Monday.com shares dropped over 25% on August 12, after the company reported a return to operating losses in Q2, despite surpassing revenue expectations.

The Tel Aviv-based software company posted US$299 million in revenue for the quarter, up 27% year-on-year, beating analyst estimates of US$293.6 million.

A sharp rise in development expenses, from US$50 million last year to US$87 million, led to an operating loss of US$11.6 million, compared to an operating profit of US$1.8 million last year.

Adjusted operating profit was US$45.1 million, up from US$38.4 million, with the operating margin slipping slightly to 15%.

Net income was US$1.5 million, supported by interest income.

For Q3, Monday.com expects operating profit to drop to US$34 million to US$36 million, with revenue projected to rise 24% to 25% to around US$313 million.

The company maintained its 2025 revenue forecast of about US$1.2 billion.

🔗 Source: Calcalist

🧠 Food for thought

1️⃣ Monday’s R&D spending aligns with growth-stage benchmarks despite market punishment

Monday.com’s R&D spending of $87 million represents 29% of its $299 million quarterly revenue, which falls within the 25-30% range typical for high-growth SaaS companies12.

Despite this industry-standard investment level, the market punished Monday with a 25% stock drop, highlighting the tension between necessary growth investments and investor expectations for immediate profitability.

The company’s 74% year-over-year increase in R&D spending mirrors broader industry patterns, where major tech companies have historically grown R&D budgets at around 22% annually, though this has recently slowed to 7%3.

This suggests Monday’s aggressive R&D scaling may be strategically sound for long-term competitiveness, even if it creates short-term margin pressure.

The disconnect between Monday’s fundamentally healthy R&D ratio and negative market reaction illustrates how investors often overlook the necessity of sustained innovation investment in the competitive software landscape.

2️⃣ Market timing may favor Monday’s growth investment strategy