#United States #New York #monday.com #GAAP #Non-GAAP

Introduction

On February 9, 2026, monday.com Ltd. publicly shared their earnings for the fourth quarter of the fiscal year 2025. The announcement revealed a steep 20% decline in their stock price shortly after the release, prompting an investigation by Levi & Korsinsky. The decline has raised numerous concerns about the company's financial health, particularly regarding the differences between its GAAP (Generally Accepted Accounting Principles) and non-GAAP (Generally Accepted Accounting Principles) profitability metrics. In this article, we will unpack the implications of the company's financial statements and what they mean for investors moving forward.

Financial Overview

For the fiscal year 2025, monday.com reported a non-GAAP operating income of $175.3 million, representing a 14% operating margin. On the contrary, the GAAP figures painted a less favorable picture, showing a near breakeven operational loss. The significant gap between these two measures is primarily attributed to stock-based compensation, which is excluded from the non-GAAP calculations. In the fourth quarter, the non-GAAP net income was $55 million, or $1.04 a share, while the GAAP figure was considerably lower, raising some eyebrows.

An In-depth Look at Projections

Management's projections for fiscal year 2026 indicate a further drop, forecasting a non-GAAP operating income of $165–$175 million, translating to an 11–12% margin. This marks a noticeable decrease from the 14% margin recorded in the previous year. Moreover, the company anticipates a mid-teens percentage growth in its workforce, signifying increased investments primarily directed towards sales and research and development (R&D) initiatives. R&D expenditures, which surged from 17% to 19% of revenues in fiscal year 2025, reached around $238.5 million.

Rising operational costs coupled with diminishing non-GAAP margins have raised questions about whether the non-GAAP metrics adequately reflect the company’s profitability path. This misalignment between reported metrics could lead to major misconceptions among investors regarding the company's financial trajectory.

The Shift in Margins

The outlook for 2026 does not appear encouraging. Management has indicated that gross margins are likely to fall from 90% in FY2025 to the mid-to-high 80s for FY2026. This decline is attributed to increased investments in artificial intelligence infrastructure. Additionally, their guidance for adjusted free cash flow suggests margins will decrease to 19-20%, down from 26% achieved in FY2025. The simultaneous drop in gross, operating, and free cash flow margins signifies a substantial shift in the company’s financial profile and poses a critical question: are the current non-GAAP metrics sufficiently transparent?

Investor Sentiment and Market Reaction

The response from the market has been swift and severe, with MNDY shares plummeting by over 20% following the announcements on February 9, 2026. Analysts have indicated that the disappointing guidance was a pivotal factor contributing to this downturn. Investors who held MNDY shares during the release and subsequently suffered losses are encouraged to seek further information regarding their legal options.

Conclusion

With financial figures portraying a company facing challenges, the disparity between GAAP and non-GAAP metrics can lead to significant investor confusion. If monday.com is to regain investor confidence, clarity in financial reporting and a realistic financial outlook are paramount. Stakeholders should keep a close watch on the upcoming quarters to gauge the efficacy of the company's strategic moves and their actual impact on profitability.

For those who have any questions or wish to explore their rights regarding potential losses, contacting Joseph E. Levi, Esq. with Levi & Korsinsky is advisable for guidance on this pressing issue.