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MongoDB in Three Words: Databases, SaaS, Cloud

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Background

MongoDB is a leading general purpose database platform, founded in 2007. It is designed to handle large volumes of structured and unstructured data, making it particularly well-suited for today’s cloud-based, data-intensive applications.

MongoDB’s document-based architecture provides developers with flexibility and scalability, allowing for rapid development and easy adaptation to changing data requirements.

MongoDB’s Q1 2025 revenue was $451 million, up 22% YoY and above the high end of the company’s guidance. Atlas revenue grew 32% YoY, now representing 70% of total revenue, but this growth came in below management’s expectations.

The company saw less seasonal improvement than expected across customers of all tenures, industries, sizes, and geographies, suggesting a tougher macro environment. Additionally, the growth of recently acquired workloads slowed earlier than anticipated, which management attributed to both the worsening macro environment and their go-to-market changes made last year that focused on making it easy for customers to start using MongoDB, potentially leading to the acquisition of lower-quality workloads.

The company’s net ARR expansion rate remained above 120%, and customer count grew to over 49,200, up from 43,100 a year ago. However, new business sales got off to a slow start in Q1 due to operational issues, though they mostly recovered by quarter-end.



To address these challenges, management outlined plans to focus more on larger enterprise deals, use AI to accelerate legacy migrations, position MongoDB as a key platform for AI apps, and invest in sales capacity.

Despite these initiatives, the company reduced its full-year FY 2025 revenue guidance to $1.88 — $1.90 billion from the previous range of $1.90 — $1.93 billion and lowered its non-GAAP EPS guidance to $2.15 — $2.30 from the earlier expectation of $2.27 — $2.49. At the midpoint of the revised revenue guidance, the expected growth is just 12.5%, implying material weakness through the rest of the year, given the reported 22% YoY sales growth in Q1.



Despite the headwinds, both external and self-inflicted, management remains optimistic about MongoDB’s massive long-term market opportunity, low current market share, and differentiation as a document model database well-suited for the AI era. A reverse DCF analysis with a 3% terminal growth rate and a 9% discount rate suggests that the current valuation implies expectations of 33% annual FCF growth for a decade. While this FCF growth rate hurdle is high, MongoDB’s LTM FCF margin is less than 7%, indicating potential for operating leverage as the business scales.

Achieving high-teens sales growth for a decade could justify the current price. 



However, without higher sales growth rates or significantly improved margins driven by operating leverage, it is difficult to justify the current price, especially in light of the recent execution missteps.

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