monday campaigns, CRM is now a suite of products that empower the entire customer life cycle from lead generation in monday campaign, doing the actual sale with monday sales CRM, all the way to post-sale delivery with work management. But that's not all. As you heard from Roy and Eran, the expectations from CRM software has fundamentally changed. From managing sales to actually doing the sale for you. To do that, we're introducing a new AI SDR agent as part of Monday sales CRM. Let's see how it works.

[Presentation]

Moving on to monday dev. With $40 million in ARR, we're seeing a healthy demand for monday dev with a good cross-sell trend. With AI, the world of software development is radically changing. Developers' role is shifting from writing code to actually building products with AI agents. This shift opens up a new kind of opportunity in the software landscape. We're positioning Monday dev as the connective tissue, the one place that holds all the context of software development. Every best task, every resolved issue, every piece of customer feedback suddenly becomes the perfect foundation for agents to build with.

And as agents take on more coding, developers must stay in control. Orchestrating, planning and tracking the agents' work. All of these, by the way, are monday dev's core strengths are the ones that will become now a central part of the developer role. Moving on to monday service. Launched earlier this year, service is already at $7 million of ARR, which makes it our fastest-growing product. With enterprise service management, we land bigger from the get-go and managed to drive meaningful growth from cross-sell to our existing customer base. Our customers are using monday service across different departments, whether it's finance, operations, HR, IT and much, much more.

To continue this great momentum, we want to extend the service product fundamentals, allowing more flexibility from one hand, while providing key features service teams needs. With that, our main focus is about the future of service with AI. In the past, service was manual with teams monitoring queues and selling tickets, basically chasing around SLAs. But today, service can be completely different as AI solves problems with efficiency, precision and consistent high quality.

Looking ahead, we'll give every organization the ability to build and train their own AI service agents connected to the data governed with enterprise-grade control and improving continuously to deliver better outcomes over time. We're expanding monday's offering, and with AI, we're ready to capture the huge opportunity of doing the work for you.

But before we conclude, I want to touch on the impact of AI internally. A few months ago, we did something really unusual. We stopped our entire R&D organization for a full month to fundamentally change how we work with AI. It was one of the strongest experiences I've had in my 9 years at monday, seeing the old team lean in, adapt and embrace this new reality. What you've seen today are the direct results of that shift. With AI, we accelerated our pace of innovation. We elevated the service we deliver to our customers, and we unlocked new levels of productivity across the entire tech organization. And this doesn't end here. We're taking it as a commitment forward to keep pushing, keep adapting and keep leading the way with AI. To sum up, we're moving from managing work to actually doing it. This is driven by AI embedded across all of our products. mondayDB and our platform give us a durable competitive edge in doing that. And with a culture of speed and execution, I'm confident we'll capture the massive opportunity ahead and laid this transformation. Thank you very much.

Thank you, Daniel. Daniel is the most busiest person, I think at monday.com. What an amazing job that Daniel and his team have done, we're going to pivot directions a little bit now. We're going to go really to go to market. And what we want to really talk about is our customers. So as you know, we have over 250,000 customers at monday from the smallest, so small start-ups to the largest of enterprise where we go wall to wall. And we wanted to just hear from some of these customers. So let's roll a video to highlight some of these customers.

[Presentation]

So these are just really some great examples of companies that are using us for CRM and work management. They're adopting some of our AI tools. But this is just the beginning. There are so many more opportunities with these customers and we go much more deeper. So let's bring out our head of -- I mean, our Chief Revenue Officer, who is going to be tackling a lot of this and going deeper with our customers. Casey George.

Good morning. It's great to be here and good to see some familiar faces in the room. Listen, I could take you through my bio my background, you can read it. I've been doing this for what is now 29 years. It's hard to believe. But my journey with monday started well before my start date I was a user and a fan, previously we had a tense situation with some support issues at a previous company and we launched a Get to Green program, as I called it. It was a sophisticated, really sophisticated project management application that we built on monday. So my exposure to monday started well before my start date.

So when I got the call, I couldn't get to the phone fast enough, to be honest with you, I was like this is an amazing opportunity, tons of innovation in a CRO's dream. But I share that with you because I like to say I've seen good, I've seen bad, and I've unfortunately seen ugly. At monday, I think I can objectively say, it's great. It really is. And why is that? And I'm going off script a little bit here. So sorry, Byron.

Since I had to follow Daniel, by the way, which I got the short straw being the new guy, speaking of. So why is monday so great? And I like to say they do the hard stuff really well, right? It all starts with product. As a CRO, and if you talk to any CRO, they'll tell you the same thing. The first thing they ask is, do your customers like to use the product. And if they like to use the product, and it's a good product, it's well supported, it's innovative and you continue to innovate, a CRO will say, it's a dream, like you'll never find a CRO leaving a company that checks all those boxes. I can tell you right now.

So when you talk to other CROs, hone in on that, that will tell you a lot about the company. So from where I sit, again, doing the hard stuff really well. Performance marketing I've never seen anything like it, right? And I think I could say that, literally, I have never seen anything like it. The amount of innovation, I ask a question, I come on, I look at their tool suite. I look at the things we got to do and I say, I really need this. In the immediate response at every company previous to this and others that I speak to is, okay, we need to go get that. It's a different answer at monday, right? And I think this amplifies what I'm trying to say. The immediate response is, well, we'll go build that for you, right? Okay. That's pretty great.

So from where I sit, from where I came from in my short tenure here thus far at monday, we're in a great place. So I think the things that I have to do that I will share with you today are the easy part. So let me ground you in a few things, and then we'll jump into what I think are 3 or 4 of the pillars that are going to drive or accelerate the success we have going forward. So 250,000-plus customers I was at our Customer Advisory Board yesterday, which, by the way, fantastic feedback we get from customers, and I'll tell you a couple of stories about that because I think it tells you a lot. But one of the customers said, that's 250,000 users, right? No, no, no, no. It's 250,000 customers. And to see the look on their face go, "Oh, I get it now ." Everyone sees what I see.

And you'll find a lot of customers who say, I'm not going to share with you how we're using monday because it's a competitive advantage. So I get that a lot. 1,000 employees, and this is important. These two data points are very important, and we'll come back to it and they'll play through the rest of the presentation. But circle those 250,000 customers and 1,000 employees. All right. Some of the logos we've acquired, and this is a very small sample, very small sample. I'm blown away. We keep hearing when are you moving upmarket? Listen, the markets come to us, right? These are major logos that consume our software and get tons of value from monday, every day, and this list is growing by the minute. And it shows up here.

What everyone needs to see from this is this is a very healthy growth trajectory. I don't need to tell you that, but you can see it. This is durable revenue, right? Very impressive. Again, my job is to keep it going, obviously, and I feel like we've got the foundation to do that. And I'll come back to this in a second as well. But as we move forward and we understand what the opportunity is and opportunity is a key word. with only 9.4% of our revenue coming from other products, right, and the rest of the revenue coming from our flagship product, therein lies a significant opportunity. And here's why. We know with only 6% penetration, the 6% penetration is the amount of customers we have that are consuming more than one product, okay? We know that you get 2.5x ACV uplift when you consume more than one product.

So from where I sit, this is a no-brainer. All we have to do is go back to those 250,000 customers and expose them to everything that monday is doing. And I will tell you, even in the Customer Advisory Board, it was our first one for this year, some new members were on there. And a lot of them said, and I hear this a lot, I didn't know you did that, right? I didn't know you had CRM. Yes, it just happens to be a $100 million business for us. I didn't know you did service. Wow. And they see all the things coming and they're just as impressed as I am.

But I share that with you so that you understand the opportunity for us to move upmarket and the opportunity for us to cross-sell because if you understand that 3,700 accounts have $50,000 or greater and then almost 1,500 are $100,000, there's a sequence to these $500,000 ACV customers. And the sequence is you start at 50, you go to 100, and then 300, 500,et cetera. So what does that mean? We only have 68 accounts. And I say only, we're very proud of this. You've seen it in every slide up to this point. We're very proud of the 68, but the opportunity to grow that number is exponential.

Team, could we go back to the previous slide? And here's why. So look at the $50,000 ACV customers. Look at the $100,000. Every one of those 68 came from this set, right? So our opportunity to exponentially grow this number is pretty significant, okay? All right. Speaking of that, let me give you an example, right? There's a major bank that we work with. As a matter of fact, I was speaking to him yesterday. And before I take you through this, I'll tell you this little story because I think it's fascinating. He came up to me and said, "Hey, Casey, I might lose ownership of monday." And he goes, I want to introduce you some other folks who are going to champion the product going forward. And I said, why is that? I was a little upset because he loves us, we love him, right?

And he says, my boss came to me and said, what is monday? And he says, well, it does a lot of things. He says, well, is it app development? He goes, kind of. Is it an application? Yes, it's an application. Does it do service? Yes, it does service. And he said, my boss was getting aggravated because he wanted me to box you into something that you're not. We're a lot of things to a lot of different people. The use cases are infinity, right? But we see that as we move upmarket, enterprise customers want to box you into something. And that, to me, amplifies the fact that we are -- we really don't have a true competitor. We can do so many things, we mean so much to certain people, different things to different people. And I think this really plays out in a customer that I'm referencing here.

Here's a customer that started with 15 seats online, by the way, major bank goes online, uses software. This is '21, late '21. They start to use the product, and it just grows like fungus, as I like to say, and more consumption, more use cases inside that one department. Then another department recognizes what they're doing, sees and says, that's pretty cool. I have an idea of what we can do to fill a void in our organization so that we can work smarter. And so another department takes it on. So now we're 2 years later, we're at 1,800 seats, right? And this is when it starts, '24, 5,000 seats, right? '25, almost 10,000 seats. And the story continues. And this is one example of the, let's say, 68, but they all look very similar.

Rarely do we ever land a $1 million ACV account on the first swing. It goes back to those previous slides. It's the third and fourth swing because they start with 50, they go to 100, 300 to 1 million. So for me, from where I sit, this is a significant opportunity that I'm super excited about. I would be remiss if I didn't highlight our partner ecosystem. And again, I've seen good, bad, ugly, right? Partners play a big role in that, right? Partners are a good indication of whether or not a company can sustain growth. Why is that? Because typically, partners literally build their business around a product, a service, whatever. So they're invested. When you talk to a monday partner, and I would welcome any of you to catch one on the floor, they will go out of their way, telling you how much they love monday.

We've had partners who have started with competitive products and drop them. We said, it just can't compete, and it provides so much value to my clients, and I can specialize in a particular industry, sub-industry niche, whatever using monday and really be a differentiator in the market where no one else can do what I do. So the fact that we have such a strong ecosystem, which is surely impressive, and it was before I started, I can't take any credit. And we continue to have partners knock on our door and say, can I be a monday partner, right? It's truly a special place, and this is a good example of it.

So let's move on to how we keep the drumbeat going, right? We do a lot of the hard stuff really well. I think what I'm going to do is the easy stuff, right? All right, 3 pillars that we're going to focus on, right? There's a lot going on. We're doing a lot of things. I won't oversimplify this. I'll try not to because it's not that easy, but there's some infrastructure that we need to put in place in order for us to capture what I think is such a significant opportunity. Multiproduct. Now mind you, AI is foundational to all of this, right? So when I say multiproduct, we lead with AI. When I say accelerate upmarket, we lead with AI. When I say customer retention, and I'll get to that, and I hate that word, AI is at the forefront of that.

But with multiproduct, and we'll get into a little bit more specifics here. This is our opportunity to sell the full platform. We have a robust platform. And I like to say there's always been a debate in the market, especially with sales leaders. Do I sell the platform? Do I have individual sellers, and we'll get into that in a second. And I think Larry Ellison said, the moment a customer has one buyer is the moment I give you one rep. I kind of think of it this way. The last thing a customer wants is another vendor and another platform. So if you can provide a seamless platform that enables them to do work in an integrated fashion, you've got a very strategic advantage in the marketplace, and I think we do. So our multiproduct growth is a huge opportunity for us, and we're going to accelerate that, and I'll take you through how we're going to do that.

Accelerate upmarket. This one is important. If I was to ask most of you -- ask you the question, hey, where does monday need to go upmarket? Your immediate reaction in most cases would be, well, they need to go sell to the Fortune 100 customers because those are the biggest wallets, right? Yes, they're the biggest wallets. But here's what I will tell you. You get one shot. You get one shot with enterprise. You show up, you got to have the right solution, the right price, the right products, all the things that they expect. And if you don't, it's really hard to go back. That's one thing. The other part is because we dominate SMB, we don't want to leapfrog over mid-market. This is where our portfolio resonates pervasively across that segment.

So we're going to double down as we move upmarket, aggressively going into cross-selling in SMB and mid-market and let the market come to us in enterprise because that's what it's doing today. There's this gravitational pull as I go back to when I first started, I saw that. And this isn't a degrading comment, but we really haven't even tried to move upmarket. The market has really come to us. And that's a powerful statement from where I sit. And again, I think I have an objective opinion. And then customer retention, we'll get into this a little bit. I hate this word, retention sounds defensive. It's not like we have a retention problem, but we just don't have a better word to describe this. I think of this as customer experience. And I think every part of our organization has a role to play when it comes to customer experience.

So for my team, it's about providing value, which obviously makes clients stickier. It's about providing additional products. It's about helping them with AI, realizing the value that can come from AI. It's about how we engage with them, right, showing up how they want us to show up. That's our role in customer retention. And I'll get into a little specifics there on how we act on that. So with multiproduct, we're making a significant investment in headcount. And you say, okay, what does that really mean? Well, if you understand that when you show up in front of a customer, especially selling them a multitude of products potentially, there's an expectation that you go deep and wide in that particular product.

So I'll use the example of CRM. We have account managers and account execs. They own the relationship. They foster the account, they help grow the account, land new opportunities. But it's unrealistic to expect for that AM or AE to go deep and wide in CRM. It's just not -- very rarely does anyone have the capacity. I can't go deep and wide across all of our products. So what do you do? You give them enablement, of course, and you hope to raise their skill level. But in order for you to scale, you surround them with the right infrastructure.

And that infrastructure is sales specialists overlays who are -- get up every day and think about, I'm going to sell CRM in a competitive landscape, right? I'm going to have the right offering, the depth and breadth, answer to the questions the client has at present monday CRM in the best form.

Again, an AM and AE, you can rarely go across all these and do that. So what we need to do is surround them with the infrastructure part of the infrastructure, sales specialists or overlays as we call them. So a huge investment there. Part of that investment is obviously SEs, our solutions engineers, that will obviously augment the team as well. And then I go back to our partners, right? Huge ecosystem, 10,000 sellers across that ecosystem help us scale, especially in emerging markets. So those two or three things will really help us accelerate the opportunity.

And here's the other thing I would tell you -- we are not doing a great job of getting to all the opportunity, which is another example of how great a product we have because we have all this inbound activity, and we're not showing up, I believe, in the best way we can. So we're going to do that. So -- I'm sorry. So as you think about offerings and you think about segmentation, and I talked about SMB to mid-market to enterprise, I believe it all starts with the offering, right?

So what offering are you going? What message are you going to these particular segments because they're different right? You're not going to show up to enterprise and say, I've got a full platform for you to run your entire enterprise across CRM service, work management, et cetera. You're not going to do that. But that story holds together in SMB. And if -- again, if I remind you, with only 6% penetration of customers with multiproduct, the opportunity is Infinity, right?

So we're going to double down on creating the right offerings, the right packages, right pricing, right -- the right incentives for our sellers to sell the full platform across SMB. When you get to mid-market, some of that resonates, especially the lower half, I mean, looks and feels a lot like SMB and you can have the same offering. But as you move up market, it's a little bit different story. It's a connected customer journey. So it may be work management feeds directly into a service opportunity, right? It may be CRM and work management.

So we're seeing that. And when you have 250,000 customers I'd like to tell the sales reps this all the time, so they understand truly appreciate and understand because I don't -- a lot of times, I think they're somewhat spoiled to be candid with you is you have a red carpet into these accounts. These are 250 super fans of monday that you can walk in that are thirsty for more monday. So why not give them what they're asking for.

So that's a big part of our evolution here. And then in the enterprise space, again, we're not going to sell the full platform in its entirety. But what we have found out and truly surprising to me, to be honest with you, we coexist in a lot of cases with some of our other products. Obviously, work management excels all the way up market.

We're doing great things there, and we've seen hyper growth associated with work management. But the part that surprised me is us coexisting with some of the big software providers in the industry. I won't name them. You know who they are. But we have an opportunity now. We're probably closed here this week, and I won't obviously share too many details, but I'm highly engaged in the opportunity more for my education, but I'll share it with you. We have a department, say, a marketing department who's looking to use service. And it's multi-hundred thousand dollar opportunity.

And I asked the question, right, why aren't you going to use that other company that's embedded in their IT organization, by the way, IT wants you to use. They said, "Casey, I don't need a science project. It will take us a year to get that developed, deployed, integrated, enabled.

And with monday, I literally could do it overnight. I can configure this on my own. It gives us immediate value. It might not have all the complicated complexity that comes with that product, but it does exactly what we need. And again, gives us value immediately"

And so for me, it was a little bit of a -- an eye opener, I thought, gosh, if it resonates at this company, which is a Fortune 100 company, by the way, just think where else it could resonate. So for me, I think there's a huge opportunity for us to coexist in a lot of cases. And I do believe it end up like work management, where it just starts to spread and before you know it, they're $1 million ACV opportunities.

So all right, moving upmarket, really simple. We have an embarrassment of riches at monday and have been. Also, performance marketing engine generates a ton of inbound leads, right? What we haven't done, we haven't really tried, so to speak, is develop that outbound motion -- that outbound muscle, showing up where customers want you to show up with what they want, right?

And I say that my background, I was -- sorry, I got a lot of stories here. But my first week on the job, I had this rep come in, and he's like, Casey, I came from this other company, and I literally used to open the phone book and call people. I've dialed in for dollars. He says, so when I get a lead here, I cherish it. Like this is the greatest thing ever. And literally he wakes up with five leads every day. And he truly appreciates how much effort that we put in to generate an opportunities for them and he cherishes and treats every one of those leads in a great way, right? And this is important, and we're going to get to this in a second. But that's not necessarily the case in every instance.

So we see an opportunity for us to do better receiving those leads, but even a greater opportunity to go outbound to go walk on that red carpet into those clients and say, "I've got more values for you, right? Let me show you, right? So a great opportunity for us to go where customers want us to go. And what do they want, right? They want a complete solution. Right? Especially as you move up market, but really, they -- I want a complete solution. They want to go solve a business problem. And sometimes, one application does not necessarily solve that business problem. And sometimes, they even made services. And every time they're going to need AI as far as we're concerned.

So we're going to lead with AI, giving them a solution that solves their business challenge, and we're going to support it in the right way. So to the nasty word of retention. Again, suggests defensive. We are not defensive. We're on the offense, right? My role as the CRO, is again, to make sure that we show up in the right way in front of our customers, deliver value, give them more things to consume. And the return on that, as we all know, is a very sticky customer, right? If you have those boxes checked with the customer, they'll never leave, right, for the most part.

So we're super focused on this, right? And what does this mean? One simple thing is the comp plan, right? So we kicked off a new comp plan, a more variable comp plan, so more incentive, more opportunity to make money for our sellers, but we've aligned them with the strategy. So in my organization, the strategy is I want to have an eye on retention, right? Customer experience, but I want to grow. So we're allocating 25% of their variable comp to retention, right? We don't want to over-rotate 75% to new growth, right?

It's a good balanced experience doing this that this drives the right behavior. Now the mirror of that and the supporting infrastructure, so to speak, that we have is the CSM organization. So our CSM organization will have the mirror of that, 75% retention, 25% new ad. And that builds a symbiotic relationship between us and our CCO organization led by Adi Dar.

So just by changing the comp plan, we're going to change behavior, right? And there's a lot of things that go into that. We got to empower the sellers to have visibility of this data and all the things that go with that. It's not as easy as it sounds, but it was a step in the right direction because, again, compensation drives behavior, at least it should.

Ownership of the account. And this was a little bit of a murky territory for us because we had so much -- so many people that were interested in helping the client at monday. It's just -- it's a great culture. I literally could walk into the finance department and say, "Hey, I need to help with someone calling a customer about something that was completely out of the remit and you get 50 hands from the finance team, so I'll jump in and do it, right? Okay. That's great.

This is the culture we've built, but it also adds some distraction because you have so many people reaching into the client and the client doesn't necessarily know who's responsible for what. So we've clearly articulated. Account manager owns the account, CSM supports all the things that the CSM should do, deep depth in a particular product, helping that client get more value, more exposure to the rest of the organization. And again, they work in a very symbiotic way. right? What does this do?

It minimizes some of the stakeholders. We distribute KPIs down to the lowest level of the organization. We show them what good looks like, right? And we hold them to that, okay? And what empowers all of this, right? AI, right? What we have built with our AI engine, I'd like to say, we eat our own caviar around here. And this is definitely an instance of that. When you have 250,000 customers and you want to deliver a great experience, you cannot do that entirely with humans, right? We know today that when we touch customers, we'll call them high touch, the churn rate is almost nothing, right?

So if we could give that same experience at scale across the 250,000-plus customers, just think of how happy our customer set would be. And so we're doing that. We're leveraging AI to do this. And I'll share with you in a moment how our organization is using it. You heard from Daniel and all the stuff we can go to market with, but we use that internally, and we're already seeing amazing results. All right. So here's an example of what a seller does, right? -- take a lead, they qualify the opportunity, right? They engage other resources to help facilitate that opportunity.

There's quotes that get generated. There's all the data that goes into CRM and the summary of the opportunity, scheduling, all those things, right? That's, in some instances, days of work, right? And we know the more customers we can get to in a very quality way, the better our conversion is going to be. So what we launched a couple of months ago, and I'm happy to report this, candidly, one of the greatest opportunities we have as a company to scale is we launched an AI agent to go sell to these customers to qualify these opportunities to bring in the right resources, surmise the opportunity, get it into our CRM and get everything scheduled.

And they did this in a matter of minutes, but we have 1,000 calls. We booked 250 meetings and generated 180 leads. So I'm going to give you a data point. It's not on these charts, probably get in trouble for telling you this. But we have hundreds of thousands of leads come in every day -- excuse me, every year. I wish it was every day. Now I do, I wouldn't have two months ago. So if you think about that, I would need 10,000 people to support that volume. And that's just not efficient, right? So my objective is to give a quality experience to every lead, whether we think it's a quality lead or not, we want to give the same experience to every one of those leads. And I'll tell you, I have a ton of experience engaging with vendors.

And I do this on purpose as much as I can because I want to see what the experience is like so I can either learn from some great practices or I can understand what I need to avoid. But I reached out to a vendor when I first started, I needed some help in something. And I reached out to that vendor and they remain nameless. And the moment I gave them all my information, when I'm available, my kids' names, my social security number, my phone -- I mean, I gave them everything because I wanted them to call. I wanted them to know I really wanted to talk to them about this opportunity.

To this day, I haven't gotten a call back. Super aggravated. I will never engage with that vendor again. I know what happened, but I also know why I want to avoid. And the #1 indicator of your ability to convert a lead to a sale is your response time. So if I can respond to every one of those opportunities that come into us, right, in a very high-quality way, in a very responsive way with SLAs, with a quality message, a consistent experience, my opportunity to convert goes through the roof, right?

So AI is going to give us that capability, right? We've launched our agents to do just that because now I have unlimited capacity. You heard Daniel talk about this, right? Literally, any hour of the day, as many calls as you want in parallel, delivering an expert response to their questions and engaging and building out an opportunity profile in seconds delivered to the rep in a very warm way where they can engage with the customer on a customer that feels like monday cares, right?

They care because they call me back in two minutes. They had all the answers and they scheduled everything just as I wanted it. So for me, this is obviously a significant opportunity that we're going to leverage going forward. So as we -- I'm out of time, sorry. As we surmise here -- sorry, I did go. I feel like Garth Brooks with this mic. I won't sing.

Significant opportunity to move upmarket, right? Mid-market, obviously, we're not going to skip over. Multiproduct. We already know the opportunity for us to grow ACV with customers with multiproduct is significant. We're going to double down on this, right? We're going to show up with the right offerings that our clients want into the C-suite with solutions that solve their business challenges. And last and far from least, we're an AI-first company, right?

We lead with AI and everything we talk about and everything we do. And I tell the team, we are literally the best reference you could have. You look at our growth trajectory and how we embrace technology and how we leverage that to grow the company, -- we are the envy of most companies. So if you can go to them and say, listen, we use all of our software times 10. Let me show you all the ways we use it, right, and embrace AI and we've done it ourselves, it's a great story. And everyone would love to be a part of that. So I feel very fortunate to be here today. Great to see everyone. Look forward to questions here in a bit. Thank you.

Thank you. Great. Thank you, Casey. So we've heard about a new AI-enabled vision from Roy and Eran. We've heard about all the product developments that we're doing with Daniel's team. And we've heard about how our go-to-market strategy is evolving and pushing more into the upmarket and multi-product. Now let's land the plane with our CFO, Eliran Glazer and pull this all together and give the most recent update on our financial strategy. Eliran?

Hello, everyone. First of all, it's great to see you all. I'm very excited to be here. And I also see some familiar faces. And by the way, Casey took eight minutes longer, so I have to be short. I will try to be concise. So Roy and Eran spoke about vision, Daniel spoke about innovation and you know innovation is the core of everything that we are doing. And Casey spoke about GTM. And I'm going to share with you how it all ties together and over the next 20 minutes or so, I'm going to speak about monday financials. The growth drivers that we have in the business, capital allocation, and you saw the announcement this morning as well as what it means to us in number in fiscal year '27, as I'm sure you have to update your models. So let's start.

I joined monday just before the IPO, and we went public 4.5 years ago. And even before we went public, monday was always best-in-class across three parameters that matters most. Growth profitability and cash generation. And it's not by coincidence. This is the way we always build the business, driving growth, efficient growth at all cost, not relevant for us.

We are driving efficient growth at scale. And we already shared some of the numbers, but we have achieved 50% CAGR between fiscal year '20 to fiscal year '25 projected going from only $161 million in fiscal year '20 to more than $1.2 billion in revenue in fiscal year '25 projected. And again, this is not a coincidence. It's not pure luck. It's the strategy of monday.

This is the playbook that we operate in accordance with. It's not only driving durable revenue growth by doing it at scale and with efficiency. But growth is only half of the story. Over -- since fiscal year 2020 going into 2025, we actually improved operating leverage significantly, driving margin expansion with 6000 -- 600 basis points. In other words, going from a loss of $86 million in fiscal year 2020 into a projected net income of $156 million in fiscal year '25. This is also driven by automation, a disciplined cost management. We take -- we care a lot about operating margin and efficiencies that we have achieved in sales and marketing. The balance sheet of monday is a major asset.

At the end of Q2, we have more than $1.6 billion in cash. and we are going to generate $326 million projected in adjusted free cash flow at the end of fiscal year '25. And this has provided us with a lot of flexibility in terms of reinvesting the business, considering M&A when appropriate and we are really -- would like to do M&A potentially in the future and capital return to shareholders. And I want to say something that Roy and Eran mentioned, they talked about rule of 60, rule of 40, rule of 60.

And people don't always understand or appreciate how important it is to be a rule of 60 company in the last trailing 12 months. So just as a reminder, for those of you who don't know, rule of 60 is the growth rate of the company plus the percentage of free cash flow from total revenue. Getting into 60%, I think there are only three or four companies in the last five years that have achieved this number when we went public together with us.

So this is something that is very, very important to us to continue to drive performance at scale. And Casey just cover all of the journey up market. But if you think about monday, when we started back in the days or 2018, we were just a performance marketing company, okay, 80% of our lead, 80% of our ARR came from performance marketing. But throughout the years, we built the sales organization, we built the partners organization. We added a lot of capabilities, and we actually went up market. But we are not neglecting the SMBs in the mid-market because we believe -- all segments are important for monday. We're not just running up market. We're actually investing in all segments.

And now going from only 5% of customers above $50,000 from total share of ARR, now to 40% and we'll continue to do it. But also the durability of the contract monthly versus annually. We are now -- have more annual contracts, almost 85% or 83% of customers that are annual subscribers. And this is important for us because it provides predictability.

It shows the strength of the platform, retention and obviously, better visibility going into the future. And one thing that is very important for us in monday is to make sure that customers stay with us for a long period, meaning if you think about land and expand, so customers landed with monday back in the days and they expand with us growing their ARR and growing our ARR. So we have customers from early adopters into recent customers that are basically growing with us quarter-over-quarter.

And you can see these cohorts are going back to 2016. It means that the platform is sticky. It means that we offer them a lot of value. It means that we offer them a lot of new products cross-sell, upsell motion, and this is something that we'll continue to see the cohorts continue to expand as we continue to grow the business. And that is why we have stable NDR. So our NDR for all customers is now around 111%. And this is stable. And for customers above $50,000, it's actually above 115%. And this is something that is very consistent over time. And why it is important? Because this is a growth driver into the future.

And we believe we have a lot of room for an upside with NDR, which means that in the next few years, we think that potentially NDR for all customers, maybe 110% to 115% and NDR for customers above $50,000 or the enterprise customers, as we call them, will be in the range of 150% to 120%. And you had a lot of things that we are doing today, and I'm going to relate to that in a minute. But not only NDR is important for us. We're also focusing on growth retention.

In meetings I have with many of you, you're asking us what is your gross retention because we are operating in three segments: SMBs, mid-market and enterprise and 250,000 customers. It's hard sometimes to have the average because it may be confusing. But when you think about the improvement that we have done over time, 800 basis points in gross retention provides us with the confidence that we will continue to drive further revenue growth, which means that the customers find again, value in the platform, they engage, they adopt, and this is something that will continue to improve over time, we believe in monday as we continue to introduce new things into the market.

This is a metric that we didn't share in the past, but I do want to share it with you. This is remaining performance obligation. And why it's important for us because it means that there is predictability and visibility into the numbers of monday. It provides us confidence in our ability to continue to grow the business as we see this number scaling to $768 million in Q2 of 2025. And this is probably one of the slides, maybe the slide that you've all been waiting for. This is our number for fiscal year 2027.

And we believe and we are confident that we are going to achieve $1.8 billion in fiscal year '27. And why we are confident in that? Everything that you heard until now from the multiproduct that we have the platform that we continue to invest with mondayDB, the fact that we are leveraging AI and capabilities into -- layered into our platform, the fact that we are enhancing the enterprise customers' capabilities, which means bigger and larger customers will continue to buy monday.

And this all gives us the confidence that we will continue to grow the business, driving durable revenue growth at scale going into $1.8 billion in fiscal year '27. And now let's speak about -- okay, it's not only about the top line, but also the investment philosophy that we have in monday. We want to make sure that we are not only driving top line, although it's the #1 priority for us, we also want to make sure that we improve operating margin.

In order to do so, we already spoke about the fact that we are going to slow down hiring. So hiring was 30% in this year. It's going to go to 20% additional hiring in fiscal year '26. But we continue to invest in platform and AI. This is something that is very important for us and the presentation of Daniel and Roy and Eran spoke about it and even Casey, this is a growth driver and innovation is in the core of everything we are doing, and we will continue to invest in innovation. We continue to invest in our product suite. We have currently four product lines, and we have a lot of use cases in between the product lines. There is a white space, thousands of use cases, 200 industries across 200 territories. We'll continue to invest in the product line definitely.

And we are going to expand our GTM ecosystem. As Casey said, we are going to continue going upmarket and driving revenue growth with larger and bigger customers, which means in terms of P&L, bottom line is, what is the result of that? The result is gross profit. So we are at high 90s. We have been at high 90s since IPO 4.5 years ago. We believe that your computing need with regards to AI might take some of the gross margin percentage. We might be at mid-80s. Again, this is something that we want to make sure that we invest and we capture the opportunity ahead of us.

Sales and marketing, we're going to get to 40% of revenue. We continue to lower the percentage of revenue, and Roy and Eran spoke about the percentage of performance marketing from total S&M going down. So it's going to be around 40%. R&D will continue to invest. This is a major growth driver. And you've seen the pace of innovation. Daniel spoke about it. The pace of innovation in monday is unprecedented. I don't think any one of our peers is investing the way we invest in AI, in product and such a rapid pace of innovation.

And this is something we are proud of. It's part of the culture. And 20%, by and large, of total revenue, this is something that still is the right number. But if we need to invest, we'll continue to invest. G&A, obviously, efficiencies. We are a lean company in terms of G&A. It's important for us to be efficient, and this is something that is not going to change of what you have seen in the past. The result, we are going to grow the business, but we are going to expand margin as well. This is something that you should expect that margin is going to be expanded going into the next few years.

In the long term, which we call five years from now, potentially, we are going to get into operating margin of 20% to 25%, and we are going to get to free cash flow -- adjusted free cash flow of around 30%. We are already doing a very efficient free cash flow generation. The generation of cash at monday is very healthy, but will continue to improve even further. Two years ago, in December 2023, we said in the Investor Day that we are going to achieve $1 billion in cash between 2023 to 2026 -- sorry.

I'm happy to say that we actually exceeded this number. We are going to generate more than $1 billion in cash between 2023 to 2026. This is, again, a testimony of the strength of the business of our ability to be very efficient. And this is something that, again, we will continue to drive as we continue to scale the business, which -- you all heard today this morning, we announced -- very happy to announce our first ever share repurchase program to the amount of up to $870 million -- sorry, $870 million, and we are going probably to relate to this in the Q&A if you will have questions about this.

In terms of capital allocation, what we're going to do is to continue to reinvest in the business. Again, I believe -- and I will be very direct on this. We are one of the best tech companies in the world. We are sitting on a huge opportunity with everything that we have built, with everything that we are doing, with the level of innovation, if we don't capture this opportunity, then it's a mistake. We are going all in. All in all AI, Roy and Eran said it, we're going to continue to invest. We are going to capture market share, and we are going to continue to invest in the business.

We don't want to lose opportunity. We don't want to miss opportunity, and we want to make sure we capture it. So we're going to invest, continue doing it in an efficient way, the way we always do, the playbook of monday, but we are going to do it. M&A, obviously, as we continue to grow and scale the business, we are now a big company. Not everything is organic growth. There are opportunities out there. We are already actively looking for companies that can complete our product offering.

And this is something that actively we are operating in accordance with our internal guidelines potentially to have an M&A opportunity. And also very important, share repurchase, not only returning capital to shareholders, but also managing dilution. Again, we are very mindful to the fact that we want to manage dilution at monday the way we have done in the past. We're able to be very efficient, and we want to continue to do it.

You can read the key takeaways. And it's the thing that I think everybody spoke about. We have a strong track record. We tend to deliver on our promises, and we are all in on leveraging AI and investment in the platform. But I want to say something that is not written here. I want to say why we are winning. Not only that we have the best platform. We have. Not only that we are investing in products. We do. Not only that we have a strong performance.

We will win because we have the best people in the industry. And this is something that is super important for us in monday, the culture and the people. And because we have the best people in the industry, we are going to continue to be one of the best companies out there, and we'll continue to win and drive further growth into the business. Thank you very much.

All right. Thank you, Eliran. We're going to do a little bit of a transition here to prepare for Q&A. In the meantime, there's a couple of announcements here. So we have a lot of our users are starting to filter in. So the demo booths are now open. We have all the AI offering demo booths that are available behind us. There's also all of our multiproduct demos, are also in here, and many of our partners also have demo booths as well.

Lunch will be served outside of the food court once we're wrapped up here at 11:55 and then Elevate on the main stage of the building across from here, we'll start at 1 p.m. for those of you who are going to join us for that.

For those of you who are online, we're going to open up for Q&A. If you do have a question, feel free to e-mail us at [email protected], but we'll try to include your question as part of the Q&A session. For those of you who are also online, we have a world tour of Elevate that will be hitting London and Sydney. The London dates are October 22, 23. Sydney will be on November 6, and then we'll do a full online session for Elevate on December 10.

Before everyone gets seat, I do want to just say thank you to everybody who pulled this stuff together. It is an army that pulls it together. The amazing Paige Newman, who helps out from the IR standpoint, Gayle and her design team who are absolutely amazing and do such a fantastic job in all the slides.

We have legal. We have many finance members. We have data scientists, the events team, product and marketing and probably somebody else, I'm forgetting, but it is an army that puts us together. And I think they did an amazing job. So thank you all for putting that together.

Let's now open it up for Q&A. As I said, we're going to go till 11.55. We've got two mic runners. So feel free to raise your hands, and they'll go to you. And let's dive right in.

Thank you. Jackson Ader at KeyBanc Capital Markets. Eliran, can we start with the $1.8 billion target for 2027. Should we be thinking about that as midpoint, floor, high end?

Yes. You should think about that as a base case. This is what we believe we can achieve. But we have a lot of investment that we are doing, as you have seen with Daniel's presentation, what Roy and Eran has described, but it's going to take a bit time for AI monetization to come into play. This is not taking into account the fact that AI is going to generate significant ARR in terms of the next few years because monetization will only start next year. So you should think about it as base case and something that we would like to drive and achieve over time.

Yes, Jackson, maybe I'll just add with Eliran there. Like we look at it as a baseline from a monetization standpoint, we're monetizing AI blocks. We're not yet introducing the monetization for many of the other AI offerings. So we think there is potential upside with that. Next question.

Arjun Bhatia with William Blair here. Maybe if we can stick on just AI theme. Obviously, that seems like a pretty important part of the next few years. I'm curious how you think AI agents will end up interacting with a lot of the other AI capabilities that you have. And over time, do AI agents actually become the primary consumption mechanism where some of the other capabilities maybe become, I'll say, less utilized. And then -- sorry, second part of that question was just monetization of agents themselves. Is that a similar kind of consumption-based mechanism as the other AI capabilities?

Dan, do you want to start maybe?

Yes. So first of all, like I do think that this is a very important shift for us from like doing the management of the work and actually doing it. And for this agents plays a very significant part because we really believe that with agents and with making them accessible to people and allowing the common builder barrier to be extremely low, we see agents taking a lot of work and doing it by themselves.

And with that, currently, agents are running on top of systems. And at the end of the day, you need to control these agents, you need to manage the work you need to make sure that your data is something that you can actually trust and make sure that you have control over.

So I do feel that the combination of what we are showing here is what we see as something that businesses, regardless whether they are tech or non-tech would be able to adopt in the upcoming years. And this is where we put our emphasis on adoption and solving real problems in the day-to-day.

And I think that across the entire offering, we're trying to see how everything actually connects and how we take everything that we have and make it a multiplier to this world in which agents are actually doing meaningful work for customers.

Yes. I can add that the way we see the go-to-market for these or like what customer wants is like twofold. One, we're building an infrastructure of agents that you can use and build any agent you want. We're also using that internally to build like other very specific agents that we can monetize like very professional deep agents.

But we're also looking into a new demand out there for a platform such as agents, okay, whether it's vertical or as a platform that you can generate whatever agent you want, okay? So like we'll both go into our existing customer base and into our existing products, but also outward facing into the new demand that is out there for just like agents separately.

Next question.

Hi, Josh Baer, with Morgan Stanley. I wanted to get a better sense of where monday magic ends and monday vibe begins as well as where does monday vibe and where does multiproduct begin? Just how -- what kind of outcomes do customers get when they use these AI tools? And what's the overlap ultimately with multiproduct can customers type code a comprehensive and customizable CRM or service app? And like how do those all overlap?

Yes. So actually, those things go hand in hand. Going forward, monday magic will also be able to leverage monday vibe. So for example, if you build a custom solution for yourself, you give a prompt to monday magic, to kind of give its feedback, it can actually leverage monday vibe. So if it's missing any component in order to build your solution, you can do that and use monday vive.

Eventually, all those AI components will be compounded. So each one can use one another, also goes to monday sidekick. We see a future where monday magic can potentially change how we onboard customers. So the whole onboarding process is going to be fundamentally different. No longer you will land into an empty system where you have to customize it, you will start with explaining your business need like you would do to a salesperson, and then it will do the rest of the work for you. Build you the perfect solution, use monday vive if needed and leverage any other AI capability in order to help you achieve your business goal.

Yes. And also because it's AI, whenever you start asking, it will point you to the right direction. It's not like there's like a complexity of like too many tools and people don't know. We can shift and like direct them to the best place they need to build whatever they really want. So it is really exciting.

We have one question online. Casey, I think this one is for you. So regarding the move upmarket, most enterprises don't have work collaboration, but they have sales and service already. So why would you leave with a product suite versus work collaboration?

Say the last part, it's hard to hear.

Why would you leave with a suite of products versus just leading with work collaboration?

Well, upmarket, you're exactly right. We're not leading with necessarily the suite. We are finding pockets in the organization with our other products where it's a good fit, right? And I shared the example in my presentation of a very large client that we're going to coexist with some of the other competitors we have that are more entrenched in that particular use case.

So -- and that's the part that surprised me, as I said, but we see a significant opportunity to coexist with our other products in that enterprise, but obviously grow exponentially with our work management platform as it scales in the enterprise organizations.

Derrick Wood at TD Cowen. Great to see the AI optimization or not the SEO, but the AEO really being effective. And it does sound like it's still pretty small, but this has been a big question for investors on inbound, top of funnel, how that's been progressing over the course of the year. So maybe could you walk us through what you've seen in the first half of the year? What changes you've been making and how you think that could pay off with top of funnel and conversion improvements moving into the second half?

Yes. Maybe we'll let our new Chief Marketing Officer, Harris Beber, to take this one.

Thanks, Byron. Yes, we've obviously gotten a lot of questions on it. So I think I could break it down into maybe three part on how we think about it. One, the questions are really important, but the emphasis on them, I think, has been outsized relative to the impact on our actual business, which is quite de minimis. If you think about what Roy shared a little bit earlier, Google represents about 10% of new. But when we look at the category. Overall, the category has seen about a 16% decline in clicks where we've only seen a 9% decline in credit.

Why? Because we're really good at growth marketing. So we've actually been gaining share as it contracts, which leads us into the second part. We're really good at growth marketing. This change is real, but this type of change is not new. This is what growth marketers do every day. I'll probably go off a little topic. If I think back of when iOS 14 launched, every marketer was worried Apple removed tracking in apps. I remember I had to go into the Board. And I wouldn't say his name, but a very significant media mogul, who managed the portfolio. I shared the iOS 14 update. And he looked at me and said, Harris, you marketers are cockroaches.

And then he said, you always tell me the sky is falling, and then you always figure it out and drive growth. And I think I've never been both so insulted and so complemented. At the same time, I say this because this is what growth marketers do. We obsess over the details we optimize the minutia, and monday is better at this than anybody else in the world. The target just changed, and that's what we're optimizing. So if I go into the third area, where are we investing in shifting our investment.

SLG, where we've seen really good traction. We're accelerating our investment there, upper and mid-funnel with video, social, where we're seeing really good returns there. And the reason why it's important to note that is where this change happened was paid search. Paid search is really high-intent traffic.

It converts within days. People know what they're looking for. They search for work management platform. They click on a link, they pay. So you see that impact when there's a change right away, which where we're investing SLG video the time to get the return on that is just a little bit longer, but we're seeing really good traction. And we're going to get the return on that over the next coming quarters where we're really excited about that.

Rob Oliver from Baird. Thanks for all the information. Really appreciate it. Casey, my question is for you. It's a 2-parter. Obviously, a lot of changes now that you had some time to begin the seed sales overlay changes, comp changes. I guess I'd love to get a sense from you of how far we are into those changes?

Have they all been implemented already, comp changes and all that. And kind of and what the initial feedback has been from the team. And then back in '23, you guys had a dedicated slide around the partners and the partner network. And I know you touched on it briefly, but would be curious to hear particularly with that emphasis in mid-market, what role you think the partners will play? And any color you can provide around or specificity around kind of maybe perhaps what contribution to that mid-market effort?

Yes, I'll take the first one first. So one of the most important hires, if not the most important hire I made was a new global VP of RevOps. If you talk to any CRO, they'll tell you that's the right hand, right? And if you have a very good head of RevOps, you can do a lot of things really well, really quickly. We hired someone that I've worked with in the past, and he has made a significant impact in a very short amount of time.

So to answer your question specifically, a lot of these things have been rolled out, but some of them will hit actually in January. So we're phasing these things as we go. We don't want to disrupt the business, obviously, to close out the year, but we also want to give them a taste of what it's going to look like next year. So we've rolled out these things in phases.

So very encouraged at our progress to this point. I'd also say certain regions operate a little bit differently. And that's why you have a region model, right? So you can absorb some of the nuances. So some regions are a little bit further ahead with some of this upmarket outbound motion than others. So that's one thing. The second question you brought up relative to partners. You saw the slide. We have an amazing ecosystem.

I know we have -- I've seen good ecosystems. This is better than I've ever seen. In our mid-market space and even in our enterprise space, our partners take a lead role a lot of times, right, because they're using monday to provide a solution to a business challenge that is very unique. Right? They've built their business around it. So we have a very healthy partnership program. We work very well with them.

In a lot of cases, as I said, they lead the opportunity so that we can move on to other opportunities. So we see that continuing going forward. They play a significant role in our services business as well, right, leveraging those partners to deliver services to get customers time to value shrunk. So partners are obviously a big mechanism for us to scale, 10,000 sellers in our partner ecosystem. I have 500. So you can do the math.

I have one more question online. This is more for Daniel and our CEOs. So you've been busy with AI functionality, and that's for good reason. How does that impact though the release of updates on the road map for our new products like ITSM, CRM? Are we too focused on AI?

Yes. So first of all, I think we did had a very meaningful period of time over the last year and so. And I think you all see the pace of innovation. And this innovation is not only within new products with AI. We actually took this change and thought about what it means to change from managing work to doing the work across each and every one of our products.

And for each one of them, it's the same pace of innovation and it's the same, I would say, new capabilities that will address these new needs. So whether it's like the new monday campaigns product that we had the privilege to do it with AI-first mindset and think how AI can actually generate demand in this new era of AI and not just build product that is more fitted to the past. Also you saw the AI SDR agent.

This is only one SDR agent that -- one of the agents that we are doing within CRM. And obviously, service, which is built from the ground up as such. So I really believe that with AI now, the pace of innovation across all of our offering is getting much faster. And also, I believe that when we have this North Star and this like very focused strategy, we see how well it resonates with what people expect on the future. So I would say like specifically that the pace of innovation increased dramatically, and it's across all both the existing products and the new products as well, and they are all deeply connected.

I can add that we have a very long-term view on the markets and like the areas that we operate in. So when we took in AI, like we're thinking like trying to think two steps ahead, where are this going? Like where do we need to build into the future. So I am just adding to what Daniel said, we have to invest also in infrastructure alongside all the innovation in AI.

Otherwise, they won't play well together. And I think that will create like a way better offering for customers and ones that they can actually adopt today and see working for them. So it's two of those areas together.

Let's take another question from the audience.

This is [indiscernible] from Barclays. I appreciate all information today. If I think about the net new products being 9% to 10% of revenue in 2025, what does that imply for the 2027 target of $1.8 billion? And then how does that think about the core work management product as well.

I don't know who wants to take that. Maybe I can start and feel free to kind of jump in. So yes, you've seen gradual improvements with our new products. This will be a disclosure we'll be making quarterly going forward. We anticipate that number to keep growing for the next couple of years. We don't necessarily have a number in mind for the FY '27 guidance, but I don't know if anybody else wants to just kind of highlight some of the excitement we have with some of our new products. I think service is probably the one we're probably the most excited about.

Maybe just to add and Casey can expand on that, but -- most of the cross-sell so far has been pretty organic. Customers finding new products and buy new products. Casey showed in his presentation, this is something that's very strategic for us. And we put a lot of emphasis going forward. We're changing the structure of the organization. We hire new people. And with AI, I just feel we're going to be able to expand our go-to-market as well, adding AI capabilities to each one of those products. So I think all those things will drive more momentum and also even accelerate multiproduct adoption.

Yes. I expect, obviously, it's a big part of my strategy that the other products start to grow and contribute in a more significant way going forward, I'm not going to give you a number but I do have a number in my head where I think it could play a significant role in our growth. With that said and there is a finer point on what Eran just said regarding organic, right? Well, what does that mean? Well, what it means is we're getting those opportunities and I'll use CRM as an example, where a high percentage of those opportunities are new lands.

They're not even monday customers. So that is a very encouraging statement because we haven't really even started the cross-sell motion yet to go sell and expose CRM to our existing customer base. And the trajectory that CRM is on. I hope I can replicate that for the rest, and you can do the math from there.

I'll just remind everyone what we talked about, I think around the end of last year that we expect these new products to be low double digits as a percent of ARR by the end of FY '25. We're well ahead of plans there, and we anticipate that number just to keep expanding for the next couple of years. Take another question?

This is Lina on Kash's team with Goldman. I was wondering as you drive adoption of AI agents and AI utilization across the customer base. We've seen some others talk about the potential impact on margins when you're in this early curve of investment. And before monetization starts to kick in. So I was curious, can you talk a little bit about how you're thinking about driving margin expansion with this next investment cycle in AI?

Maybe I would start, in the presentation, I shared the model about what would be the impact on our gross margin. So I said potentially, we are a very high margin company in terms of gross margin. We have achieved 90% throughout the last four years. We believe there is going to be an impact of a few hundred basis points.

And what we have assumed is probably that we are going to be in mid-80s, but we think there is an upside on it because we are very efficient in the way we run our business. So I would say this is probably the range I would think there is going to be potentially some impact between 85% to 90%.

All right. Another question?

At your previous Investor Day, you included some list price action in your multiyear target. Is there any anticipated list price action in this new guidance?

Yes. So this is really the last time we had an Investor Day, we had a very broad-based pricing increase that impacted all of our customers. That was about 3% to 4% of revenue uplift we got both in FY '24 and FY '25. The anticipation is that we should always be getting pricing about 1% to 2% per year. These are largely enterprise to your customers that are signed up on a discounted rate and that we're bringing back to list price. That's how I would think about pricing for the next couple of years.

Yes. But maybe just to add to what Byron said, having in mind the fact that we are now introducing the AI products, and Roy and Eran presented a slide that he is speaking about pricing for the multiproducts themselves, but also there's going to be a pricing that is going to be related to the AI product consumption based. So we're not going to do like a price increase the way, as Byron said, but definitely, we're going to have some pricing schemes that will address the AI products and the bundling of them into the existing products.

Getting a lot of questions online, which is fantastic. This one is probably for Adi. Your retention numbers keep improving. Gross retention is doing well. What exactly is Adi going to be doing to continue to see that improvement?

So we touched that a little bit during Casey's presentation, but we have quite a detailed strategy. I would say that the three main pillars that we are trying to attack is, first of all, expand the way that we touch our customers, meaning try to take the high-touch customers and grow it a little bit, probably like 50%.

The second part is integrating and embedding AI all across the way that we serve our customers. So we are now establishing a new segment, which is called mid-touch segment, in which we are hybridly working between human intervention and AI in order to serve like 30,000 to 40,000 customers, which were not touched by anyone from monday until now.

And the last part is looking at the no-touch segment, which is quite an extensive segment we see in the monday and over there, providing a full AI-based service, which is going to really increase, and we already see that, by the way, to increase the retention in this segment quite dramatically.

Thank you, Adi. Another question from the audience?

This is Noah Herman with JPMorgan. It's very exciting to see the product innovation coming out of monday, especially around AI. How do you envision the uptake on the new AI products like vibe, sidekick and agents? And how would you kind of compare that to CRM, which has achieved $100 million in scale in less than four years?

Yes. So maybe I can start. So all those new products are fairly new and now being gradually released. As you've seen in the slide, Roy and I presented, we planned the monetization of those products to be based on consumption. Actually, we're going to launch a new pricing model in the next few weeks for those new products.

Based on the usage, we see amazing uses so far on vibe and sidekick and magic. We didn't know exactly what conversion is going to be, but usage is off the charts, and we're going to launch monetization as part of it. So it's really hard to say right now. But judging for all the signs we've seen definitely has potential to be an upside going forward.

Another question from the audience?

Steve Enders from Citi. I want to ask on the free cash flow margin and the medium-term outlook or long-term outlook that you talked about there. I think a bit surprised it's only up a few points from where we are today. So I guess, what factors should we be kind of keeping it in mind that might impact that? And then maybe how do we think about the trajectory of free cash flow from today to then?

Yes, sure. So first of all, we are very efficient in generating cash over the past few years. I think we achieved more than 25% most of the time and actually getting to 30% in some quarters. But we also have to take into account a few things. First of all, the interest environment may change. Now we're taking into account the fact that the interest environment has been around 4% to 5% yield on the cash that we have in the bank.

So this is something that we also need to consider. Second thing is we are becoming profitable for tax purposes, there are going to be potentially tax payments also taking this into account. And the fact that we would like to invest, as we said, in the opportunity that there is in front of us over the next few years, this is something that we think we should capture the opportunity. So we feel to get to around 30% from where we are today and we start high, this is something that is probably the right kind of cadence for us. And obviously, there is an upside, but we do want to make sure that we don't lose sight of the opportunity ahead of us.

We've got one question online, and we'll keep it with Eliran. So can you -- with all the innovation -- organic innovation that you're doing with your platform and your products, can you dive a bit deeper into what you'll be looking for in terms of M&A? Is it new products? Is it customers? Is it something else that strengthens existing product? M&A...

Okay. So with regards to M&A, I said, and this is one of the main capital allocation purposes that we have in monday. We're actively looking. We have a manager, a project manager in London that is actively looking for companies. The companies that we are -- or the target companies that we are focusing on are the ones that can accelerate our road map. So if there are feature functionalities that can complete our CRM offering, definitely, we would like to acquire these companies, workflows.

If there are companies that can provide features even in AI in the world of service, in the world of CRM, -- we do want to make sure that we buy them. It's going to be tuck-in mostly equity hiring. We're not thinking about acquiring revenue or customers, which is the hundreds of millions or it's $1 billion and above.

We're actually looking at the, I would say, tens of millions to potentially if we have a great opportunity, maybe more than $100 million to $200 million -- around $200 million. But these are kind of the ballpark numbers that we are considering. I do want to say also that when it comes to M&A, we don't want to defocus our trajectory.

And many companies like us in the growth stage, as you have seen, we have a lot of things that we are doing. So when it comes to build versus buy, we do acknowledge the fact that buy is important, but we do want to build a lot of things and make sure we are focused on them. So when the opportunity comes and we are actively looking, this is kind of the companies that we would like to acquire.

Let's go back to the audience for the next quesiton.

Byron, thanks to management team for hosting this excellent meeting. I wanted to stick on the topic of capital allocation and this is probably a question for Eliran. I want to talk a little bit about the share repurchase program. It was actually a very good announcement, very specific number, $870 million, which is about 9% of the company.

Just curious about where that number comes from. But more importantly, I'm actually more interested in at this moment in time, how does management prioritize or optimize the trade-off between returning cash to shareholders in the form of share buyback because clearly, the stock seems quite cheap and especially if you even achieve your 2027 targets and the exit growth rate will still be quite attractive from an investment perspective in the company's own shares.

With all the other priorities that you have, including the tuck-in M&A, the investment in product, the investment in R&D, what internal metrics or analyses are you looking at that signal that a buyback is more attractive right now versus some of the other priorities for capital? So sorry for the long-winded question. So the specific number, which is like 9% of the company, where did that come from? And then number two, just how you're now weighing those trade-offs?

Okay, sure. So I will start with the latter part, and then I will get to the specific numbers. So from our perspective, we finished Q2 with $1.6 billion in the bank. And when you do a calculation about what is potentially you can invest in the business, let's say, 6 to 12 months operating expenses as well as to leave hundreds of millions of dollars to potential M&A, we have this. So we have no problem.

Therefore, we felt very comfortable with getting to a number that is up to $870 million. We wanted to keep it below 10% of the market cap. And the idea is to have it opportunistic, meaning we want to make sure that we have the cash. And if we see that the price in the market is the right price, then we are going to acquire potentially shares of monday in a very opportunistic way over time.

We feel that returning share -- returning capital to shareholders is an important thing that we can do for the shareholders that are investing in monday. But on the other hand, we don't want to make it something that will come as a trade-off to us being able to invest in the business.

So we think this is the right balance between reinvesting in the business, doing M&A and returning share -- returning capital to shareholders. So this was kind of the thinking process. We're also very confident in monday. We have all the things that we detailed today are telling us that monday is undervalued, and we have confidence that the share price is going to go up. And we want to also take the bet on our company because we feel this is something that can grow and flourish, and we want to take advantage of that.

All right. We have about 5 minutes left. We need to take another question from the audience. One in the far back.

Lucky Schreiner with D.A. Davidson. It was interesting to see the variety of use cases for AI so evenly spread across departments. And with this emphasis on going back to your customer base to cross-sell, I'm curious if you're starting to see more competitor displacements. And maybe what's your updated view on the competitive environment today?

Yes. So obviously, AI is coming from everywhere, right? So we see -- we're approaching the market at the same time our competitors are with AI. As far as the placements are concerned, we are not seeing that, right? Pervasively, I'm not seeing any pressure from the competitive landscape replacing us. It's early days for AI. I'm obviously very bullish on our capabilities. And obviously, our customers love Monday and they want to consume more from Monday and who better to offer an AI solution than us. And candidly, I think ours is best. So it's early days in AI, not seeing a ton of competitive pressure on takeouts for our solutions.

Great. We have one question online. This one is probably more for Shiran. You're seeing headcount go from the growing in the mid-30s to around 20% by FY '27. Was that always part of your plan? Or has AI impacted your hiring?

Great question online. So of course, AI impacted that. I think in 2024 and 2025, H1 2025, we really built a lot of infrastructure that will enable us to leverage the power technology and our foundation in order to grow linear because the way we work and from the get-go, we are building lean teams because we believe that fast execution, and you've seen the results of it, fast execution with lean teams, it's actually a competitive edge of us. And I think in the era of AI, it's even much more significant than ever before.

So that's the way we work, and that's the way we plan. And actually, the 20% you just saw is actually a result of a model we built in our headcount planning when we actually baked the AI impact we've already seen and what we expect to see in the coming year and increased productivity from our headcount. So this is definitely planned as part of our planning for 2026, and I believe part of our approach also going forward.

Thank you, Shiran. Any more questions in the audience? Right here in yellow.

I just had two quick questions. One, just a follow-up on capital allocation. Do you have -- I guess, earlier on, do you have any plans to be more aggressive on the share repurchases beyond just managing share dilution to 2%? Because you have a lot of examples of software companies over the past decade or so that have shown really great top line revenue growth. But when you actually calculate their revenue per share growth, it's actually very disappointing because there is so much dilution. And so just wondering your kind of philosophy around how you manage that and maybe you can be more aggressive around that number?

And then I just -- the second question was just more around product. When I do kind of checks with kind of larger, more kind of upper mid-market customers, one of the big skepticisms that they've kind of voiced to me is really around scalability or just -- I know you have mondayDB 2.0, but there just seems to be still a lot of skepticism about can monday's CRM product, for example, support an organization of my size where I'm managing tens of thousands of leads a year. And then some of them actually point out, I think monday internally, you actually don't use your own CRM product either. I don't want to name who it is, but you don't use it internally either. So just wondering like, I guess, is the scalability criticism, is that just because people haven't really given it a try? Or do you think you may need kind of mondayDB 3.0 to just rearchitecture for as you move even more up into the upper mid market?

I'll start with the second part of your question, and then we can go back to the share repurchase program. So look, I think here, we need to distinguish between two things. One is the platform capabilities that mondayDB and the infrastructure that we built and then specifically Monday CRM.

In terms of the infrastructure, mondayDB and everything we've built around it, we feel we're on a very good path to scale into the enterprise. You've seen the 80,000 seats. That's just one example. The amount of large enterprise is growing, looking very good, exponentially growing over time.

I think with Monday CRM, we need to keep in mind that even though it's a $100 million business, it's still a very young product, only 1.5 years. And obviously, because it's so young, it's some key features. And like work management, we're going to compensate those features. And eventually also Monday, we have very quick few plans to also move into Monday CRM. I think even more now with AI, it's obvious that what used to be a benefit in the past, now with AI, there's much more leverage adopting a new CRM system. So we're baking all those SDR capabilities into Monday CRM, and that's another reason why we want to expedite our move from existing vendors that we use into Monday CRM. And I think it's also going to affect our customers.

In a way, I think not only the CRM space, but other spaces as well, it kind of level the playing field. Those new capabilities are way more important to customers than the old integration or very nuanced features, and I feel just creates even more opportunity for us. That's about the Monday CRM, and I'll let Eliran talk about the share.

Yes, sure. So with regards to your question, we don't do share repurchase to manage dilution. We manage dilution, and we are doing share repurchase. This is very important because we are one of the companies that went public 4.5 years ago and have been one of the most aggressive and listen to the market when it comes to managing dilution.

If you look at our share-based compensation compared to our peers and to benchmark, we are at a very low percentage of revenue in terms of share-based compensation. We're listening to the market. We're looking internally, and we have planned how we manage dilution. So the question should have been -- we have been more aggressive. I think we're doing the right work. We are doing the right thinking process around it, and we'll continue to manage dilution and do share repurchase plan as we announced.

Great. Thank you, Eliran. Thank you to the entire executive team to make yourself available for Investor Day and making it a success. Thank you, investors and analysts who attended our 2025 Investor Day, and that's a wrap.

Hopefully, see you all over at the Elevate user session at 1:00. Thank you.

We're going to light it up, okay? We're going to let you know why? This is my last fireside chat for a Goldman Sachs on open technology company. So we're going to make it really good. Right green right? Yes. There you go. Monday is a truly special company. I think you've heard me say that, it was probably 1 of the first or second IPOs that have worked on at Goldman. We have been aware of the company for quite some time. We knew that they were on to something special -- it's hard to describe it back then? Is it the next service now? Or is it the next sales force? Or is it the next is, but they are the next Monday. So congrats on being so unique and sticking to your vision. And the idea was that software needs to change. It's too complicated.

It's too cumbersome and we're going to simplify it, and we're going to add value to every possible professional users. So I'd like lofty goes like that. But you never achieve lofty goes very easily. It takes a lot of complexity to simplify a product. So here we are. So congrats on the journey. And we do have a new executive who has joined us, is this your first fireside chat at a public conference -- for monday as an exec and -- so we want to create a nice little niche for the conference.

So thank you both, Elron, and Casey for joining us. Case welcome to your first sell-side conference. What does -- maybe start with the earlier on? What does success look like? And you are absolutely right when you told me in 2021, we worked on your IPO that you have a goal and this is the goal, and you deliver. This is 2025. A -- so what next? What is the goal and the vision of the company looking into 2030 and beyond.

Yes. So first of all, thank you for having us. It's really exciting. I met cash when I joined Monday, 4 months before the -- it was like, I remember this moment. What does success look like? So a few things about Monday that are very unique for me. One is to continue to maintain the culture that we have in Monday. It's really a unique culture. Innovation is the core of everything we are doing. And I would like to think of us as a company to continue to innovate in a very rapid pace is 1 thing. The second thing, we want to be the go-to platform for work management entirely, meaning we have now work management, we have CRM. We have Monday Dev with Monday service. And on top of all of that, there are all of the AI product that we are now bringing to the market. and I wipe coding that actually went live today, Monday Magic, Monday sidekick.And this is a compounded effect because this is a perfect figure.

The AI products, together with the solutions that we have and definitely to continue to develop the platform. So in 5 years from now, you mentioned maybe ServiceNow at the beginning of the conversation. ServiceNow like you know, the GoTo platform in the world of work management, this will be great for us.

Got it. Casey, give us a little bit of a flavor for your background, what have you done in enterprise software? And how do you see your mandate at Workday going forward? .

So I've been doing this quite a long time. This is my 29th year. I started straight out of middle school. Just so we're clear not really. .

We do look at -- yes .

20 years at IBM learned a ton, right? And there were some very good years at IBM -- there were some challenging years, but I'm cherish both because I learned so much from that experience. I left I left IBM moved on to a smaller public company. And I have this question all the time asked me, why did you leave IBM .

Why not? Yes. I mean, why not?

Well, you spent 20 years with somewhere just got there, right? But I tell the story because I think it's interesting in a lot of us can relate to this. Adamant said, "Listen, case, we've talked to you a lot at IBM. You've been exposed to good, bad, ugly, et cetera, right? You're never going to really leverage all the things we talk to here at IBM. I think you should leave. And if you tell anybody, I'll deny it. But go to a smaller company and show them what you've learned, right? That's where you'll provide the most value.

So I left 1 is a smaller public company, Verint, which some of you have heard, just was sold to Tomo Bravo. We had a good run there for a few years. then took on a very challenging opportunity where I'd say I learned the most in this last couple of years working at Talent/click. Talent was acquired by Click. I was brought in to do the integration of the go-to-market team. So we combined a data integration company and an analytics company and 1 plus 1 is 3, and then we sold it.

So that was a very interesting experience. It was a private equity experience and everyone understands what that means, right? It's a finance culture. So learn a ton doing that. But when I had the opportunity to join Monday, I jumped at it, right? Here's a company that has built an amazing culture you are.

Where about Monday in the first place.

I was a user or the product. I saw a ton of value from the product. And so when they reached out, I was like, I got to take this one, right? But more importantly for me, I wanted to be part of a growth story. I want to be a part of a culture that was about innovation. And if you say anything about Monday, it truly is an innovative culture. Roy an Iron ore geniuses, they think about what can I provide to the market to our customers that they want and they think about innovation on a daily basis. So for me -- sorry, for me, -- that's a great opportunity for a CRO because we love having new stuff to sell to our customers and being a part of what is an amazing culture just makes my job that much easier. So that's how I ended up with Monday.

Got it. you've been at Monday for 6 months. What is the -- how do you perceive or how do you explain rather not perceive the go-to-market strengths of the Monday business model? And if I could dare to ask you to dare to answer what are the improvements you see to a good go-to-market model that Monday has?

Yes, Monday does a lot of things really well. If you think about our performance marketing engine, it's best-in-class. We do things that other companies can't do, and therefore, we generate a ton of leads. -- for our organization, and we're very good at that high velocity, converting leads into transactions in a very a short amount of time, where I saw the opportunity, though, is there was an opportunity, obviously, to move up market. And when I say move upmarket, I'm talking about SMB to mid-market and eventually get to enterprise, -- and there's a lot of things that can be done that need to support that sort of motion. And Monday, that's foreign territory to them. They haven't had to do that. And I would argue still don't necessarily have to do it, but we want to do it.

So what we are doing at Monday is really building out that infrastructure to move upmarket. And that means build the marketing engine to do that in SLG motion with marketing -- that also means, obviously, training our reps in a different way, hiring different reps to do outbound, et cetera, building offerings that resonate and then the real advantage we have now, and the real low-hanging fruit is the opportunity to cross-sell. When you have 250,000 customers with the majority buying 1 product, if you can sell to them any of the other products or even better sell them all, your wallet share goes up dramatically. So that is definitely an opportunity for us and we're organizing the team around.

Got it. What are your priorities from a hiring standpoint in sales and marketing? I know you talked about moving up market. What is the profile of people that you're looking to hire and how do you not hire too much where it becomes a little counterproductive, but your higher at the right pace and the on-ramping and the enablement, all those things are fairly successful.

Right. So a couple of things. The good news is there are a lot of great people on Monday. There's a lot of talent, and they're very open to taking on new enablement, new learnings and changing if they have to change on how they do their role. So we have a ton of talent to pool from 1 too. We are augmenting the organization with some leaders that have done it before as I like to say that our part of my network that could come in and help them mature the organization in a way that will enable us to move up market. So that's 1 of the things that I'm doing. As far as enablement goes, that's a big lever for us. I would argue that we haven't necessarily had to do that very well. I think today, we need to if we're going to capture all the cross-sell opportunity all the opportunity to go outbound and move up market and to get more productivity out of the reps. So that's definitely something that's underpinning everything that we're doing right now.

I know lot has been said about the Google performance marketing changes and the SEO industry has gone through a lot of pressure because of what AI has done. How is -- how are you dealing with that? How are you regearing the lead generation engine to accommodate the changes that are happening in the industry and how balanced is your regeneration as a result of take this 1 .

I didn't expect this question, I thought Yes. So Kash you are with us for the past 4.5 years, Mondays the best-in-class when it comes to performance marketing. What we have done in PLG getting to $1 billion is we built a machine with a big brand that is phenomenal. And I think we called it out in Q2, it was definitely overstated. And we already -- it was not happening in isolation. We already shifted budget into different channels, namely B2B, LinkedIn, video, influencers and others, and we're already starting to see returns. And this is part of the ordinary course of business. And Casey, maybe when we spoke earlier with investors, you mentioned that you see an opportunity there.

Yes. It really is an opportunity for us to accelerate our outbound motion as well as moving up market. When I say that, we shifted investments to mid-funnel. And obviously, those opportunis take a little bit longer, but they're higher value, higher quality but they're a little bit elongated in the sales cycle. So that does present a little bit of a challenge for us, but the reward for us is so much greater. So it's, I think, an opportunity for us to accelerate that motion.

So you become -- although your performance marketing has been very productive. How are you reducing your reliance from, let's say, a percentage 100% performance marketing dependence too, if you were to dial it down, where are you getting your sources of leads from other sources if it's not from Searches?

So actually, we don't want to reduce searches if we see the returns. So maybe just to explained on the Monday business mode. This is hybrid. So we have the BI system called Big Brain. And every campaign that we are doing is basically we see the return quite immediately. So when we see a good return based on our KPIs, we continue to invest. I think it's important to mention that we don't want to let go of the SMBs and mid-market kind of lead generation. This is an area of strength of Monday. On top of that, we have the upmarket motion that we have. But we don't want necessarily to move out of this if we see the returns. If we don't see the returns that we are used to based on the KPI that we determine, then we are investing in other channels. But we continue to see top of funnel lead generation back in July, it went to normal. So for us, it's something that we'll continue to do.

Got it. I think 1 of the ways in which that reliance may impact the business is you may not add the same number of net new customers that you've been adding before. But in terms of the value of the customer, which is is what you're talking about, Casey, that as you move up market, 1 customer there is worth maybe 3 small customers or 4 smaller customers. So if you have to advertise, get 20 paid clicks result in 15% translation conversion, just getting 1 customer, a long, hard part way might be more economical in the long run because that customer is going to be more valuable other it took a while for them for you to find it.

Yes. Maybe I will start and then if you want to add. We had record net adds of the 100,000 customers in Q2. And this is something that was very positive. MDR for 50,000 customers and 100,000 customers was above 115% and we said, we finished last year with 245,000 customers. It's a big number as we scale. And we said that we are going to grow.

How many were you at the time of the IPO?

86 million.

Did you ever think that you triple your customer base in like 3 years -- to be fair.

No, when we went public back in 2020, based on the number of 2020, we were $161 million in AR -- and we -- the guide for this year is north of $1.2 billion -- so think about that, this is -- the scale of Monday is I'm going to fire .

Credibility. He rocks in my word. He said, we will not let you down. And outperformed revenues, outperformed margins, our performed free cash flows. .

To before, I didn't know because I joined as part of the IPO there was .

Expectations on you now on the revenue side.

Well, to that, you highlight tripling the customer base. I think I stared at that 3 or 4 times, and I just couldn't believe it that we had 250,000-plus customers and therein lies the biggest opportunity, right? If you can unlock those customers. I mean what a huge opportunity we have. And so that's obviously a huge asset that Monday has that we're going to tap into. So fantastic revenue per customer, I'm sure it's like a very small amount of revenue that you generate to, yes, it looks like a rich enough base

It depends on the segment, by the way, because it's hard to do the average. You have the mean anything our .

It's going to have a wide range of distribution, obviously. Another thing that struck me at the time of the IPO was how much cash do you have on the balance sheet you said x, how much money have you raised in your life. It was the same amount. Effectively, you burnt cash and the generator of the cash that you had just back to when you need money to go public to .

I think at the time everybody was speaking at growth at all costs, and we spoke about sustainable growth meaning we wanted to make sure also that we are becoming efficient and the revenue growth to the bottom line. So now we have $1.6 billion in cash at the end of Q2. We are going to -- we generated left here more than $300 million. And this year, we also gave similar number. And yes, we need now to invest the money. So we'll invest in the business. We'll consider potentially M&A that can either be tuck-in or acquiring or potentially opportunistic and we need to think about potentially return to shareholders in the longer term or other uses of cash. But this has provided us with a lot of flexibility.

My tough 1 is coming next, about 30% plus growth rate. But before that, Casey, you wanted to get your feel for the pulse of the spending environment, what is it like out there? There's cross currents. Some people say SMB is getting a little weaker some say SMB is actually getting better. It depends upon who you talk to. What are you seeing?

I haven't seen anything dramatic. What I have seen is SMB definitely doing vendor rationalization. So if you can provide more than 1 product and they can consolidate and they're very interested in that. upmarket. I haven't seen a whole lot of change, right, at least relative to what we're doing, excuse me. We continue to see tons of new opportunities, especially outside of the IT organization, which is pretty interesting, pretty compelling. And I was telling somebody earlier that it truly amazed me the fact that we're able to coexist with the likes of ServiceNow for service and Jira for dev, et cetera, and Salesforce for CRM, we're seeing customers go outside of the normal buying centers to go and get value for their particular organization. They're engaging us to do that. So it's been pretty compelling. So I haven't seen a dramatic shift, but we are seeing some interationalization in the SMB in the market space.

Got it. So Eli, a tough 1 for you. Why can't Monday be 30% growth rate longer term?

Enter the question. So I'm going to speak about potentially what we need to do in order to continue grow the business. So for us -- so we have no full product line, right? Again, Monday Work Management, Monday CRM, Monday Dev and Monday service. we have introduced 3 products that are going to complete the offering. And we are now going deeper inside of each 1 of the products rather than adding additional products horizontally. And we believe also that with the platform capabilities with Monday DB that we invested as well, now getting into 3.0. We have the right product suite, the right platform to benefit from additional scale in the next few years. And also in terms of head count and maybe I'll defer in a minute to Casey, we believe that the investment in head count hiring is already -- the bulk of it is behind us.

We are going to invest continue to bring talent mostly to the product and R&D organization but not in the rate we used to do in the past. So this is going to be -- we will continue to scale the business. And we're also looking at margin expansion in the next few years.

Next question. How do you balance growth versus margin expansion? Is the business at scale that you can do both?

Yes. Priority #1 for us is growth because we believe now there are tons of opportunities. We are well positioned to take advantage of this current market trends, in addition with AI because and you might get to AI later, but we believe that we are well positioned to take some low-hanging fruits. And if we need to invest, we will invest, but we're also mindful to the margin line. We're not going to improve margin like we used to do in the past, like in, I don't know, 4 years since in the IPO last 2 years, we went to 15% in the -- we care about margin, but we care about growth as well as taking the opportunities.

Got it. Case when you look at the product portfolio that you have to take to market and sell, what how do you see AI adding to a more efficient workflow, new productivity enhancements, et cetera. I know that we have the bipod we have instances of AI infusion -- but how do you see -- as you speak with your founders, their product people, when you walk away from those conversations, how do you think about how AI can be sold to your customers? How do you commercialize AI?

Yes. And if we all agree that the market expects AI to be embedded in everything that we do, and I think we all agree on that. Monday's approach in the way that I mentioned earlier, what do our customers want, right? They want time to value. And even before AI, Monday really excelled in this space, you could build a Monday board in a matter of a couple of hours, right, without services, without any special health right? We now have tools that allow you specific to Monday board, for example, that allow you to do the exact same work in a matter of seconds or minutes using natural language. So that's the immediate value our customers are getting from the software.

We launched Monday Magic a month ago or so. Monday Vibe incidentally was released today. I would encourage everyone to check that this is a game changer, in my opinion, right? This is -- this gives you the opportunity is what I would call a layperson to go develop an application in a matter of minutes. -- right, using natural language, a very intuitive engagement for our customers to do it. I've used it is absolutely amazing. I think I'm less biased than maybe Yellon, because I've only been here 4 months, but it's a game changer. And I think the common thread to AI for us anyways, that it unlocks the value of Monday, which is already pretty tremendous. And I think we have a pretty significant advantage leveraging AI in our products versus some of the pure, let's say, AI companies because we have an enterprise-enabled platform that has all the governance security, compliance, all those things so that you can deploy whatever you build immediately because it's a Monday platform. So I think that's a huge unlocking lever for us.

Eliran, what has the management team been thinking about how you can incorporate AI into your IT workflow, our CRM workflow and even the core work management or other things that the founders are thinking about that...

You mean internally or .

To externally. And then I want to talk about it eternally separately as well.

Oh,externally. So because Monday is built as an open source. If you think about the way Monday is built from day 1, it's an open source and the architecture is cumulate, meaning you can use it in any way or shape or form that you want. Just as a reminder, I spoke with some of the investors earlier. When you sell Monday to customers, you don't really sell a software you sell a bunch of building blocks and Lego-brick that basically, you can build the software of your dreams, right? You can build anything. This is why we are servicing 200 different industries. We never thought that Monday is going to be big with construction companies with hotel chain management because they take Monday building box and they build the software that they want.

So when we think about it, this is -- the AI is completing the vision of democratize the power software -- so not only that we give you a building box that you can build any solution that you want. We're now providing you with AI tools that will help you do it even in a faster way, Monday Magic, for example, you go. And sometimes you are now covering a company like Monday and you say to the -- you use Monday say, "I need the Board to cover companies but I don't really know what questions should I ask you how to build this Board because there is an onboarding process. Magic will start to ask you what do you want? Are you missing that? Because it's rather than just helping you do the work is doing the work for you. And this is in Monday, Board and dashboard. Monday vibe is addressing applications on top of Monday, like in the ecosystem, any application out there. So as Casey said, we released it today, the results are amazing. We got a lot of stuff which is amazing. And Monday Sidekick helps you to -- is your agent to do all kinds of things.

So the management team thinks about how we can leverage AI together with the platform of Monday execution and platform, and it's a compounded effect, and this is something that next week, we are going to announce in the Investor Day.

It's going to be big. It's going to be huge nice.

We're going to hear about scalability breakthroughs. So I think you've been talking about that previously the largest deployment was a certain size. How is the core platform scaling to accommodate bigger and bigger deployments, not that it's not a CFO question, but that you mentioned...

No, no, yes. But -- so we invested in Monday DB. So there was -- for the past 2 years, scale, speed and performance. So there was a stage investment in order for us to be able to service the bigger and larger customers that are now landing bigger. And you can see it by the success of of going upmarket with MDR getting better as well in the net adds of $100,000. This was an important -- I would say, a very significant percentage of the R&D team is working on the platform because we want to be able to not limit ourselves as we sell to the big organization out there. And Casey, you have a certain philosophy about what it means to go upmarket. It's not the Fortune 100 or 500 million.

No. And if you look at where our revenue comes from, we have -- I don't want to use specific numbers, but a pretty significant set of customers that are spending at least $50,000 a year with us, and then there's a certain segment of customers they're spending $100,000, right? So if you take those segments of our ARR, you understand that a lot of those customers then go to 500,000 because the first transaction is never the 500,000. It's always the 50,000. And so we are seeing a significant hockey stick in this regard. 50 is going to 100, 100 going to on et cetera. So it's a very natural healthy way that we're growing and moving upmarket. And again, a lot of that is coming from the mid-market space as we push into that market and the enterprise customers are pulling us up.

The first time you guys broke out your 50,000. The first time you break out of the 50,000, 100,000 cohorts and how you showed the growth in those cohorts. I still remember that quarter and Kelly and I were writing the note. And I said, that's the most important thing that stood out. And if you can look at the growth algorithm, the 100, I don't know, Gilly, you remember that, but the percentage of revenues comes from 100,000 this percentage of venue it was hitting a threshold where you could not ignore, but you could not be worried about what was happening in the rest of the business, but this was going to be the leading light. And so if you project this out, could Monday conceivably land a $10 million customer. What stops Monday from landing a big like the big league, like if you look at the ServiceNow and sales forces and Workday, they made their word, mark by landing wall-to-wall 20,000 employees, 30,000 employees. What stops? Why would you not be able to do that?

The short answer is we will in the very near future. Let me use an example. We -- there's -- that's the best thing I heard today that we will -- we already have. Over the long-term period of the customer of 80,000 seats. If you take all the period of the contract, you are exceeding $10 million. .

But we will get the $10 million ARR in the very near future. And a lot of these examples are similar. There's a lot of them out there where we have very, very large customers. I'll just say, Fortune 100 global institutions are better described where -- and a couple of years ago, they signed up for 50,000 online, right? So major enterprise, definitely below the radar of IT and procurement. In the next transaction, it was $200,000, and that was 6 months later. And then before you know it, less than a year later, we're at $500,000 than $1 million. That's why I talked about this $50 million the third and fourth transaction really gets you into that range. And so that very customer, which started at 50,000 in 2022, I predict we'll be at the $10 million by the end of next year, right, based on how they're consuming. And there's a number of opportunities like that, right?

Are they accelerating at all at that pace? No. but that's the progression we're seeing. And again, this is a very healthy growth model because we get into a department, and then it spreads, right? So oh, what are you doing? Let me use that? Can I do that. Let me use more of this. I didn't know it could do that. And then before you know it, you have.

Is there -- have you tracked -- so we had at Lasan earlier today, the President of Atlas she's actually retiring at the end of this year. And they have disclosed 50% of their headcount or not, but user base. Business users, the other 50% developers, customer support, et cetera. Are you at the point, and if you have disclosed, maybe I missed it, but do you have a rough feel for the persona of your user base and how it's split over developers and customer support people, finance people?

No. more than maybe, Kash, specific when you speak with customers, but close to 70% of our customers are non-tech -- so this is almost like -- and this is the .

Users, you mean end users .

End users .

Nontech people. .

Non-tech people for 30% and some are tech companies and potentially. So it's not the developers that are actually using Monday. It's the entire organization. Marketing, we see a lot of in people finance people, construction, it's like a whole slew of users.

It's interesting. And my final question for you. If you guys have questions, please do raise your hand. We talked about AI in the product externally speaking. How have you been -- I know you have big brain, which tracks all your expenses, gives you not just expenses, but that is the big information system insight system. What have you done with AI internally in development, customer support, marketing, sales enablement resourcing to get a leg up?

All of the above. Maybe Casey, you start.

So I'll take the -- on the sales side. And this is probably the most exciting part of by business, right? If you understand today, we get hundreds of thousands of leads a year, our ability to provide a consistent engagement with our customers is -- you cannot get to all of those leads on to at least in an efficient way. And oh, by the way, you're ... .

You're not alone Mark Ben said that they have not called back 10 million leads.

Right. Now they get -- of AI. And it's the exact scenario, right? So now we're able to give a very consistent experience and a very responsive way. There's nothing more frustrating than engaging with the company. You expect the call back, and it doesn't happen in an expedited way, then you move on. So now we'll be able leveraging AI agents to get to every lead within 2 minutes, right? Nurture those opportunities, hand them off to a live seller that's an opportunity that's curated. It's warm, it's ready to go. And so our ability to convert leads will definitely go up. Our ability, obviously, to give a better experience for our customers will go up. right? So all of that is a lift for our company. We're obviously leveraging AI across the entire organization, but for us and from where I sit, when you have 300,000 leads a year, if you can convert better there, the lift to your business is significant.

I would add to that. So customer support. We are using ADA and more than 50% of the calls is already going through chatbot and AI capabilities, a lot of efficiencies, development. We did a month Hakathon. So every division in Monday Dow had to go through an acaton.We did in finance 1 week -- and you already -- people are using Monday Five coding, and they develop all these applications to do cash flow management to do a reconciliation of bank statements to the cash. It's unbelievable because you do it and for me, I'm old school, like I'm a dinosaur by now, but people -- the people are doing it like it's like my daughter is testing. It's flying. So they are doing all these things, development processes. It's not that we are -- there is always like this, AI companies are going to reduce forth. We don't want to do it. We want to actually every person that we hire to do much more because he has more time in development, we used to do things that took months. Now they are being done in days and weeks.

This is a productivity enhancement tool that is amazing. So we want to do more potentially with the people that we have. The vision of Monday is 10 expert developer. It's something that we are seeing. So every division is doing better with using AI. And we force in a way, "people to get out of their comfort zone and do that.

How are you using AI, Eliran?

I'm -- as I said earlier, I'm using AI.

Powering your plots.

So all the search is being done on AI, internal development documents. I read a lot of legal documents. So I do like and browsing, I read a lot of stuff from the market, earnings sentiment. So I use it mostly as an education tool like a week. And and the team, I'm not -- unfortunately, I'm not involved with the team on the day-to-day, but the team is using it much more. I use it mostly for learning and gaining a lot of data, you have an access to 1,000 Einstein out there. So I consume a lot of data with and help me to analyze the data. .

And the way it looks like you -- our development organization that does not use AI, somebody that uses it, we'll be putting our product releases much quicker. And if you are on the good market side and if you're not using it to create SDR resources or lead nurturing at different points, somebody else is going to do it and accelerate their time to achieving quota or accelerate the time to close. And it's it's competitive necessarily all of a sudden. Those without AI will be the losers. And people ask me, so yes, are going to take away jobs, Well, take jobs we do right -- you don't see it today, but it's going to happen 12, 18 months, 24 months from now, if you -- looks like you're on an early start to this. So I wish you well in your journey. I wish you that whatever calls you have at 2030 that when have you come back in the next several years that it's -- you're happy with your progress, first of all best to Arnand Roy for me, please. tell them which .

And wish you on there from Ronan as well. Good luck in your new journey.

Thank you so much. .

Pleasure for being here. Thank you. .

Thank you. I really appreciate it. It's been a great partnership. Thank you for everything. Thank you for your support of Goldman Sachs, and thank you for your clients, for your complete attention, and we still have half a day more, but I don't have any companies tomorrow. So -- but I'm ending this with Monday, how cool is this, right? I started with you guys at Goldman, you are the first IPO that I worked on, and we're ending the way to go -- maybe it's all Carmike. It's very karmic.

I believe in karma.

Joe, let's give it on of applause.

Good day. My name is Bella, and I'll be your conference operator today. At this time, I would like to welcome everyone to monday.com's Second Quarter Fiscal Year 2025 Earnings Conference Call.

I would like to turn the call over to monday.com's Vice President of Investor Relations, Mr. Byron Stephen. Please go ahead.

Hello, everyone, and thank you for joining us on today's conference call to discuss the financial results for monday.com's second quarter fiscal year 2025. Joining me today are Roy Man and Eran Zinman, co-CEOs of monday.com; and Eliran Glazer, monday.com CFO.

We released our results for the second quarter fiscal year 2025 earlier today. You can find our quarterly shareholder letter along with our investor presentation and a replay of today's webcast under the News & Events section of our IR website at ir.monday.com.

Certain statements made on the call today will be forward-looking statements, which reflect management's best judgment based on currently available information. These statements involve risks and uncertainties that may cause actual results to differ from our expectations. Please refer to our earnings release for more information on the specific factors that could cause actual results to differ materially from our forward-looking statements.

Additionally, non-GAAP financial measures will be discussed on the call. Reconciliations to the most directly comparable GAAP financial measures are available in the earnings release and the earnings presentation for today's call, which are posted on our Investor Relations website.

Now let me turn the call over to Roy.

Thank you, Byron, and thank you, everyone, for joining us today. We are pleased to report another outstanding quarter for monday.com. Underscored by robust revenue growth of 27%, this performance reflects surging demand for our platform and the powerful value we deliver to customers across industries.

Our relentless focus on efficiency is bearing fruit with Q2 non-GAAP operating margin of 15%, a testament to the strength of our business model and disciplined execution. We continue to make significant strides in our AI offering, expanding capabilities and accelerating innovation to empower teams and drive impactful results at scale. In Q2, customer adoption of our AI capabilities accelerated across the monday.com platform, with users performing 46 million AI-driven actions since launch, a strong indicator of increasing engagement and the growing value that our AI tools deliver.

This quarter, we introduced Monday Magic, Monday Vibe and Monday Sidekick, 3 AI-powered capabilities that mark a major step forward in our evolution from work management to work execution. These innovations enabled users to instantly generate workflows, build secure customer applications without code and receive proactive context-aware support, all within the monday.com platform. By embedding AI into the heart of our product, we're unlocking new levels of speed, flexibility and productivity for teams across every industry.

Let me now turn it over to Eran to walk you through some of our business highlights for the quarter.

Thank you, Roy. The enterprise continues to be our fastest-growing segment and the investments we have made in offering for these customers are bearing fruit. In Q2 we achieved a record number of net new adds of customers paying over $100,000 annually, further validating our traction with enterprise organizations. .

We are very excited to share that monday CRM has recently reached $100 million in annual recurring revenue, marking a significant milestone in our product rapid growth. This achievement underscores the strong demand for a flexible, customizable CRM platform and the trust our customers place in monday.com to power of their business operation. Reaching this benchmark reflects our relentless focus on innovation, customer experience and extending the capabilities of our CRM to address evolving market needs. We are very excited to build on this momentum as we continue to scale and deliver exceptional value to our customers.

We recently announced the appointment of Harris Beber as monday.com new Chief Marketing Officer, based in our New York City office. Harris brings over 20 years of marketing leadership from leading global organizations, most recently overseeing global marketing for Google Workspace and previously serving as CMO at Waze and Vimeo where it was instrumental in driving significant growth and innovation. At monday.com, Harris will lead our global marketing organization and drive forward our evolving strategy, focused on creative, human-centered storytelling to support continued dynamic growth.

We are pleased to announce the appointment of Adi Dar as our first Chief Customer Officer. In this important role, Adi will be responsible for overseeing the end-to-end customer journey, including adoption, retention and long-term satisfaction. Adi will continue to serve as Chief Operating Officer until a successor is appointed.

Lastly, we're happy to invite all of you to our upcoming Investor Day on September 17. As part of this year Elevate New York Conference, Investor Day 2025 will be a key moment to showcase our progress and ambition. Whether you join us in person or virtually, you'll hear directly from our leadership team as we highlight our achievements and outline our long-term vision, strategy and product road map. We look forward to sharing deeper insights into our business and the opportunities ahead.

With that, I'll now turn it over to Eliran to cover our financial and guidance.

Thank you, Eran, and thank you to everyone for joining our call. Q2 marked another strong quarter with solid revenue growth and improving efficiency. Total revenue came in at $299 million, up 27% from the year ago quarter. Our overall NDR was 111% in Q2. We now expect overall NDR to be stable at 111% throughout fiscal year 2025. As a reminder, our NDR is trailing 4-quarter weighted average calculation.

For the reminder of the financial metrics disclosed, unless otherwise noted, I will be referencing non-GAAP financial measures. We have provided a reconciliation of GAAP to non-GAAP financials in our earnings release.

Second quarter gross margin was 90%. In the medium to long term, we continue to expect gross margin to be in the high 80s range. Research and development expense was $59.2 million in Q2 or 20% of revenue, up from 16% in the year-ago quarter. Sales and marketing expense was $139.2 million in Q2 or 47% of revenue, compared to 51% in the year-ago quarter.

Net income was $58.3 million in Q2 2025, up from $49.3 million in Q2 2024. Diluted net income per share was $1.09 in Q2 based on 53.3 million fully diluted shares outstanding.

Total employee head count was 2,867, an increase of 172 employees since Q1. We continue to expect to grow head count by approximately 30% in fiscal year '25.

Moving on to the balance sheet and cash flow. We ended the quarter with $1.59 billion in cash and cash equivalents, up from $1.53 billion at the end of Q1. Adjusted free cash flow for Q2 was $64.1 million and adjusted free cash flow margin was 21%. Adjusted free cash flow margin is defined as adjusted free cash flow as a percentage of revenue. We remain on the target to meet our Investor Day goal generating over $1 billion in free cash flow from fiscal year '23 to fiscal year '26. Adjusted free cash flow is defined as net cash from operating activities less cash used for property and equipment and capitalized software costs, plus costs associated with the build-out and expansion of our corporate headquarters.

Now let's turn to our updated outlook for fiscal year 2025. For the third quarter of fiscal year 2025, we expect our revenue to be in the range of $311 million to $313 million, representing growth of 24% to 25% year-over-year. We expect non-GAAP operating income of $34 million to $36 million and an operating margin of 11% to 12%.

For the full year 2025, we expect revenue to be in the range of $1.224 billion to $1.229 billion, representing growth of approximately 26% year-over-year. We expect full year non-GAAP operating income of $154 million to $158 million and an operating margin of approximately 13%. We expect full year adjusted free cash flow of $320 million to $326 million and adjusted free cash flow margin of 26% to 27%.

Let me now turn it over to the operator for your questions.

[Operator Instructions] Your first question comes from the line of Kash Rangan with Goldman Sachs.

Nice results. But I'm wondering that you're pivoting to the enterprise, NDR in the enterprise is picking up, the growth rate in the second half is good. but you didn't take it up, typically, there is a bit of a raise to the second half expectations as you finish up the first half. And the product customer adds for the new products also seem good. But it feels like there's -- that you're waiting to hit an inflection point in the business where the new products and the pivot to the enterprise can stabilize the growth rate, maybe cause a bit of an inflection, but we're not quite there yet. I would love to get your thoughts.

And also simultaneous with that inflection that you're looking to achieve, presumably, you're adding on a couple of new executives as well. So help us walk through all the puts and takes of the executive adds and the inflections that you're looking to achieve in your business.

Yes. Kash, this is Eran. So first of all, like you mentioned, we really put -- we brought in our go-to-market leadership point, Casey as our CRO and Harris now as the CMO, and also Adi, our Chief Customer Officer, and I think a lot of this will greatly contribute to increasing momentum with the upmarket part of the business, improving retention of customers and driving more expansion over long term.

And on the other hand, like you mentioned, we also have the engine of going multi-product. Just as a reminder, while work management is very mature for enterprise customers and kind of high end of mid-market, the newer products, the CRM, [ dev and ] service are currently more serving the SME segment. So on one hand, we feel the multiproduct strategy really help bundling and selling more products to kind of more of the lower-tier SMB market part of the business, while the changes we've done to go-to-market team and organization and a lot of other things is driving upmarket expansion so I think both things are contributing to continued expansion of our revenue and growth, although it's definitely 2 separate efforts that, over time, as we mature the product and sell to high-tier customers, will become one.

Your next question comes from the line of Alex Zukin with Wolfe Research.

I guess maybe can you talk about the demand environment, the spending environment? And specifically, did -- was there anything different with the linearity in the quarter, particularly with the large deals? And I have a quick follow-up.

Well, I can take the marketing or demand side. It's Roy. So we do see a lot of demand in different areas, like in CRM, that we can grow in. We shift things into mobile. But we do see some pressure from Google on the new side, though it's not something we didn't encounter before. So it's considerably small on that respect.

And within like the CRM, we do shift a lot of resources into other areas, okay, that we see a better place to grow. Like we have a big brand and we monitor all the performance stuff, so we see areas that we are more efficient in so we move resources there.

Yes. Alex, this is Eliran. Maybe just to add to what Roy said, to summarize. So demand in general remains very strong. Upmarket, we have record net adds for the $100,000 customers. and we see a very good traction and momentum in the upmarket -- mid and upmarket customers. As Roy said, we are seeing some softness within the down market due to the changes in the Google algorithm. But this is temporary, we believe, and we are already taking actions proactively to address this, and we believe this is going to be recovered going into the second half of the year.

Overall, our enterprise momentum, the record large customer additions and continued expansion within our fastest-growing segments provide us with a lot of confidence, and we feel very comfortable with the second half of the year.

Perfect. And then maybe just in the context of improving enterprise traction, talk a little bit about billings. They were -- it seemed like they were down a little bit sequentially from a deceleration perspective, it decelerated a little bit. Maybe is that still the right way to think about a forward-looking metric? Is it possible that we'll get an RPO comment at some point, if that's a better gauge of traction? And maybe just comment a little bit more on NRR, specifically how we should think about it progressing through the year.

Sure. So with regards to calculated billings, we said it in the past few times, this is an imperfect measure of our business. We look at ARR growth. This is something because of -- I wouldn't want to take you through the accounting things, but we don't record the deferred revenue, only on a cash basis. And this is why we don't think it's the right measurement of the business.

With regards to NDR, as expected, we said there's also a prior quarter debt, the lapping of the 2024 price increase is going to impact on NDR. This is why the number came down from 112% to 111%. And we believe this is going to be stabilized through the end of the year.

And the flip side of it is we see a very strong momentum with gross retention that continues to improve and the adds of the customers in enterprise. Both the $50,000 customers and $100,000 customers, we believe, are going to contribute to the expansion of NDR in the beginning of next year.

Your next question comes from the line of Jackson Ader with KeyBanc Capital Markets.

A couple on sales hiring and productivity. So first, is sales hiring, either in the enterprise or elsewhere, building in line behind or ahead of your expectations as you headed into the year?

Yes. Jackson, so this is Eran. So we ramped up pretty significantly in the first half of the year. Our main strategic areas were mostly sales and marketing, hiring across all fronts, people who specialize in the new products and also people that are kind of more focused on the enterprise part of the business. So it's pretty much in line with our plans, and we continue to hire more people in the second half of the year.

And again, we see great inventory within our own customer base for more extension. We see healthy top-of-funnel movement with new customers. So overall there's more room to grow within the sales team, and we'll continue to hire coming into H2 and the beginning of next year.

Jackson, maybe -- this is, sorry, Eliran. Just to add to what Eran said. And we have Casey who joined us in prior quarter, at the end of prior quarter, and this is part of the CRO organization transition. So there is a high focus on continuing improving and enhancing the sales organization across the board throughout the end of this year and going into next year. .

Okay. All right. Great. That makes sense. And actually, I'm going to pivot over to CRM accounts. The net new number was pretty far below what you guys have typically been doing on a quarterly basis. What should we be reading into that? Is this kind of a new normal and you're going to land higher valued customers? Or was this more of a blip?

Yes. Jack, this is Eran. So first of all, when I said that we were very proud of monday CRM to reach $100 million in such a short amount of time, and it's a very significant milestone for us as a company, so we're very proud of that. I think some of it is seasonality. I mean traditionally, like we mentioned Q1 is stronger in terms of net accounts add and the Q2 is relatively lower compared to Q1. But yes, part of it is the pressure, Eliran and Roy mentioned in the low end of the market. And also, part of our strategy in CRM, and we kind of repeated that several times, is landing bigger customers and having higher ACV customers would drive a lot of focus on that front. And we continue to improve the product and landing larger and larger customers.

So I think that just the amount of customers is not the perfect indicator of our progress within the product. And maybe over time, we'll shift to a more telemetric that represents that.

Your next question comes from the line of Brent Bracelin with Piper Sandler.

I wanted to double-click into the CRM business, clearly saw all the results here in Q2. But you took that from, what, 0 to $100 million ARR in 3 years. Maybe walk through, is this really resonating as a lower cost replacement product? Is it greenfield? How much of the business has been net new logos versus cross-sell? Any additional color on scaling that to $100 million here in, it looks like, about 3, a little less than 3 years?

Cool. It's Roy. So I think our CRM is like amazingly good for customers because it offers complete flexibility where they don't have that option in other CRMs, like they can -- you can really build whatever you want. So it's not just lower cost, it's the capabilities that come with it. And there is a huge demand for that in the market, something that is simple, that people really love to use and that you can actually build anything you want with it.

And together with that, like we started with like a more SMB-style audience. But as we add more capabilities like marketing and other stuff, it becomes a whole suite, and we move upmarket, like Eran mentioned.

Helpful color there. And just a quick follow-up. Vibe coding has really just taken off, lit and fire here. I know it looks like you guys are releasing your own kind of Vibe coding tool. Can you just talk about, just given the launch of GPT5 and now you're releasing video coding, what are some of the foundational models you're using? And how do you think about Vibe coding and being differentiated for monday with its own by vibe coding tools versus other vibe coding tools out there?

Roy again. So we're super excited about that. That's like an acceleration to our vision. We always wanted to have tools that give people the power to build whatever they want to control their own destiny. And with vibe coding, we can give them that. And it's really tremendous and we see the feedback we get now is amazing.

And I think we are in a very unique point like monday, because we've historically built everything in our platform that is very open. The platform is open. It's built out of building blocks. It's all modular. And that gives us a huge head start into building enterprise-grade applications that really work seamlessly. And that is also connected to the rest of your workflow. So essentially, if you need like an addition to monday, you can build your own building block or complete new app totally. But it's completely integrated. So it's connected with our integrations and automations, and everything works together. So we're super excited about this one.

Your next question comes from the line of Arjun Bhatia with William Blair.

Can I go back just for a second on the Google changes? I'm curious how you go about kind of remediating the impact from the AI search on customer acquisition cost. I understand, I think for work management, maybe not as big of a deal given you're getting up market traction and it's more sales-led. But I imagine it impacts service and CRM and dev a little bit more. And then Eliran, how long -- like how do you contemplate that into the guidance for the rest of the year in terms of how long that might take to remedy?

It's Roy. I can start, and then Eran can complete. So it's not something we didn't see before. It's now -- it's not a huge impact that we see on performance marketing, and we have a lot of room to grow in other areas and we can optimize for that. We're also doing a lot of AI in AI and what's been searched by people in AI and that they find us there. But generally, it's not such a big impact right now and we can mitigate it in many different ways.

Arjun, this is Eliran. So just as a reminder, when we look at guidance, it's grounded on the analysis of the latest market trends and the internal performance indicator that we are seeing at the time of the guidance. As Roy said, we believe this is something that is temporary, and we're already taking actions to reallocate resources to places that we see greater return.

So in terms of the impact for the year, already baked into the guidance. And we want to make sure that we deliver the most accurate and transparent outlook possible. And this is something that we took into account.

Okay. Understood. And then maybe this one is probably for you, Roy. But some of the AI capabilities that you rolled out, you talked about vibe coding just now, but they sound very exciting. I think you mentioned in your prepared remarks and the shareholder letter that you're transitioning from a system of work to a system of action. And I'm curious what that means in terms of how customers are using monday, how they're implementing it, the value that they [indiscernible] how does that change with all these AI capabilities that you've now incorporated into the platform?

Yes. That's like another exciting thing. So we released like 3 different products. One is like vibe coding, mondav Vibe, and then Magic, which is building whole solutions on monday, and Sidekick, which I think you're referring to, which is doing the work for you. So essentially, we have all the context. We know everything people are trying to achieve because it's in monday, their project, their context, their history. And so we are able to create with a single click an AI that helps you accomplish the actual work, and not just help you manage work better. And that's our vision. And as AI progresses, we will progress with it and we'll be able to perform more and more actual work for our customers.

So for example, instead of like you figuring out which venue you want to create an event, we find the venue for you and create like a comparison. So that's work we can do for other people. And there are like and hundreds of those examples that customers were testing it out, and it's really cool.

Your next question comes from the line of John Baer with Morgan Stanley.

It's Josh. You're putting up some really strong growth numbers. I think at a high level, this year could be thought of as an investment year with 30% head count growth, and that's slightly ahead of top line growth, a bit of margin compression. And the result, obviously, a ton of product innovation, the go-to-market motion that's maturing and able to penetrate upmarket. So I'm just wondering, as we look ahead beyond this year, can we see the yield on these investments in the form of higher, more durable growth or more operating leverage, just looking ahead? Any thoughts on how you'd characterize the future, if this is more of an investment year?

Yes, Josh. This is Eran. I can start. I mean definitely coming into 2025, we had a very concrete plan. On one hand, we had some catching up to do in terms of hiring for the sales organization because we saw so much potential within our existing customer base and a lot of demand. And we're doing that. It will continue to grow into 26 but in lower percentages, I would say, for the sales organization.

And then for the R&D part, we definitely saw a big opportunity in investing into R&D. And coming into this year, we put a lot of effort into building new AI capabilities into the platform and just working on each one of the products. So it was an era of investment. But we're already starting to see fruits of all that investment in how people leverage AI, how people use the products, going upmarket, definitely see the fruits of that.

I think '26 is going to be very different in terms of head count growth. We're going to be more efficient compared to '25. But we're going to see a lot of the investment and the results of what we've done in '25 going into '26.

Your next question comes from the line of Mark Murphy with JPMorgan.

This is Noah on for Mark Murphy. Can you maybe just touch a little bit on some of the adoption you're seeing in terms of managed services as you're moving upmarket into these enterprise accounts? What are some of the most typical managed services that are being adopted by customers? And I just have a quick follow-up.

This is Eran. Can you just repeat -- you're asking about addition to the monday service product? Or were you referring to something else?

Some of the add-on services...

Okay. Yes, got it. So we have a bunch of add-ons that we offer to our customers in addition to the licenses that we provide to them. Some of them are about kind of more robust security or managed services and other parts of the business. Definitely, as we go upmarket, our customers want a little bit more [indiscernible] and customization to how they use monday. So we offer that as part of our enterprise package.

And yes, we see some growth over there definitely as we go upmarket, it becomes more common for customers to attach one of these add-ons to their license. So we see healthy growth, but it's pretty much in line with the growth we've seen in the enterprise segment.

Great. And then just a quick follow-up. On the fiscal year 2025 guidance, is there any change to the pricing contribution and just also FX impact?

Mark, it's Eliran. There isn't any change to what we have seen in -- what we have said in the past. With regards to FX, it's going to be not material. We estimate the full year impact to be below 50 basis points. And with regards to pricing, this is in accordance with what we have said in the prior year that, over the 3 years between '24 to '26, is going to be altogether $80 million, with $40 million impact this year. .

Your next question comes from the line of Steve Enders with Citi.

I guess just to start, I want to ask on, I guess, go-to-market changes, and with Casey in there now for a quarter and Adi being promoted to the Chief Commercial role, I guess what is -- what changes with the go-to-market? And I guess is there anything to read into the change from the CLO to the CCO here?

Yes, Steven, so this is Eran. So yes, first of all, we're very happy for Casey to join. It's already driving significant impact to the sales organization. And going back to what earlier I referred to at the beginning of the call, so we had some weakness on the low touch part of the business, but actually the enterprise part of the business, the touch part of the business performed really well, and we had a record add of enterprise customers -- customers over $100,000. So I think we're very happy so far with the transition, and there's a lot of impact, positive impact, to the sales organization.

As we mature as a company, we accumulate more and more enterprise customers that use monday for a very strategic part of their own business. And part of it is why we established now the Chief Customer organization to support those accounts to improve retention, improve their expansion ability and just provide a better service, putting the customer in the center. And I think this is part of us maturing as a company, going more upmarket. And we expect this to drive higher NDR of over time and also improve -- continue to improve the growth retention of the company. So very positive about all the recent changes we made to the go-to-market leadership and already we're seeing great results.

Okay. That's great to hear. And then I want to follow up on, I guess, some of the Google commentary from earlier and the impact of search. But it seems like you already have put some of those plans into place. I guess, what has been maybe the efficacy of those changes so far? I guess what kind of gives you confidence that the changes you've made will kind of play out as expected and, I guess, the confidence you're going to have in the second half guide from the Google impact?

It's Roy. So like one thing to remember is that we have around 250,000 customers and a lot of the growth we see come from expanding them, okay, in multiproduct and giving them service. The new part is obviously smaller but very important for the long term. And like I said before, it's not such a significant impact until now, not nothing we didn't see before.

So it's just a matter of budget allocation and scaling on areas that we improve on. So we do that always, okay? Like we improve some areas of the product and then shift to another -- some other areas in media, like YouTube and other areas. So it's not just like that we have a lot of things to do. And we see the impact quickly. So it's something we can improve and iterate quickly. So yes, it's not that big.

Yes. Maybe Steven, just to add to what Roy said. Look, over the last 4 or 5 years, we've seen many, many things change in the market, anywhere from prices spiking up by 30% at some point 3 years ago, to prices going down.

I think what gave us a lot of confidence throughout all the years we've been doing performance marketing is, one, we don't only do just ad words. So we have a lot of other channels as well. And also, we monitor every campaign, every click, every expense, so we're not flying blind everywhere, which was unoptimized, we optimize. So we know we can optimize, we know we have full visibility into how we spend that budget. And we're doing the right tweaks to kind of remain efficient and just distribute the funds in a very organized way.

Your next question comes from the line of Brent Hill with Jefferies.

I think there are a lot of questions just as it relates to the Google change and what percent that impacted your business if you think about just X, Y, Z percent covered in this category from Google, what would that have been in the quarter?

So given there are so many questions on that, maybe we can double-click a little bit more into it. Like the better, high-quality customers still click on Google and ads. If you're looking for solution such as a CRM or project management, you're going to reach us, okay? So the drop that we see is just on volume because they are experimenting with AI on top. And it's not that significant for the higher quality of customers. So it's more volume than quality. And we can get that from many other areas. So again, like I don't -- I think we can mitigate that relatively quickly.

Okay. Yes, I think this is just going back to the magnitude of [indiscernible] I'm trying to figure out was enterprise SMB, it sounds like there was some weakness in SMB. You're blaming on Google. I'm just trying to put the pieces together what the impact is to the forward guide because it's a lot lower than you've usually put up in terms of the magnitude. So I think everyone is just trying to reconcile that. So that's all the color we're going to get on that.

Thank you for that question. [Operator Instructions]

Your next question comes from the line of Raimo Lenschow with Barclays.

Perfect. Two quick questions for me. One is on services. That's, from our checks, that sounds like it's a really nice emerging opportunity. Can you talk a little bit about how services compared to the CRM rollout? Like obviously, you've got the $100 million ARR for CRM, but like services almost looks more interesting. Can you speak to that?

And then maybe just a very quick mask question following Brent. So you beat the quarter in Q2 by $ 6 million, but you only raised the full year by $3 million. And so I guess we're all wondering a little bit like, is that kind of buffer on the Google search side? Is that the new CRO? Where is that buffer coming from?

Yes. So this is Eran. So maybe I'll start with the second part of the question. So yes, definitely the new CRO, as I've mentioned, the enterprise part of the business is performing well according to our expectations, summarized in the first half of the year. We saw some weakness in the lower side of the business. Part of it is because of the Google changes, part of it is maybe some other trends that it's going to hard to I understand kind of where exactly they're coming from, but we see a little bit of weakness regardless of the Google search.

And look, we try to be as transparent as possible about the impacts we see from the search engine. It's just not that material right now. But it's a start of a trend, so we're starting to be -- we want to be a little bit more conservative about, I don't exactly -- I don't control -- we don't control exactly Google will play this out, how the world is going to be. So we're trying to understand what are the implications.

Currently, in terms of -- I don't -- we don't have the exact percentages, but very, very low, almost insignificant. But it has some effect in our ability to acquire some part of the lower end of our customer base. So that's the best visibility we can give right now.

Yes. This is Eliran. Maybe to add to what Eran said. So our full year guidance already reflects the strong execution that we have seen year-to-date, and it's including Q2 performance. We remain super confident in our ability to deliver against our fiscal year '25 outlook. And we continue to cut for areas of uncertainty, as we already mentioned in the call that could influence some of the numbers for the end of the year, but they're already back into the guidance. And our approach is always to provide guidance we believe is both achievable and prudent. And we want to make sure that we maintain focus on the longer-term growth and profitability as well.

Yes. And just to add answering the first one of service. We are super excited about service. We see it as a huge opportunity. It is scaling really fast, absolutely. And what's also exciting is that it's not the same go-to-market. It's not Google, if you like. It's from existing customers and we have a different go-to-market that succeeds really well with service. So we're like super excited about that one.

Your next question comes from the line of Matt Bullock with Bank of America.

I wanted to ask about AI actions. Obviously, the cumulative number is growing nicely, but it looked like the in-quarter AI Actions sequential growth did slow. Maybe just help us think about how the AI actions trended relative to your internal expectations. And then help us think about the potential monetization story in 2026. And I have one follow-up.

Yes. Sure. This is Eran. So we're actually very happy with the adoption of the AI action. It grew by almost $20 million this quarter. And just as a reminder, we started to introduce payment at the beginning of the year. So obviously, it had some effect on adoption. But apart from that, we see more and more accounts kind of suppress the 500 AI monthly credit limit, and we're starting to see kind of more revenue accumulated from the AI action. So we're very happy with the progress and the adoption of the AI actions.

And also, we have some new generation AI features, like Roy mentioned, Magic, Vibe and Psychic, which also contribute to the AI usage. So overall we're very happy with the adoption within the platform.

Fantastic. And then one follow-up quickly. I hate to harp on the SEO question, but we're getting a lot of inbounds on. Is there anything you can provide in terms of data points around conversion rates, maybe traffic, performance marketing costs? And then help us understand, why call this out now? How did the influence of Google SEO disruption change this quarter versus 1Q, for example?

Yes. So look, I think like we said, we optimize in real-time. We just budget on a daily basis. Right now the effects are very minor in terms of acquiring new accounts, definitely for the kind of mid-market enterprise segment. We see a little bit of impact on the SMB part, but still very insignificant. And we optimize this on a day-to-day basis.

So we've done some optimization last month. We continue to do optimization this month. But overall, nothing very significant that impacts our ability to acquire new customers.

Your next question comes from the line of DJ Hynes with Canaccord.

Eliran, just one for you. So Josh asked earlier about this being an investment year. Do you see that 30% head count growth as a surge? Or is that kind of more steady state hiring pace given the growth of the business?

And then looking forward, I know we're not guiding to next year, but just -- if you think about budgeting, do you expect a moderation in the pace of hiring? Like what's the kind of go-forward view of where we are?

DJ, Eliran. Sure. So we already said that we expect head count growth to be this year in fiscal year '25 around 30%. And it's actually going to start -- the growth in head count is going to start to decelerate in H2, going into next year, I think we said it last year and we said at the beginning of this year, we have huge opportunities, the market is great. We have multiproducts. We want to make sure that we capture the opportunity. Therefore, we invested in product, in R&D and in sales and marketing. We believe by the end of the year, we will have the right resources going into the next few years. So we expect it to be more moderate and capture the opportunity -- the huge opportunity that we have in front of us going into '26 and beyond.

Your next question comes from the line of Connor Murphy.

your next question comes from the line of Tom Blakey with Cantor.

Great. I have a couple. One on CRM ARR, great update there. I think there's been a couple of questions. Wondering about the contribution to growth there related to seat growth and pricing. If you could maybe make a comment on that. And specifically, it seemed like there was like an increase from 4Q '23 disclosure in terms of, obviously, average deal size moving upmarket. But I wanted to just kind of see the interplay there in terms of seat growth and pricing and discounting, and specifically on the slope of that. Was there anything that changed maybe in 2025 specifically with regard to pricing?

And then the second question was just could you maybe double-click on why stock-based comp jumped in the quarter.

Yes. This is Eran. So just in reference to what we're seeing in CRM products. So definitely, we see the ACV growing in CRM. Actually we see it over 20% year-over-year increase in Q2 in terms of the ACV of our customers in CRM. Mostly it's seat expansion, larger lands of customers. So definitely, it shows that the investment that we put into the products, making them more -- going more upmarket, adding features and functionality pays off. So like we said, accounts count is not the only indicator. We see accounts utilizing monday CRM in a broader way. So definitely very encouraging to see that and exactly in line with our strategy.

This is Eliran. I will refer to the question why there is an increase in the share-based compensation. So it's largely seasonality related to broad-based equity refresh for existing employees, which of course every year, in Q2, this is the compensation cycle of the company, and new grants tied to strategic hiring and retention of employees with the addition of a few members to the executive team and to the mid-executive team of the company.

And we view this as necessary as part of the playbook of monday in terms of retention to employees, refresh equity to some of the employees going into the next few years.

Your next question comes from the line of Connor Murphy with Capital One Securities.

So I just want to go back to the SEO question. Just I mean I understand the component where it's impacting net adds. But are you guys seeing more churn downmarket as well? Because I'm just -- I mean, I'm looking at the NDR down 1%, upmarket is flat. So I wanted to get a little more color on the downmarket customer base? And then I have one follow-up.

Connor, this is Eran. So we actually see the opposite. Our gross retention is at all-time high. And it's not just on the enterprise part of the business but across the whole customer base. So we don't see any change in terms of churn or their ability to expand. Like I said, it looks very good. And like we said before, it impacts a little bit customer adds in the beginning of the funnel. But overall, it doesn't change the churn profile. .

Understood. And then just you guys are sitting on $1.6 billion in cash and you're generating over $300 million this year despite heavy investment. Can you just go back and talk a little bit about your strategic priorities, whether M&A or potential buybacks just given where the stock is?

This is Eliran. So going forward, priority #1 remains on organic growth and we would like to continue the investment in product and sales. investing in the platform, in mondayDB in AI. We are also considering inorganic growth. Obviously, we now have multiple products that each one of them can have -- has his own road map, and we would consider M&A to further enhance and accelerate those road maps.

On the longer term, we might think about other return on investment methodologies or -- but for now, this is the main focus, is organic growth as well as consider attacking M&A potentially.

Your next question comes from the line of Derrick Wood with TD Cowen.

Given the enterprise strength, how much focus do you have on going after larger multi-thousand seat opportunities, especially in light of the mondayDB upgrades? Just wondering if you could have some of these bigger, larger deals in the pipeline, especially as we get into the stronger enterprise seasonal spending in the back part of the year?

Yes. This is Eran. So look, we're definitely also focused on landing larger enterprises. We have the end of the year momentum. Also we have our annual conference for our customers coming up in September, our Elevate Conference. So also a lot of opportunity coming out of that traditionally.

But at the same time, we also remain focused and committed to our mid-market and SMB segment. I think one of the big unlocks of the multiproduct strategy is we have more opportunity to sell bundles to our customers, doing more cross-sell, selling more complete solution, and give them the full monday experience. So I would say we're focused on both. I think we have opportunity as a company on both, and we'll continue to invest this year and next year.

Great. And just as a quick follow-up, the -- I mean, interesting to hear that you're already getting AI consumption-related revenue, it sounds like people burning through, their allotted credits coming back to purchase some. I mean should we be thinking that this kind of sets the stage to see bigger AI monetization next year on the heels of driving adoption this year?

It's Roy. Yes. So exactly that, like I think we're driving more usage with value. Pricing it allows us to get the feedback and optimize the product to give enough value that customers will continue to buy more. And like Eran mentioned, we're adding new products of AI that build more solutions and workflows to consume those credits. And we see that we are expecting to increase it over time.

Your next question comes from the line of Scott Berg with Needham.

First one, probably for Eran and Roy. With the release of Magic, Vibe and Sidekick, can those be kind of, I guess, new lead AI type functionality or modules? Or do you -- what you see with AI actions, are they still kind of the lead AI functionality for the platform?

So look, there are -- it's a good point, there are 2 sides, okay? One, within the platform after you've built the solution or you're working with the platform. And that's mostly Sidekick which does the work for you. And when you want to build a new solution or solve something us, then you'll lose either Magic or Vibe.

And Magic essentially is like you ask it anything you want. You can go now and check it out. It's a MondayMagic.ai. You type whatever you want. And it's amazing to see what customers ask it. They really put in their business problems in there and expects you to solve it for them. And it does. It gives them like a really great solution to how they need to operate. It's even great to see how the AI thinks about it. It's a great way to get a reflection on your business and how you need to think about it.

And then it gives you the full solution, even creates a movie that explains the solution. And that's the new way for us to give people the power to build the tools they need. And it incorporates also Blocks and Sidekick in there, so it's like it's a compound value.

Got it. Very helpful. And then Eliran, in your guidance, probably another question on the performance marketing, Google here. It looks like -- yes, I know. It looks like you're -- flow through your profitability from Q2 for the back half of the year. But is your strategy and approach in the back half similar to the second quarter in terms of prioritizing more profitability over growth from those lower customers? Or should we maybe view that guidance differently?

No, we apply the same philosophy on guidance as we did in Q1. Just as a reminder, overall NDR, we believe is going to be stable at 111%. We do think that customer growth is going to be in the mid-single digits. This is something that might have changed. And we also took into account a small amount of monday service revenue with some potentially small FX tailwinds, very minimal.

And as we go back to head count, we said that it's going to be decelerated in terms of the percentage of what we have done in H1. But if there are going to be opportunities for us with everything that we spoke of, you said no performance marketing, and we will see some recovery, definitely we'd make the investment if we deemed this is the appropriate one.

Your next question comes from the line of Rob Oliver with Baird.

I had a question on the partner network, so I wanted to ask about that. When you guys look into your partner network, how important of a role is that playing in the move-up market, $50,000, $100,000? And then anything relative to current pipeline of demand, if you're seeing particular verticals or geographies which are outperforming or you see as opportunities as you look into the back half of the year and into '26?

Yes. So we don't see any particular segments that are overperforming or underperforming. And like we said, we're going to continue and do performance marketing in H2 across all products, and we'll continue to invest in all of them. We don't see one particular segment, whether it's SMB or enterprise or any specific business sector, that's overperforming or underperforming coming into H2.

Your next and last question comes from the line of Taylor McGinnis with UBS.

On the revenue guide for the second half, it implies growth stabilizing in the mid-20s. When we compare this to the initial base case framework of high 20s, low 30s growth, can you just talk about which assumptions have changed relative to your initial expectations?

And then as we look into next year, I know you're going to be lapping some of the bigger price increases, so is mid-20s still a good starting point? Or maybe you could just walk us through the puts and takes given the product road map and hiring ramps?

This is Eliran. So with regard to next year, we are now working on the budget. So obviously, once we have -- we will finish the year, we'll provide you guidance with regards to that.

With regards to this fiscal year, we're operating in accordance with the playbook that we have set at the beginning of the year, taking into account all of the things that we mentioned earlier, the fact that NDR is going to 111%, some uncertainty with -- I think we already said about the Google searches, we want to make sure that we deal with as we're already proactively addressing it. And the assumptions with regard to head count, hiring, as well as the new products contribution to the revenue. These are all the things that we took into account as part of the guidance based on what we know today. And we want to make sure this is responsible and prudent.

Awesome. And then just lastly for me. Could you maybe give a little bit more color on what in-period NRR looked like? So was it around the 111% trailing 12-month metric? And as like a second part to that, it looks like where there was maybe some NRR pressure was amongst the smallest customers. So when you talk about stability going forward in NRR, does that apply across all of the customer segments?

Yes, it's pretty much broad-based. We do see strength in the midmarket and upmarket enterprise accounts. As we said, the reason why we see the deceleration from 112% to 111% is mostly the lapping of 2024 price increase. Other than that, we didn't see anything that impact NDR.

That concludes our Q&A and today's call. Ladies and gentlemen, thank you all for joining. You may now disconnect. Everyone, have a great day.