Monday.com Shares Plunge 37% in February as AI Fears and Slowing Growth Spook Investors
February proved to be a brutal month for software stocks, with the sector facing a perfect storm of shifting investor sentiment. The growing narrative that generative AI could disrupt traditional software-as-a-service (SaaS) business models gained significant traction, triggering a widespread reevaluation.
The catalyst for the sell-off was clear: advancements from AI labs like Anthropic, which unveiled new plug-ins for Claude, demonstrated that AI assistants are evolving rapidly from mere curiosities into potential challengers to established productivity and CRM platforms.
Monday.com (NASDAQ: MNDY), a prominent player in work operating systems, found itself squarely in the crosshairs. Data from S&P Global Market Intelligence shows the stock tumbled 36.7% for the month, with much of the damage occurring in a sharp sell-off during the first week following its fourth-quarter earnings report.
While the company posted results that topped analyst estimates on the top and bottom lines—revenue climbed 25% to $333.9 million, and adjusted EPS came in at $1.04—the market's reaction was overwhelmingly negative. Investors zeroed in on underlying concerns: a slowdown in growth among smaller customers and guidance that fell short of expectations.
Management's outlook for 2026, calling for revenue growth of 18%-19%, landed below the Street's forecast. Similarly, Q1 2024 guidance was slightly soft. This deceleration narrative was compounded by the company's own success with Monday Vibe, its AI-powered app builder, which became its fastest product to reach $1 million in annual recurring revenue. Ironically, this highlight may have underscored the very AI disruption risks worrying the market.
"The numbers tell a story of a company at an inflection point," said David Chen, a portfolio manager at Horizon Capital. "Beating quarters is no longer enough. The guidance confirms growth is maturing, and in this environment, that makes you vulnerable to the AI narrative, whether the direct competitive threat is immediate or not."
Other analysts were more blunt. Anya Sharma, a tech analyst at Apex Insights, offered a sharper critique: "Monday.com is getting squeezed. They're spending to build AI features to keep up, which pressures profitability, while their core market faces potential fragmentation from cheaper, specialized AI agents. The guidance is a red flag that the golden growth era for standard SaaS might be over. Investors aren't just selling a stock; they're selling a business model they think is under siege."
Despite the plunge, some see potential value. Michael Reeves, a long-time retail investor following the SaaS space, commented, "The valuation has come down to earth dramatically. If they can demonstrate they can integrate AI to enhance their platform rather than be replaced by it, and show a path to stronger GAAP profits, this could be a buying opportunity. But it requires patience and a belief in their execution."
Looking ahead, the path to a recovery for Monday.com shares appears contingent on the company demonstrating an ability to navigate the AI transition successfully, reignite growth momentum, and translate its operational scale into sustained GAAP profitability.
Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Monday.com.