monday.com Q2 FY26: Seats-Plus-Credits Model Gains Traction

What happened

monday.com's Q2 FY26 results, as reported by Seeking Alpha, showed a 22% YoY revenue beat, a 17% non-GAAP operating margin, record net additions in the $100K+ and $500K+ customer cohorts, and a sequential doubling of AI ARR. These figures mark a notable improvement over the prior quarter's 14% non-GAAP operating margin and suggest that the seats-plus-credits pricing model is beginning to monetize AI usage without immediate margin compression. The DeepValue master report had previously flagged uncertainty around AI monetization and the risk that third-party AI compute costs could pressure gross margin, and Q2 results appear to alleviate some of that concern. However, the report also noted that the company still has not quantified AI revenue contribution in official filings, and one strong quarter does not guarantee durable NDR improvement or margin protection. Overall, the new data supports a more constructive view, but investors should remain vigilant about the sustainability of these trends and the potential for AI-related costs to erode profitability over time.

Implication

Over the next 6-12 months, the key test will be whether monday.com can sustain high NDR (ideally above 115%) and protect gross margin as AI usage scales, because the company's own filings warn that third-party AI compute costs can pressure margins. If AI ARR continues to grow rapidly and the company provides transparent disclosure on AI contribution, the market may re-rate the stock toward the article's $153 price target, which would imply substantial upside from current levels. Conversely, if gross margin deteriorates in subsequent quarters or if overall NDR fails to improve, the bear scenario from the DeepValue report (implied value $60) becomes more likely, and the recent optimism could reverse quickly. Management's ability to balance seat-based revenue with consumption-based credits will be critical, as any sign that AI is cannibalizing existing seat revenue rather than adding incremental spend would undermine the thesis. Therefore, investors should monitor Q3 FY26 results closely, paying particular attention to the gross margin trend, NDR by cohort, and any explicit disclosure of AI ARR or consumption revenue, before adjusting positions materially.

Thesis delta

The Q2 FY26 performance shifts our thesis from cautious to more constructive, as the AI ARR doubling and enterprise cohort expansion provide concrete evidence that the seats-plus-credits model is working. However, we remain skeptical that this trend is immediately sustainable without margin pressure, given the company's own warnings about AI compute costs and the lack of quantified AI revenue in filings. The article's $153 price target appears aggressive relative to our base case of $95, but if Q3 results confirm the momentum, our base case could move toward the bull scenario of $125.