What Should Investors Do With the New Wave of IPOs?

In this episode of Motley Fool Hidden Gems Investing, Motley Fool contributors Jon Quast, Matt Frankel, and Rachel Warren discuss:

• Monday.com’s financial results for the first quarter of 2026.
• The upcoming Cerebras IPO.
• Mailbag: Trim my winners to raise cash or deploy new cash?

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A full transcript is below.

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This podcast was recorded on May 11, 2026.

Jon Quast: What should investors do with a new wave of IPOs coming? You're listening to Motley Fool Hidden Gems Investing. Welcome to Motley Fool Hidden Gems Investing. I'm Jon Quast, and I'm joined today by Fool contributors Matt Frankel and Rachel Warren. Later in the show, we do want to talk about a new IPO that is coming to market, as well as a question from you regarding what to do with new IPOs when they do go public.

But first, we wanted to talk about earnings report that came out this morning and that is from Monday.com. This is a enterprise software company, and we've been talking about the death of SAT stocks. And this reminds me of the Monty Python routine where they're saying, bring out your dead, and the one guys like, I'm not dead yet. I'm actually getting better. Monday.com gets lumped in with the stocks that are doomed, and it reported today. The market apparently loved it. Because, man, the stock jumped about 25% in pre-market trading. I see it's down from that now that we're recording, but this is a stock that got hammered down over 70% over the last year, but there must have been something here that the market liked, Rachel.

Rachel Warren: The stock has taken a massive beating over the last year, down significantly. It's worth noting, Monday.com stock is still down about 50% year to date at the time that we're recording this episode. I think what we've been seeing is really, I think a lot of the market appetite that's been surrounding a lot of software stocks. This fear that generative AI will either disrupt Monday.com's customer acquisition, maybe render its project management tools obsolete. But certainly, there were a few things that the market liked. For starters, Monday.com beat analyst expectations on the top line with $351 million in revenue. That was a 24% year-over-year increase. The company also delivered adjusted earnings per share of $1.15. That's compared to what analysts were guiding for of just $0.93 a share. Management also raised their guidance for 2026. They're now looking to bring in about 1.5 billion in revenue. The launch of their new AI work platform, also, net dollar retention rate was 110%. There were certainly some good numbers that the market seems to like.

Jon Quast: Matt, what stood out to you?

Matt Frankel: In a nutshell, the market was pricing in three things, rapidly slowing growth, margin compression, and the risk of AI disruption. This quarter really showed better than expected results when it comes to all three of those things. Rachel noted that Monday beat expectations on the top and bottom line. They give excellent guidance. Beyond those headlines, looking at RPOs remaining performance obligations, which is future booked work, that was up 33% year-over-year. Anytime you see future revenue growing faster than current revenue, it's generally a good sign, and the market takes it as such. Enterprise customer expansion is a very impressive story. Monday's clients that account for more than $100,000 in annual recurring revenue, that grew by 39% year-over-year in the quarter, much higher than the overall top line. Those tend to be very sticky customers, so that's a part of the story the market's really paying attention to.

Management specifically pointed out that 10% of new annual recurring revenue was driven by AI specifically, and that it expects that to continue to grow. They just announced their new CS plus credit business pricing model, which a lot of AI software companies are expected to do. They just announced that last week, and it will be rolled out over time, and it should help keep revenue growing as AI can do more of its customers work for them. Finally, on the issue of margins, operating margin doubled to 6% from 3% a year ago. Despite the really strong revenue growth, management said that headcount is going to remain relatively stable for the next year, and that is a good indicator that we should see margins expand even further. All three areas looked really good.

Jon Quast: Something that you said just then, Matt, you talked about how the market was pricing in a rapid deceleration in the revenue growth rate. But I wonder if maybe the celebration here from the market wasn't premature because if you do look at the numbers, the top line is continuing to decelerate. In the fourth quarter, it had 25% growth. That was last quarter, 25%. This quarter, the growth was 24%, and then next quarter, it's expected to be 18%-19% growth. The trend line is still slowing down, and the margin improvement was great and everything. I think that it still leaves the core question to the thesis intact here. Is that is this business starting to approach a ceiling, and the decelerating growth would tend to indicate that because of the AI tooling that's coming out, is that siphoning off some of its potential business and causing it to have a less big opportunity than what investors thought a couple of years ago?

Rachel Warren: I think that's the major tension here. This was a pretty significant growth story a few years ago. Certainly, monday.com is becoming a more mature enterprise business. But that acceleration unit is real. When you're seeing mid-20s growth slow down to 18%-19% next quarter, that's not really the trend line you want to be looking at. The slowdown is coming a few factors. You've got smaller businesses that are tightening their belts. Monday.com is really leaning heavily into moving up market to grab those bigger corporate contracts. They're expanding their multi-product strategy. They really have to squeeze more value from the customers that they already have.

I think the big question that the market still has that a lot of investors still have is whether monday.com becomes a victim of AI or the master of it. You've got the bear case, which is that AI might eventually just allow teams to build their own custom workflow. That makes a platform like this one redundant. Now monday.com and their management are obviously betting that AI will be the glue for their platform. That new AI work platform I mentioned, it's designed to automate the tedious parts of project management, try to make the software stickier for their clients. For me, the biggest drawback for this business or the stock, I should say they're not profitable on a GAAP basis. They're still really leaning heavily into stock-based compensation. I think the stock is probably going to be under pressure for a while.

Jon Quast: Matt, go ahead and give us a counterargument here.

Matt Frankel: As I mentioned, the growth in RPOs and the AI-specific revenue growth, they're certainly encouraging, and revenue is expected to slow over the next quarter, but remember that that seats-and-credits model is going to take several quarters at a minimum to roll out to all of its customers. Keep that in mind. But they're not out of the woods. What they needed to do they did. They reframed the narrative from Monday is losing to AI to maybe AI could be a tail one for Monday. They needed to reframe the narrative like that, and they did that with this quarterly report. But at the same time, I would place a big emphasis on that word maybe in that sentence. I personally am not a buyer here. It's on my radar, especially with the massive buybacks they're doing, but they are not out of the woods yet, but solid quarter. Credit where it's due.

Jon Quast: Credit to where it's due, indeed, but that's all the time we have for Monday. When we come back from our break, we're going to be talking about an AI semiconductor company that could go public as early as this week. You're listening to Motley Fool Hidden Gems Investing.

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Jon Quast: Welcome back to Motley Fool Hidden Gems Investing. We have a question coming up about IPOs in just a moment. But before we go there, we want to talk about an actual IPO that could happen as early as this week. Many investors may not have heard about it, but you're going to be hearing about it. The company is called Cerebras, and Cerebras is in the news today because it just increased the expected IPO range for what it's going to be going public at. The company is looking to raise nearly $5 billion in its IPO. That would value it at around $50 billion. This is going to be a big IPO, and I do want to note, as well, that this is an incredible increase in the valuation just from a few months ago. Back in September, the company did a series G funding round and was valued at about eight billion at the time. This is roughly 6X, what it was valued at just what, seven months ago. Very interesting. But this is going to be a big IPO. Rachel, go ahead and start us off here. What is Cerebras and how does this company make money?

Rachel Warren: Essentially, Cerebras is looking to build a massive alternative to Nvidia's empire by rethinking what a chip even looks like. Instead of making thousands of small chips from one silicon wafer, they actually use the entire wafer to create one giant processor, the wafer-scale engine. They say this can train and run AI models far faster than traditional GPUs. They don't just silicon. They package it into these multimillion-dollar supercomputer systems that handle everything from power to liquid cooling in a single unit.

They make money through a few different channels. One is selling these massive hardware appliances. They provide recurring software and support services. They also offer AI as a service, where companies can rent time on their chips via the Cloud. Now, they've recently landed very significant deals with hyperscalers like AWS in March. They signed a binding term sheet with AWS. That was the first major hyperscalar to commit to deploying Cerebras systems in their data centers. They just signed a big deal with OpenAI, and a lot of the excitement around these deals is what you're seeing in that updated IPO range of 150-$160 per share. You're seeing reports that demand is 20 times oversubscribed for the IPO. They could raise nearly five billion in their public debut. This is certainly an upcoming IPO that the market is going to be paying very close attention to.

Jon Quast: Matt, I'm just curious here, and I know it's on every listener's mind as we talk about this what competitor alternative to Nvidia? That sounds exciting. What would be some brief bull and bear cases for Cerebras stock when it goes public Matt?

Matt Frankel: It's pretty clear, actually. The bull case is the truly unique nature of Cerebras' hardware. Independent testing shows one of their products, the CS3 delivers 21 times faster inference than Nvidia’s flagship GPU and with 32% lower costs when you include things like energy and hardware. There's a case to be made that Cerebras is well-positioned for the shift away from training AI models, which is what we've been doing so far and why Nvidia’s GPUs have been so successful to running AI models where speed becomes the most important thing, and that's where they excel.

That's especially true as the agentic AI boom unfolds. The big agreements with OpenAI and AWS, Rachel mentioned, they certainly help the bull case, as well. At IPO, Cerebras is going to trade for roughly 100 times sales, assuming a $50 billion market cap, but it grew revenue by 76% year-over-year with a 47% GAAP net margin last year. There's a lot to like there on the bull side. There are several bare cases other than the valuation and the general hype surrounding the IPO. Customer concentration is huge, which Rachel can touch on in a bit. It's important to mention that Nvidia is developing competing products, and Nvidia has pretty much an unlimited R&D budget, which would scare me, investing in any competitor of Nvidia. There's a lot of future growth priced in here, and there's more that can go wrong than a lot of investors seem to think, especially if you buy the $50 billion valuation.

Jon Quast: Rachel, what else do you see in this?

Rachel Warren: I think there's a few different ways to look at this. Obviously, there's the bull case really, I think, goes back to Cerebras' architectural mode by using one massive processor on a single wafer instead of thousands of small chips. They could eliminate a lot of the bottlenecks we've seen. It could make its hardware significantly faster for next-gen AI reasoning. I think the most obvious bare case for anyone looking at this business that it's importan