U.S. software stocks rebound as investors reassess AI risks
Software stocks bounced as AI fears eased, and monday.com’s bet is now on proving AI boosts retention, pricing, and product value. That put its recent AI pivot under the market’s microscope.
U.S. software shares climbed as investors rotated back into application-layer names and away from the chipmakers that had powered much of the AI trade. For monday.com, the move signaled something bigger than a one-day rebound: public markets were again rewarding software companies that can show AI lifts product value, customer spending and retention, not just headlines.
monday.com has already spent the spring trying to meet that standard. On May 6, the company said it was going all in on AI and recast itself from a work management platform into an AI work platform. Five days later, in first-quarter results, monday.com reported revenue of $351.3 million, up 24% from a year earlier, along with record GAAP operating income of $19.8 million and record non-GAAP operating income of $49.0 million. Net cash from operating activities reached $104.7 million, while adjusted free cash flow was $102.8 million. Net dollar retention came in at 110% overall, 114% for customers with more than 10 users and 115% for customers with more than $100,000 in annual recurring revenue.
Those numbers matter because monday.com spent much of February under pressure from the same AI anxiety that has hung over the sector. On Feb. 9, the stock fell about 21% after the company issued conservative guidance and investors worried that agentic AI tools could erode the software model. The company projected second-quarter revenue of $338 million to $340 million and full-year 2026 revenue of $1.452 billion to $1.462 billion, below a FactSet estimate of about $1.48 billion. CNBC said the stock had already lost about half its value for the year at that point and more than three-quarters from its November 2021 peak. Co-CEO Eran Zinman said then that monday.com did not see any current impact from AI companies, but it was shifting product, messaging, ads and its homepage to become more AI-native.
The latest results suggest the business is still growing efficiently even as the market re-rates SaaS risk. monday.com finished 2025 with revenue of $1.232 billion, up 27%, and 87 customers with more than $500,000 in annual recurring revenue, up from 50 a year earlier. It also said paid customers with more than 10 users reached 65,016 in the first quarter, up 7% year over year.
The product roadmap is now part of the valuation story. In March, monday.com launched Agentalent.ai, a hiring platform for enterprise AI agents, and the company said monday vibe was the fastest product to cross $1 million in ARR in its history. For engineers, product managers and sales teams, the message from the market is clear: AI is no longer a shield for software stocks, it is a test of whether a platform can become more useful, more sticky and more monetizable as the technology spreads.
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