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There's no case of the "Mondays" today for project management software company Monday.com (MNDY) after it reported an impressive beat-and-raise Q4 earnings report, sending the stock rocketing higher. Similar to competitor Atlassian (TEAM), which delivered its own beat-and-raise performance on January 30, MNDY saw strong demand from enterprises as the number of customers with over $100K in ARR jumped by 45% yr/yr to 1,207. These enterprises are gravitating towards MNDY's new AI tools and products, including its recently launched Monday Service product, a platform that consolidates requests, incidents, projects, and business data that's now available to all of its customers.

• MNDY has an established track record of easily beating EPS and revenue estimates -- it has done so in every quarter over the past five years -- but its guidance has disappointed from time to time. For instance, last quarter, the stock plunged after the company's Q4 revenue guidance was merely in-line with expectations and signaled a sharp slowdown in growth to about 29% from nearly 50% in Q3. This time around, MDNY guided 1Q25 and FY25 revenue slightly ahead of expectations, fueling excitement that its AI investments will pay off in an even bigger way this year.
• Looking beyond Monday Service, the company is also rolling out AI Blocks, Product Power-ups, and Digital Workforce as key focus areas for 2025. AI Blocks are pre-built AI functions that are accessible and integrated into its automation tools, such as project management, that handle more repetitive work, enabling the user to focus on higher-level tasks. Power-ups are a suite of products, covering areas like resource management, CRM data automation, and predictive risk management, that will be embedded into MNDY's platform.
• The downside is that the company's rising AI investments will weigh on its profitability in FY25. MNDY is forecasting non-GAAP operating margin to slide to 11-12% in FY25 from 14% in FY24, but investors are shrugging this modest decline off, instead focusing on the company's AI-centered growth opportunities.
• Opportunities to up-sell and cross-sell new AI products should only bolster MNDY's already strong net dollar retention rate, which ticked higher to 112% from 111% last quarter. This metric was even higher for customers with more than $100,000 in ARR at 116%.

The main takeaway is that MNDY is emerging as a favored AI play as adoption grows for new products like Monday Service and as it launches a set of new AI tools. With a forward P/E north of 68x, the stock is far from cheap, but MNDY's track record of outperformance and its consistent top-line growth of 30%+ warrants a premium valuation in our view.