monday.com Ltd.

Good day. My name is Desiree and I'll be your conference operator today. At this time, I would like to welcome everyone to Monday.com's first quarter fiscal year 2026 earnings conference call. I would like to turn the call over to Monday.com's Vice President of Investor Relations, Mr. Byron Stephen. Please go ahead.

Hello, everyone, and thank you for joining us on today's conference call to discuss the financial results for Monday.com's first quarter fiscal year 2026. Joining me today are Roy Mann and Aaron Zimman, co-CEOs of Monday.com, Elrond Glazer, Monday.com CFO, and Casey George, Monday.com CRO. We released our results for the first quarter fiscal year 2026 earlier today. You can find our quarterly shareholder letter along with the investor presentation and a replay of today's webcast under the news and events section of our IR website at ir.monday.com. Certain statements made on the call today will be forward-looking statements, which reflect management's best judgment based on currently available information. These statements involve risks and uncertainties that may cause actual results to differ from our expectations. Please refer to our earnings release for more information. on the specific factors that could cause actual results to differ materially from a forward-looking statement. Additionally, non-GAAP financial measures will be discussed on the call. Reconciliations to the most directly comparable GAAP financial measures are available in the earnings release and the earnings presentation for today's call, which are posted on our investor relations website. Now, let me turn the call over to Roy.

Thank you, Byron, and thank you everyone for joining us today. Monday.com delivered a strong start to 2026. Q1 revenue grew 24% year-over-year, reflecting sustained demand for our platform as enterprises consolidate their work infrastructure. We generated a record $49 million in operating profit, demonstrating that our growth is increasingly efficient. Adjusted free cash flow margin expanded to 29%, underscoring the financial durability of our business model. Gross retention continued to improve in Q1, reaching historical highs for the company, reflecting how DeeplyMonday.com is embedded in how our customers run their businesses. Enterprise momentum continued to build with 42% of ARR coming from our customers with over $50,000 in ARR. A record number of new customers with over 500K in ARR and average contract values continued to expand. reinforcing that the consolidation of work infrastructure onto Monday.com is a durable enterprise-led trend. The market is also responding to our AI product. Approximately 10% of our net new ARR in Q1 was driven by AI, a figure we expect to grow as our AI offering expand and mature. We are also seeing the benefits of AI play out in SignedMinder.com itself. Since 2025, AI has driven a 32% increase in our output per developer and a 38% reduction in product time to market. AI gives our engineers the bandwidth to be more rigorous about the architecture, edge cases, and long-term maintainability. The result is a team that ships more and breaks less. We believe this is an early but meaningful signal of what AI-native engineering looks like in practice, and we intend to keep pushing on that frontier. Now, let me turn it over to Eran to walk you through some of the significant progress we've made in our AI-driven products during the quarter.

Thank you, Roy. At our investor day last September, we laid out a fundamental shift in how we see money.com. Not a platform that helps teams manage work, but one that actually does the work for them. Last week, we took the most significant step in that journey changing our core offering from Monday work management to Monday AI work platform. This is not a feature release or a rebrand. We have re-architectured the core of our platform around a single belief that work should be orchestrated between humans and AI agents at scale from a single system of records. AI agents that execute work, flexible software that adapts to how teams operate, and enterprise-grade governance, all grounded in MoneyDB, are a single source of truth that give AI the context to drive real outcomes. This quarter, we took that foundation further with MoneyDB 3.0, delivering a 100x increase in scale. from 100,000 items per board to over 10 million with high performance, low latency execution designed to accelerate AI adoption rather than constrain it. A standalone AI tool that can automate a task Monday can run an entire operation. And with more than 250,000 customers already running their work inside Monday, we have a data advantage that no point solution can replicate. Alongside the platform launch we're making an equally important change to how customers pay for Monday. We recently introduced a new seats plus credits pricing structure for new customers, moving to consumption-based pricing that aligns what customers pay with the value AI actually delivers. As AI agents takes on more work across organizations, revenue expands naturally without requiring additional seats purchases. We plan to allow existing customers to opt-in to this new model, with enterprise customers receiving complementary AI packages to support adoption at scale. In addition to that, we are excited to announce our agreement to acquire OneAI. Their team has spent years solving one of the hardest problems in enterprise AI, making voice agents that actually work in production environments. With this acquisition, we are bringing native voice capabilities directly into the AI work platform, extending the ways agents can engage with customers and teams. We are not managing Money.com as a company defending its position. We are rebuilding it as the company that defines what an AI work platform means for businesses. Q1 was a strong step in that direction. We remain focused on execution, and we look forward to demonstrating continued progress throughout 2026. With that, I'll turn it over to Elrond to cover our financial and guidance.

Thank you, Iran, and thank you to everyone for joining our call. Today, I'll review our first quarter fiscal year 2026 results in detail and provide updated fiscal year 2026 guidance. As Roy mentioned, we have had a strong start to 2026. Total revenue in Q1 came in at $351 million, up 24% from the year-ago quarter. Our overall NDR was 110% in Q1. We now expect overall NDR to slightly decline by the end of fiscal year 2026. As a reminder, our NDR is a trailing four-quarter weighted average calculation. For the reminder of the financial metrics disclosed, unless otherwise noted, I will be referencing a non-GAAP financial measures. we have provided a reconciliation of GAAP to non-GAAP financial in our earnings release. First quarter gross margin was 89% compared to 90% in the year-ago quarter. Research and development expense was $78.4 million in Q1, or 22% of revenue, up from 19% in the year-ago quarter. Sales and marketing expense was $158.2 million in Q1 or 45% in revenue compared to 48% in the year-ago quarter. General and administrative expense was $28.6 million in Q1 or 8% of revenue compared to 9% in the year-ago quarter. Operating income was $49 million in Q1 up from $40.8 million from the year-ago quarter and operating margin was 14% similar to the year-ago quarter. Operating margin in Q1 had an approximately 190 basis points negative FX impact, mainly from the appreciation of the Israeli checker compared to the U.S. dollar. Net income was $56 million in Q1 compared to $58.4 million from the year-ago quarter. Diluted net income per share was $1.15 in Q1, based on 48.9 million fully diluted shares outstanding. Total employee headcount was 3,211, an increase of 56 employees since Q4 25. For the remainder of fiscal year 2026, we expect headcount to stay largely flat, reflecting the productivity gains AI is already delivering across our organization. Moving on to the balance sheet and cash flow, we ended the quarter with $1.21 billion in cash, cash equivalents, and marketable securities, compared to $1.67 billion at the end of Q4 2025, reflecting $553 million of shares repurchased executed during the quarter. As of the end of Q1, approximately 182 million remained available under our existing share repurchase authorization program. Adjusted free cash flow for Q1 was 102.8 million and adjusted free cash flow margin was 29%. We now estimate that the accelerated share buyback executed during Q1 will reduce full-year 2026 adjusted free cash flow by approximately 20 million. Adjusted free cash flow is defined as net cash from operating activities, less cash used for property and equipment, and capitalized software cost, plus cost associated with the build-out and expansion of our corporate headquarters. Let's now turn to our updated outlook for fiscal year 2026. For the second quarter of fiscal year 2026, we expect our revenue to be in the range of $354 million to $356 million, representing growth rate of 18% to 19% year-over-year. We expect non-GAAP operating income of $46 million to $48 million, with an operating margin of 13% to 14%, which assumes a negative FX impact of 100 to 200 basis points. for the full year 2026 we expect revenue to be in the range of 1.466 billion to 1.474 billion representing growth of 19 to 20 year-over-year we expect full-year non-gap operating income of 185 million to 191 million with an operating margin of approximately 13%, which assume a negative FX impact of 100 to 200 basis points. We expect fully adjusted free cash flow of 280 million to 290 million, with adjusted free cash flow margin of 19% to 20%, which assume a negative FX impact of 100 to 200 basis points. Let me now turn it over to the operator for your questions.

Thank you.

We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star 1 again. If you are called upon to ask your question and are listening via speakerphone in your device, please pick up your handset to ensure that your phone is not on mute when asking your question. We do request for today's session that you please limit to one question and one follow-up question only.

Thank you. And our first question comes from the line of Raimo Lancho with Barclays.

Your line is open.

Hey, guys. This is Damon Cogganoff from Raimo. Thanks for asking the question. Can you help us understand the new updated NDR guide? As I think about the Q1 results and the full year guide, it seems like stabilization throughout the business. And then I look at the NDR guide and print across your cohorts. It just seems like there's more stability in results than maybe the guide. Yeah, any help there would be great.

Hi, Ryan. This is Eliran. So thank you for the question. So there is a lot on retention and expansion side that we are very positive on. Growth retention is at historical highs. We're still seeing double-digit seed growth year over year. in our mid-market and enterprise customers. 34% of our 50K customer score has adopted more than one product. It was 29% in Q4. So we're seeing a lot of positive signs. As a reminder, we're lapping the pricing actions from 2024, two years ago in 2025. And they increased our NDR by 102%. We're going to lap this at the end of Q2. And we don't believe that the expansion or new adoption will now be enough to offset some of the pricing rollover that we have seen in the past.

Got it. And I guess, can you just provide an update on the top of funnel demand that you're seeing now compared to the end of 2025? I know the initial 2026 guide did imply some degradation to the telefunnel, so I guess just what does the updated full year guide now imply, maybe compared to Q1? Thank you.

Yeah, so this is Iran.

So look, we have nothing new to report with PaceSearch. Overall, the telefunnel environment remains soft, but it's pretty much in line with our expectations that we gave in the beginning of the year. I would say that on top of that, ACV of new lands is increasing across touch and no touch. So we've seen high-quality leads coming into the platform. And we continue to manage performance marketing cautiously.

So pretty much in line with what we expected.

Next question comes from the line of Josh Baer with Morgan Stanley.

Your line is open.

Great. Thanks for the question. Congrats on a good quarter. I wanted to talk a little bit more about the new seats plus credits pricing model. Maybe to start, like, can you just provide a little more context on how exactly that works? And then also wondering what are the impacts in 2026 from the new model?

Yeah. Hi Josh, this is Iran.

So maybe I can start and then hand it over to Casey. So look, we're very excited for this change. It's the biggest change in the company history. We're changing the core offering of our product. With the new native agents within the platform, customers will be able to do the actual work in addition to managing work. Part of that change is that new customers will have two vectors of expansion. One with seats, meaning the more people they add, the more they pay for seats, the same way it used to be. But there's an additional vector on top of that for AI credits. So the more they consume AI credits, the more they pay, the more they're going to use our agents and other functionality. For existing products, it's going to be gradual. I'll let Casey kind of cover the change we're going to do with existing ones.

Yeah, so we spent a lot of time... Hi, Josh, by the way. We spent a lot of time getting feedback from our customers, and what we rolled out is very consistent with how they want to consume value in our platform. As you heard from Ron with our new customers, it comes with, you know, seats plus credits. For existing customers, it's going to be an opt-in motion, so we'll work with them over the next, you know, couple years as they look to move into this model. We are going to incentivize those customers to move to the new model, especially with our touch customers where we spend a lot of time with them building use cases and finding new ways for them to consume our platform leveraging AI.

Got it. Thank you. And so as far as 2026, are there any assumptions on the impacts from the new model, either from the new customers who are on it, or I guess also what are the assumptions as far as the adoption from existing customers? And then just last on this subject,

Hi, it's Eliran.

So, Joss, it's still early stage. You know, we will have much clearer picture in the coming months, and then we can provide updates or more color on what we're going to see. For now, we didn't assume any significant impact or any impact on the numbers.

AIDER with KeyBank Capital Markets. Your line is open.

Great. Thanks for taking our questions, guys.

I guess if I can just quickly follow up on that pricing model as well. Are you guys actually seeing either slowing in employee headcount or seat growth at existing customers, or are you just kind of making this change in anticipation just to decouple yourselves from being so dependent on seats? I'm curious whether it's forward-looking or you're actually seeing it today.

Yeah, thank you for the question.

We have not seen any degradation in demand relative to seats. What we have seen is customers looking to use our platform leveraging AI, and that's why we've launched this new platform. So overall, the demand continues to be strong for new seats, and we actually see acceleration in some of the emerging markets where we've invested. Upmarket is strong. Seat demand continues to be very solid, and they're taking on new workloads, leveraging AI.

Great. Okay. Thanks, Casey. Actually, I'll stick with you.

The larger lands, you know, from the – the direct sales motion with larger, you know, trying to land a little bit more upmarket. Curious how that's trended. I know the, you know, 50,000, 500,000 seats, but curious whether that's driven by new lands or people kind of graduating up into that segment of the customer base.

Thank you. Yeah, and it's both. We saw double-digit growth for both mid-market and enterprise segments relative to seats. Our ACB grew 22 percent year-to-year. You know, gross retention is at historical highs. And obviously, with RPO, we see some seasonal declines, which were anticipated. It's pretty much in line with what we've seen in prior Q1 performance. Pipeline is very strong. As a matter of fact, our March was one of the strongest months we've ever had. So, as we move up market, as we've talked about before, we get exposed to the buying cycles of those larger customers. So we see less linearity in the quarter, but really delivering in the last month of every quarter seems to be consistent.

Okay, thank you.

Next question comes from the line of Mark Murphy with J.B.

Morgan. Your line is open.

Thank you so much, and I'll add my congrats on a very nice performance. So with the understanding you had a solid quarter and the gross revenue retention improved, could you share what you are observing within the customer base in the last several months as Claude Code and Claude Co-Work have proliferated globally pretty rapidly? In other words, I'm just curious, what are your customer conversations like regarding those products? They do bring forward some advancements in code generation, no code, low code, agentic. I'm wondering if some of your customers are maybe using them in conjunction with Monday or maybe something that you just don't see popping up too much.

Yeah. Hi, it's Roy. So yeah, we see a lot of customers having purchased a cloud and what our vision is having agents and people work together on the same platform and that also includes external agents. So if you noticed, we opened up the platform completely to have any agent that is even external to Monday sign up on itself and get an account, a seat, and so that touches what Eran said on the hybrid model of having agents, whether they are external, they will have seats, and our internal agents, which work really well within the Monday platform, and also external with other platforms. So this is the future we see, and that's like perfectly aligned, and it's great to see adoption of AI.

Maybe I'll just add on top of that, I think there's a big difference between people using plot code or equivalent products on their own and using that around work with other people in collaboration. And we see a lot of customers, I think, you know, agents essentially, it's an amazing technology, it can be used in different ways. But I think where we shine is exactly how customers want to adopt it in a way that's kind of integrating their work, working with other people, and native agents built within a work platform. So I think a lot of our customers are looking for a solution like that where they can leverage AI and put that into their existing workflow.

Okay. And then as a quick follow-up, the stat that shows 10% of the new ARR in Q1 was driven by AI, it's pretty impressive. Could you drill down into the stats so we just understand You know, how are you deriving that? What are you counting in there? Is it Monday vibe? Is it the agents and AI workflows? Is it the AI credit packs? If someone upgrades to pro or enterprise and you deem that to be, you know, AI influenced or relating to some AI project, would you count something like that in there, et cetera?

Yeah.

Hi, this is Ron. So when we say AI contribution, we mean direct contribution, not contribution made possible by AI. Currently, it doesn't include the agent product because it was just released about a week ago. Currently, what drives the AI revenue is our existing offering, including Vibes, AI Blocks, Sidekick, and so on. Obviously, with agents, we have expectations for this to rise going forward, so it's still early days.

Thank you.

Next question comes from the line of Howard Ma with Guggenheim Securities.

Your line is open.

Hey, thanks. I want to add my congratulations on a strong quarter as well. I want to ask about pricing and packaging. If we look six months from now, so heading into 2027, how much of your customer base do you think will be on this new seat-based plus usage-based pricing model? And Do you expect different adoption trends between mid-market versus large enterprise? And one more part, too, is where does One AI fit into pricing? It will be a separate add-on.

Yeah, so hi, this is Laurent. So look, as I said, we're opening up the ability to purchase agents for new customers. We feel the adoption for existing ones is going to be very gradual, so it It's hard to estimate that right now. I think we'll be able to provide more call-out going forward. New customers will buy both seats and AI credits. But again, it's really hard to give any more information about this right now. I would say that we're very excited for the 1A acquisition. It's a very strong team with a lot of special knowledge about voice agents. We plan to integrate that deeply into our AI work platform. also into our CRM. In terms of the commercial fit, we're still working through the precise packaging and pricing, but definitely it's gonna be part of our AI credit consumption model. So overall, I think it's a great addition to the team. They bring a lot of knowledge and expertise. I think overall voice, we need to separate the technology from the adoption. Adoption is very complex among every customer. And I think they bring a lot of knowledge and expertise to help drive more adoption within our existing customer base.

Okay, got it. Thank you, Eran. And as a follow-up for Eliran, I want to ask about your expectation for headcount being flattish this year. I think last quarter you had called out headwinds from the Israeli shekel appreciation foregone interest payments due to share buybacks and cash taxes. I think those are the three items. I think the headcount being flat should give you a lot of cushion relative to those headwinds, unless there are any other headwinds that we should consider.

Hi. So with regards to headcount being flat, this is being staged throughout the year. So there is still the impact of the hiring that we have done in prior years and the fact that the shekel is strong versus the dollar. So there is going to be some benefits from that, but we're going to see it more into going into next year rather than this year.

Okay, thank you.

Next question comes from the line of Steve Anders with Citi. Your line is open.

Okay, great. Thanks for taking the questions here.

Maybe just follow it up on some of the guide philosophy, and I think, you know, trying to understand a little bit better just the upside that you saw this quarter. I guess, A, like, what was the kind of key factors that drove the revenue upside? And then, I guess, B, kind of moving forward, how should we think about, you know, I guess, the kind of what's kind of assumed there? Maybe what's different in the guide philosophy versus what we saw in 1Q?

Hi, Steve. This is Eliran. So nothing has changed since what we have provided in Q1, but what we have seen is the outperformance was broad-based. It wasn't driven by any single segment and, you know, court or region. It was broad-based. Of course, upmarket momentum remains strong, as Casey spoke about. We have record net heads of 500K, and we continue to grow upmarket. And obviously, the AI contribution, as we mentioned, 10% of the net new ARR approximately is coming from AI. So this is encouraging drivers that kind of drove the results and the bid for this quarter.

Okay, that makes sense. And then on, I guess I want to follow up on some of the agents' discussion and kind of curious to how you're kind of viewing the monetization angle for both first-party agents and also for third-party and I guess kind of where you kind of feel like you have the right to win on, you know, using Monday homegrown agents versus where it makes sense for third-party agents to be utilized instead?

Yeah, hi, it's Roy.

So, we see that agents are going to be everywhere. Like, really, people will have them for many different things, like personal assistance and maybe other different agents, and those we want to allow them into Monday to help people manage whatever they want to manage, whether it's even to know what's going on. Monday's own agents are really, really good at execution and analyzing and executing work. and doing that together with other people. So the collaboration part being built on top of Monday gives them access to all the data seamlessly, and they're out of the box working really well, while people can customize them to do any kind of work and also connect them to other platforms. So we feel as part of the future vision we have of doing the work and not only managing the work, those agents, are going to be the best collaborative agents between people and agents together.

Okay, perfect. Good to hear and thanks for taking the questions.

Next question comes from the line of Brent Thiel with Jefferies. Your line is open.

Hi, thank you. This is John for Brent Thiel. Two questions. On the AR credit pricing, the table... There's a lot of parameters depending on what type of use there is. But even at one cent per credit, I mean, that could balloon up for customers. So I'm wondering how, you know, customers will measure what's been the customer reception on that new pricing table. And then second question, I don't know if you can talk a little bit about the in-quarter NDR since I guess the $100,000 plus has come down a little bit. And you did a little bit of pricing lapping the factor. Thank you.

This is Casey George.

So as it relates to the pricing model for AI credits, so it's been clear from our customers that they want transparency and control and governance of those credits. So we're giving them that as part of the platform, right? So they can see exactly who's using the credits, what is it used for. They can scope out the work that's being done so that they can plan accordingly for their AI credit usage. So we're seeing that as a big driver for our platform. We continue to get feedback from customers that that's what they want to see, so we're giving that power to the customers so that they can govern their credits. I'll hand it back to Iran to answer the follow-on question.

This is Aliran. Hi, John. I will answer the question on the NDR. So, John, to your question, so first of all, land and expand dynamics, so we are seeing recent enterprise deals They are lending bigger, but larger customers typically commit to a multi-year agreement with more structured expansion. So if you think about the 100K customers, they are lending and taking multi-year deals. So this is, you know, one of the reasons why we're saying that the 100K NDR is slightly below the 50K one. It's not related to churn. Actually, our growth retention is at all-time high. And we expect, and it's important to say, we expect that 1% or 2% of temporary pressure for the upmarket NDR metrics, for the reminder of fiscal year 2026, as we'll have the pricing benefit that we spoke about.

Thank you. Next question comes from the line of DJ Hines with Canaccord.

Your line is open.

Hey, thank you, guys, and congrats on the nice quarter. Elrond, does the addition of usage-based elements into the model more effectively match your revenue with your costs tied to AI so that we could see better gross margin preservation over time?

So we said, you know, when we were in the investor that we said that we expect gross margin to be mid-80s, we were used to 90%, but because of the computing cost of AI, we said that we are expecting for the short-term or for you know, the foreseen future to have some impact. Overall, again, we're not seeing yet a significant impact on our growth margin, but we believe there is going to be additional costs regarding computing costs related to AI. Okay.

And then, Iran, maybe following up with you, one on the product side, does the addition of voice capabilities with One AI push you any closer to turning service into more of a customer-facing application over time?

Yeah, so I think currently we're gonna focus mostly on the integration into CRM and network platform. Going forward, it's definitely also an opportunity for the service team. But overall, I think voice capabilities are important almost in any product right now. And like I said, the hardest part is not using the technology, but actually customize it to your own needs. And I think both with agents and voice, this is exactly where we can shine. People are amazed at the technology where it's very hard to use it, especially when it's used through a prompt or a very hard to use user interface. And I think Monday really can help customers adopt agents and also voice agents in a very easy and intuitive way.

Yeah. Okay. Thank you.

Next question comes from the line of Alex Zukin with Wolf Research.

Your line is open.

Hey, guys. Thanks for taking the question. Maybe the first one on new product ARR. It was north of 11%. Now it continues to grow nicely. But maybe just can you dig in a little bit on the interplay between CRM and service? Maybe share some details on that progress in the quarter.

Yeah. So, hi.

This is Aaron. I'll just give a kind of high-level number. So as we said, new products account for over 11% of our ARR. We see significant opportunity to accelerate across our presentation, especially mid-market segment. We see more and more customers adopting more than two products and even more. CRM, as we said, we suppressed 100 million. We continue to grow very nicely, mostly in the SMB segment. And the new products, campaigns is off to a strong start as well. In regards to service, we still see 70% of our ARR coming from big markets and enterprise. So the ATVs is the highest across all products. Most of the growth with service is driven by seed expansion and cross-sell with customer support workflows. So overall, we continue to see good demand across the ARR main service. We continue to see acceleration. inauguration, but expansion of seats and usage.

And we're very happy with the adoption so far.

Okay, perfect. And then maybe just a second one. The comments on maybe why the $50,000 and $100,000 ARR sequential ads were a bit lower, I realize some of that is seasonality, but I think in the last six, seven months you talked about shifting performance marketing from lower-end resources towards the upmarket, higher-end. Maybe just comment on the performance of that shift. Is that driving out performance? Is that something we'll see later this year as seasonality improves?

Hi, Alex. This is Eliran. So we said that there is some seasonality. Usually with Q4 and Q2 are the strongest upmarket performance. We saw a record net ads of 100K in Q4 last year. So there was possibly some pull forward. And when we look at the mid and upmarket metrics, we look at them as a whole. So if you think about the 50K and the 500K customers, they were very healthy with 500K net ads. at historical high. So we look at them all together and this is what kind of the way we view it.

Great, thank you guys.

Next question comes from the line of Taylor McGenies with UBS.

Your line is open. Yeah, hi, thanks so much for taking my question. You mentioned that the strength in the quarter was broad-based, but it did seem like a bit of a turnaround from the trends that we saw last quarter and the upside was higher. So I guess anything surprise you in the quarter in terms of areas that were stronger than expected? And then when you think about some of those trends, maybe you could unpack what you're seeing at the start of 2Q as well. And then not to throw too many questions in there, but just a housekeeping item on Do you mind unpacking FX impact to revenue in the quarter and what's being expected for the full year guide?

Hi, Taylor. This is Eliran. So as we said, I think the positive surprise was AI contribution with ARR growing to almost 10% of net added ARR coming from the AI product. And this is something that we are very pleased with. Other than that, we continue to see the upmarket momentum that we have seen in the past, and enterprise customers continue to grow with the 500K net ads and numbers. With regards to FX, we did see small tailwinds from FX in Q1, but it didn't impact the overall reported growth rate, so it was very small.

Great. Thank you so much. Next question comes from the line of Alan Verkovsky with BTIG.

Your line is open.

Hey there, thanks for taking the question and congrats on the strong quarter here. Can you talk about the level of engagement you've seen with your MCP? What types of customers you've seen use it more? Are there any trends you've seen thus far in terms of expansion activity of customers that have used MCP? And then I've got a quick follow-up.

Yeah, hi, this is Iran.

Yeah, we see some issues through the NCP protocol, and overall we see more and more agents signing up to the platform. We actually did invest a lot of work making Monday accessible to agents and make it easy to agents to use the platform and sign up, but it's still not very significant numbers.

Yeah, it's small numbers, but the ones who use it have a way stronger retention profile.

Got it. And then maybe just as a follow-up to an earlier one about your guidance, as it looks like the Q2 revenue guide implies lower sequential growth than Q1, despite being a seasonally stronger quarter. So can you just unpack, like, what are you factoring in there? How much of it is prudence versus maybe potential impacts from any new dynamics you're seeing there?

Hi, this is Eliran. So what we said is basically that we provide our guidance based on everything that we know today. And we believe that with the investment that we're doing on AI and the fact that we're going to see the impact throughout the year, we remain focused basically on managing the year expectation rather than looking at just the next quarter. So on the cost side, we're investing in our product and GTM capabilities. The potential increase of expenses from AI, as I mentioned earlier, compute, we are expecting this to be increasing throughout the year. And there is an inherent uncertainty on how that revenue ramps when we are thinking about throughout the rest of the year. So when we take all of this together into account, our guidance does imply some moderation in H2.

Perfect. Thanks, guys.

And our last question comes from the line of Matt Bullock with Bank of America. Your line is open.

Great. Thanks for taking the question. I wanted to follow up on the 10% of net new ARR coming from AI products. It seems like it was one of the sources of upside in the first quarter. So maybe it'd be helpful if you could help us think through the assumptions for consumption-based revenue or AI product revenue for the 2026 guide and how to think about that as a potential upside lever as we move throughout the year.

Yeah. Hi, Matt. This is Ron. So, look, as I said, all the AI revenue that we got this quarter was not from AI agents and consumption, mostly driven by Vive and AI blocks and scikit. We still don't know how to model and expect revenue coming from agents and token-based usage. Happy to give some more color next quarter, but it's really hard to kind of model it out right now.

Understood. And then just one quick follow-up, if I could as well. Can you just help me think through some of the incentives you're going to be providing the enterprise customers to migrate them over to the new C++ usage model?

Yeah, happy to.

So our customers today are buying AI capabilities a la carte. We'll continue to make that offer available to them, but we're also looking at ways for where they can buy, just like our new customers, where they get incentives for buying AI packages along with their products. So that's how we're looking at it. Those have not been announced yet. We'll look to do that. And again, it's an opt-in policy for our existing customers. We are not forcing any of our existing customers to move. But again, we're going to make it highly incentivized for them to do that.

Yeah, and just to add to that, it's not a migration. It's like a flip the switch kind of thing. There is nothing they really need to do other than agree to it. There's no sort of migrating anything.

Understood. Thank you.

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