Monday.com’s stock experienced a significant downturn, dropping over 19% in Monday trading. This sharp decline followed the project management software company’s release of weaker-than-anticipated financial guidance, amplifying existing market concerns about the disruptive potential of artificial intelligence on the software business model.
For the current quarter, monday.com projected revenues between $338 million and $340 million, falling short of the $343 million consensus estimate from analysts surveyed by FactSet. Looking ahead to the full fiscal year, the company forecast revenue in the range of $1.452 billion to $1.462 billion, also below FactSet’s projection of $1.48 billion.
This recalibration comes at a time when the broader software sector has been under pressure. In recent weeks, software stocks have seen significant sell-offs, driven by escalating fears surrounding AI’s capacity to reshape the industry. The emergence of advanced agentic AI tools, capable of automating complex tasks, has fueled anxieties that they could potentially supplant traditional software solutions. Year-to-date, the iShares Expanded Tech-Software Sector ETF (IGV), a key industry barometer, has plunged 22%, with monday.com’s own shares already having shed half their value prior to this latest development.
During a conference call with analysts, monday.com’s leadership team sought to assuage these concerns. They emphasized the company’s robust market position and detailed ongoing efforts to integrate AI-driven functionalities into their platform. These advancements include the development of AI agents and a “vibe” feature, aimed at enhancing user conversion and engagement.
“We are not currently observing any direct impact from AI companies, and we are proactively evolving our product to be inherently AI-native,” stated Eran Zinman, co-CEO and co-founder. He further elaborated that the company has strategically shifted its marketing and homepage messaging to underscore its commitment to AI integration.
However, management also acknowledged potential headwinds for the remainder of the year. They anticipate continued market volatility, partly attributable to near-term margin pressures stemming from foreign exchange rate fluctuations.
In terms of its most recent financial performance, monday.com reported fourth-quarter earnings per share of $1.04 (excluding certain items), surpassing the LSEG analyst expectation of 92 cents per share. Revenue for the quarter reached $333.9 million, marking a 25% increase year-over-year and exceeding the analyst consensus of $329.6 million.
Looking forward, the company’s operational income forecast for the year, projected between $165 million and $175 million, falls notably short of FactSet’s estimated $220.2 million, contributing to the market’s cautious outlook.
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