Monday.com Ltd (NASDAQ:MNDY) provided mixed guidance for fiscal 2026, reflecting a tougher market environment, while concerns remain about seat expansion in the collaboration space, according to Piper Sandler analyst Billy Fitzsimmons.

The Monday.com Analyst: Fitzsimmons downgraded the rating from Overweight to Neutral. He also reiterated a Buy rating, while cutting the price target from $100 to $85.

The Industry Thesis: This year has so far been "rough" for enterprise software, Fitzsimmons said in the downgrade note.

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Investors had earlier been looking to software companies to monetize AI to drive revenue acceleration, the analyst stated. He added, however, that companies that were earlier building the AI are moving up the stack.

This means they are also competing for the same limited corporate budgets as traditional software companies, the analyst explained.

"Investors have moved from being excited about AI to reassessing terminal multiples and scrutinizing both profitability and SBC (stock-based compensation)," he further wrote.

The Monday.com Guidance: Monday.com provided "disappointing" guidance for fiscal 2026, projecting revenue growth at 18.3%. That’s significantly below consensus expectations of 20.5%. Management's guidance suggests that the company's operating margins could contract by 2.6 points and free cash flow margins by 6.8 points.

Performance marketing headwinds have resulted in higher customer acquisition costs for small-and-medium business customers, the analyst mentioned. "The collaboration space has seen greater investor scrutiny given concerns around seat expansion, cited performance marketing headwinds, and generally slowing growth rates," he further wrote.

Monday.com seems to be "doing all the right things," Fitzsimmons says. For example, it added new tools and launched a hiring platform for enterprise AI agents (Agentalent.ai).

Even if software sentiment recovers, "collaboration sentiment may lag broader software sentiment," Fitzsimmons added.

MNDY Price Action: Shares of Monday.com had declined by 1.62% to $62.52 at the time of publication on Tuesday.

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