monday.com's second-quarter 2025 results reveal a significant surge in operating expenses that is outpacing revenue growth, leading to a contraction in operating margins. This financial trajectory has intensified investor concerns regarding profitability, with the company's stock underperforming broader market indices year-to-date.

monday.com's Q2 2025 Performance Highlights Expense Surge

monday.com (MNDY) reported its second-quarter 2025 financial results, indicating a notable increase in operational expenditures that has begun to outpace the company's revenue expansion. This trend has resulted in a contraction of key profitability metrics, raising questions about the sustainability of its current investment strategy and its broader market valuation.

In the second quarter of 2025, monday.com posted revenues of $299 million, representing a year-over-year increase of 27%. This marks a deceleration from the 34% growth observed in the comparable period of 2024. The outlook for the third quarter of 2025 projects further slowing, with revenue growth anticipated at approximately 24.3%.

Simultaneously, the company's expense burden has intensified. Research and development costs surged to 20% of revenues in Q2 2025, up from 16% a year earlier, reflecting increased investment, particularly in AI-related initiatives. Sales and marketing expenses continued to consume a substantial portion of revenue, accounting for 47%. Furthermore, a projected 30% expansion in headcount for fiscal year 2025 suggests that these elevated costs are likely to persist.

Margin Contraction Signals Weakening Operating Leverage

The accelerating costs have directly impacted monday.com's operational efficiency. The non-GAAP operating margin contracted to 15% in the second quarter of 2025, down from 16% in the prior-year period. While non-GAAP operating income increased to $45.1 million, representing a 17% rise, this growth lagged the 27% increase in revenue, pointing to a weakening of operating leverage. On a GAAP basis, the company reported an operating loss of $11.6 million (a negative 4% margin) in Q2 2025, a shift from a GAAP operating income of $1.8 million (1% margin) in Q2 2024.

This combination of slowing top-line growth and rising operating expenses creates a challenging environment for margin stability, fueling investor concerns about the company's ability to translate revenue into proportionate profitability.

Market Underperformance and Competitive Landscape

Investor apprehension is reflected in MNDY's stock performance. Year-to-date, shares of monday.com have declined 19%, significantly underperforming both the Zacks Internet - Software industry, which saw a 15.4% increase, and the Zacks Computer and Technology sector, which advanced 20.4% during the same period. From a valuation perspective, MNDY currently trades at a forward 12-month Price/Sales ratio of 6.84X, which is above the industry average of 5.74X.

The competitive landscape further highlights these challenges. Rivals such as Salesforce (CRM) and Atlassian (TEAM) demonstrate more efficient growth models. In Q2 2025, Salesforce reported 11% year-over-year revenue growth while maintaining a non-GAAP operating margin above 30%. Atlassian delivered 22% revenue growth alongside a 24.3% non-GAAP operating margin, showcasing their ability to scale profitably even with significant expansion.

Analyst Sentiment and Forward Outlook

Analyst sentiment, as reflected by Zacks Investment Research, currently assigns monday.com a Zacks Rank #5 (Strong Sell). This rating is primarily influenced by recent negative revisions in consensus earnings estimates. The consensus earnings estimate for the current fiscal year has experienced a substantial downward revision of 30.1% over the last 30 days.

Looking ahead, the ongoing interplay between decelerating revenue growth and an aggressive spending trajectory suggests continued pressure on MNDY's profitability and stock performance. The company's ability to effectively manage its operational expenses, particularly in areas like R&D and sales & marketing, or to significantly re-accelerate revenue growth, will be critical. Challenges in small-business customer acquisition, partly due to changes in search algorithms, also add to the headwinds the company faces. Investors will closely monitor monday.com's strategic adjustments to restore operating leverage and achieve more efficient growth in a competitive market.