MongoDB Earnings: AI Customer Onboarding Contributes to Atlas' Growth Outperformance

Key Morningstar Metrics for MongoDB

• Fair Value Estimate
  : $312.00
• Morningstar Rating
  : ★★★
• Morningstar Economic Moat Rating
  : None
• Morningstar Uncertainty Rating
  : Very High

What We Thought of MongoDB’s Earnings

MongoDB MDB reported solid first-quarter results, with year-over-year revenue growth of 25%, beating the high end of guidance. Gross margin of 72% improved 100 basis points year over year, despite the lower-margin MongoDB Atlas expanding faster than expected at 29%.

Why it matters: We are glad to see MongoDB extending its reputation for handling heavy-duty workloads from general use cases to artificial intelligence use cases. Recent go-to-market leadership changes did not seem to slow MongoDB’s growth, as embeddings and vector search continue to see healthy adoption.

• MongoDB onboarding Frontier AI Labs and AI Natives is a positive sign of the product’s potential to capture AI workloads, which should drive further growth of remaining performance obligation beyond the current level of $1.46 billion.

The bottom line: We raise our fair value estimate for no-moat MongoDB to $312 per share from $303. The stock rallied 11% earlier on May 28, based on positive results from its peer. Shares are moderately overvalued, in our view.

• Our WACC assumption for MongoDB increased by 80 basis points to 9.8%, which partially offsets a more optimistic outlook for MongoDB’s near-term revenue growth. Our beta of 1.1 reflects MongoDB’s high volatility, now captured with greater granularity.
• Despite progress on the AI front, competition among MongoDB and open-source database alternatives remains high. It takes time to see how MongoDB stacks up against competitive products in handling an AI-oriented data pipeline for unstructured data.

Coming up: MongoDB raised its full-year revenue guidance by $80 million at the midpoint to $2.92 billion-$2.96 billion, driven by Atlas’ outperformance. Non-GAAP operating margin guidance at the high end was also up by 50 basis points to 20%.

• MongoDB recorded its second consecutive quarter of positive GAAP income, laying a solid foundation for consistent margin improvement. We expect the company’s net profit margin to surpass 10% by fiscal 2030.