What happened?
Shares of work management platform monday.com (NASDAQ:MNDY) fell 4.4% in the morning session after the company reported third-quarter 2026 financial results and cautioned that transitioning to an AI-first model introduced near-term operational headwinds.
According to a company press release, monday.com reported revenue of $377.5 million, representing a 19% year-over-year increase, and attained $36 million in artificial intelligence annual recurring revenue. However, guidance for the next quarter was below expectations. MNDY projected sales of $381 million at the midpoint for Q4 2026, below analyst estimates of $385.7 million. In addition, Net revenue retention rate fell to 108%, down from 113% in the previous quarter.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy monday.com? Access our full analysis report here, it’s free.
What is the market telling us
monday.com’s shares are extremely volatile and have had 49 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 20 days ago when the stock gained 6.5% on the news that software stocks extended gains as the broader stock market undergoes an overhaul regarding the future of the artificial intelligence trade.
Repricing continued to unfold following the previous week’s sharp retreat in tech equities, when mounting financing hurdles weakened demand for physical artificial intelligence builders. As reported by CNBC, high-growth software stocks are looking increasingly attractive as market participants rotate money out of the semiconductor sector and into the parts of the AI trade that they believe will outperform going forward.
CNBC noted that this rotation is being driven by growing investor weariness that the broader market will face a challenging environment next year due to a ballooning U.S. fiscal deficit, higher inflation, and an anticipated deceleration in the massive AI infrastructure capital expenditure cycle.
Furthermore, CNBC explained that the earlier narrative surrounding “software obsolescence”—where investors feared AI agents could replace traditional software packages—has largely receded as strong earnings expectations and new AI product partnerships revive confidence in the sector. Ultimately, CNBC observed that this shift in sentiment has created a pronounced divergence in the market, with software sector ETFs climbing sharply in recent months while semiconductor ETFs suffer extended, historic losing streaks.
monday.com is down 42.7% since the beginning of the year, and at $82.14 per share, it is trading 50.6% below its 52-week high of $166.21 from November 2025. Investors who bought $1,000 worth of monday.com’s shares 5 years ago would now be looking at only $184.70.
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