Monday.com (MNDY) had a pretty good quarter. The market did not care. The work management software company reported third-quarter results that beat expectations across the board, then told investors growth is about to slow down. The stock fell 7.31% to $81.50 by Monday afternoon.

Here's the scorecard: Q3 revenue came in at $377.535 million, up 19% year over year and above the $369.169 million analysts expected. Adjusted earnings of $2.14 per share crushed the $1.37 consensus. Net dollar retention was 108%, and 112% for customers with more than 10 users. Customers spending more than $50,000 in annual recurring revenue grew 26% to 5,038. Adjusted operating margin expanded to 24% from 15% a year earlier.

So why the selloff? The forward guidance. Monday.com sees fourth-quarter revenue of $380 million to $382 million, below the $385.665 million consensus. That implies growth of about 14%, down from 19% in Q3. Adjusted operating margin is expected to be roughly 18%.

CFO Eliran Glazer warned that weak demand from smaller businesses and longer enterprise sales cycles could persist into 2027. He added that stabilizing revenue growth would take several quarters. Management also flagged cautious AI spending and continued SMB weakness as headwinds through 2027.

The AI pivot is expensive

Monday.com is repositioning itself as an AI-first, enterprise-focused business. Co-CEO Roy Mann outlined plans to expand enterprise adoption through hybrid seat-and-AI usage pricing and implementation services under Monday Frontier. Co-CEO Eran Zinman said AI ARR reached $36 million, helped by stronger adoption among larger customers.

The record 24% adjusted operating margin got a boost from workforce reductions and lower expenses, according to Glazer. But the company plans to reinvest most of the roughly $100 million in gross restructuring savings into AI, employee compensation and other initiatives. That reinvestment is part of why the margin outlook for Q4 steps down to about 18%.

Cash flow told a similar story. Operating cash flow fell to $20.4 million from $95.1 million a year earlier. Adjusted free cash flow declined to $63 million from $92.3 million. Monday.com ended the quarter with approximately $1.1 billion in cash, cash equivalents and marketable securities.

The full-year picture

For 2026, Monday.com raised its revenue forecast to $1.473 billion-$1.475 billion from its previous outlook of $1.466 billion-$1.474 billion. Analysts expect $1.471 billion. It also increased its full-year adjusted operating margin forecast to approximately 18% from 16%. Adjusted free cash flow is expected to be $282 million-$288 million, a 19%-20% margin.

The company is essentially asking investors to trade near-term growth for a bigger enterprise and AI opportunity down the road. Whether that trade pays off depends on whether those longer sales cycles shorten and whether SMB demand stabilizes. For now, the market is pricing in patience. Or at least, it's pricing in a wait-and-see approach.