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MongoDB is Boldly Disrupting the Database Market

MongoDB's 40% revenue growth and 19% operating margin were both excellent, even in a difficult macro. But what will the company's recent change in its sales strategy mean for investors?

September 8, 2023

The 7investing Key Takeaways

MongoDB (Nasdaq: MDB) is a different database provider. Rather than storing information in rows and columns (as has been the norm from Oracle’s relational databases for decades), its document-model, general purpose databases are more flexible and user-friendly. Its “No SQL” approach makes it easier for developers to code, helping them scale new applications much more quickly.

In its most recent second quarter 2024 results:

  • Revenue grew 40% year-over-year and generated a 19% operating margin.
  • Mongo’s fully-hosted “Atlas” offer grew at 38%, even despite unfavorable macro headwinds.
  • Operating leverage is improving significantly, with fiscal year guidance calling for a 700 basis point year-over-year improvement.
  • New product features like Relational Migrator are helping drive growth.
  • The company’s go-to-market strategy is now gearing towards grabbing more workloads by relaxing requirements for 1-yr upfront commitments, and it appears the strategy is working out.

The Numbers

  • Revenue of $424 million, up 40% year-over-year. This was above the high end of guidance.✅
  • Atlas revenue was up 38% and is now a $1 billion run rate product.✅
  • Non-GAAP operating income was $79 million, and at 19% margin (!!)🆙
  • The company added 1,900 new customers.💪🏽
  • Annual recurring revenue (ARR) net expansion rate was again above 120%.💪🏽

Our Thoughts About the Numbers

  • Powering stream processing and stream processing unlocks a broad range of applications, which aren’t possible with store-now and batch-process data later approaches. MongoDB partners with Confluent on this front. “We introduced Atlas stream processing, which enables developers to work with streaming data to build sophisticated event-driven applications. The flexibility of the document model and the power of the MongoDB query language provide a compelling and differentiated way to process streaming data compared to alternative approaches. Our early access program has meaningfully oversubscribed as customers realize they can use a familiar and easy approach to work with streaming data and immediately see value.
  • Relational migrator is in general availability (GA) since June. Relational migrator should help accelerate transition of legacy relational database workloads to MongoDB. “So regarding relational migrators, it’s important for investors to know that this is really a high-end enterprise play. That’s where the bulk of the legacy relational market is. And relational migrator is designed to help customers reduce the switching cost of migrating off relational databases to MongoDB for both EA and Atlas. So it’s a place to — depending again on the customer’s choice of their deployment model but it’s really meant to reduce the switching costs. I would say that there was no real impact in terms of revenue of customers using relational migrator because we just only made it generally available in June.
  • Baller move. Sales reps are not incentivised to sign 1-year commitment deals. It means…

To see even more of our deeper-dive into MongoDB’s results, our analysis of its current valuation, our overall thoughts about its competitive position, and our “Conviction Rating” on whether we think the stock is a buy, click below to read our complete Company Update.

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