On Monday, shares of Monday.com experienced a significant decline of over 19%. This drop followed the company’s release of disappointing guidance, amid surging worries that artificial intelligence is impacting traditional software business models.
The Israel-based firm projected revenue for the current quarter to be between $338 million and $340 million, falling short of analysts’ expectations of $343 million, according to a FactSet survey. For the entire year, Monday.com anticipates revenue between $1.452 billion and $1.462 billion, compared to the FactSet estimate of $1.48 billion.
In recent weeks, the software sector has experienced a substantial sell-off, driven by increasing concerns over AI disruption and fears that emerging autonomous tools might render traditional software obsolete.
This year, the iShares Expanded Tech-Software Sector ETF (IGV) has declined by 22%, while Monday.com’s shares have already lost half of their value.
During a recent earnings call, the company’s management defended its market position, emphasizing the integration of new AI features, including agent capabilities and a ‘vibe’ feature, aimed at boosting conversion rates and user engagement.
“We currently don’t perceive any impact from any AI company, and we’re proactively shifting our product to be more AI-centric,” stated Eran Zinman, co-CEO and co-founder.
Zinman mentioned that the company is reorienting its advertisements and homepage to highlight AI capabilities.
Despite these efforts, management cautioned about persistent volatility in the market this year, attributing it to short-term pressures on margins from foreign exchange fluctuations.
For the fourth quarter, Monday.com reported earnings of $1.04 per share, excluding certain items, surpassing the LSEG expectation of 92 cents per share. Revenue increased by 25% year-over-year to $333.9 million, exceeding the $329.6 million forecast by analysts.
Looking ahead, Monday.com is projecting operating income between $165 million and $175 million for the year, falling short of the FactSet estimate of $220.2 million.
In summary, Monday.com faces substantial challenges as it navigates concerns over AI disruption and adjusts its business strategy. The company is working to enhance its offerings with new AI-driven features, aiming to stabilize its market presence in these turbulent times. The future will undoubtedly be crucial as it strives for recovery and growth.
