Tomorrow, Monday, monday.com reports third-quarter results, and more Israeli software companies follow later in the week. Headlines will be full of terms like ARR, net retention and guidance, and the stock may jump or plunge by tens of percent, sometimes even when the company 'beat estimates'. To understand why, it helps to know a few basic concepts.
Companies like monday.com, JFrog or Wix run a SaaS model, software as a service: customers do not buy software once but pay a monthly or annual subscription. So the most important metric is not the quarter's revenue but recurring revenue. ARR (Annual Recurring Revenue) is what the company expects to receive in a year from existing subscriptions if nobody cancels and nobody joins. It shows how big the 'base' is and how fast it grows.
The second metric is net revenue retention (NRR). It checks how much of the money from customers a year ago is still coming in today, including customers who expanded usage and minus those who left or cut back. Retention above 100% means existing customers alone are growing revenue, even without new ones. For companies that charge per user, like monday.com, this metric is especially sensitive: if customers cut staff, or replace some work with AI, they need fewer seats.
A third metric investors like is the 'Rule of 40': revenue growth plus a profitability rate, such as free cash flow as a percentage of revenue. A company where the sum exceeds 40% is considered well balanced between growth and profitability. And finally, guidance. Almost always, what moves the stock on results day is not what happened in the quarter but what the company expects for the coming ones. We saw it last week, when Atlassian beat estimates but plunged on a cautious outlook.
So what to watch tomorrow at monday.com? Growth relative to its 19% to 20% outlook for 2026, net revenue retention, the effect of cutting about 20% of its workforce on profitability, and any figure showing whether its AI and agent products are starting to generate revenue. Those numbers will decide whether investors see it as a company AI strengthens, or one it threatens.
