This AI-Powered Software Stock Dove 19% After Earnings. Here’s Why.

Monday.com issued weaker-than-expected guidance for the fourth quarter ending in December. (Dreamstime)

Key Points

• Monday.com reports adjusted earnings of $1.16 a share and revenue of $316.9 million, exceeding analyst expectations.
• Shares of monday.com drop sharply after the company forecasts fourth-quarter revenue of $329 million, below analysts’ estimates.
• The company, known for its work operating system, has integrated AI into its products and launched three new AI-powered features in July.

Cloud-based software company monday.com posted better-than-expected third-quarter earnings on Monday, but shares took a dive as one detail overshadowed any bright points.

Monday.com reported adjusted earnings of $1.16 a share, handily beating the 88 cents analysts had anticipated, according to FactSet. Revenue climbed 26% to $316.9 million, beating the $312.3 million consensus.

However, shares dove as much as 19% after the company forecast $329 million in revenue for the current quarter ending in December, compared with analysts’ calls for $333.7 million. The stock was down more than 15% in midday trading.

The market reaction was nothing new: The stock slid after the last report, in August, when a weak third-quarter outlook overshadowed otherwise solid earnings and a full-year guidance raise. Coming into Monday, shares had fallen nearly 20% this year.

The company is known for its work operating system, or a customizable software platform tailored to product management. It has increasingly integrated artificial intelligence into its products, and launched three new AI-powered features in July.

Monday.com competes with the likes of Atlassian and Asana, shares of which were up 0.4% and 0.6%, respectively. The tech-heavy Nasdaq Composite was up 2%.

Write to Mackenzie Tatananni at mackenzie.tatananni@barrons.com