MongoDB (MDB) Shares Skyrocket, What You Need To Know

What Happened:

Shares of database software company MongoDB (MDB) jumped 17.9% in the pre-market session after the company reported a "beat and raise" quarter. Second quarter results blew past analysts' billing expectations. The top-line benefitted from the strong performance of its Atlas cloud offering, which recorded 27% y/y sales growth while driving 71% of overall revenue. Next quarter's revenue guidance also came in higher than Wall Street's estimates. 

While AI isn't yet a significant revenue driver for the business, MDB launched the MongoDB AI Applications Program (MAAP), to accelerate demand for its AI solutions. That the company raised full year guidance across the board is icing on the cake. However, the quarter wasn't without challenges, as the business observed light deceleration in the consumption of existing workloads due to macro headwinds. Overall, this was a great quarter.

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What is the market telling us:

MongoDB’s shares are very volatile and over the last year have had 23 moves greater than 5%. But moves this big are very rare even for MongoDB and that is indicating to us that this news had a significant impact on the market’s perception of the business. 

The biggest move we wrote about over the last year was 6 months ago, when the stock dropped 13.9% on the news that the company reported fourth-quarter results and provided revenue guidance for the next quarter and full year, which fell below Wall Street's expectations, suggesting a slowdown in demand. In addition, while free cash flow was positive, it came in below expectations. It is important to note that the topline guidance reflected tough comps, with MongoDB expected to recognize close to zero revenue from unused Atlas commitments in FY'25 ( vs. over $40 million in FY'24). 

Similarly, the profitability outlook was also underwhelmed, with non-GAAP operating income projections for the next quarter and full year falling below expectations. Margins are expected to be impacted by an acceleration in hiring as the company highlighted slow capacity expansion in FY'24, especially in the first half due to macro uncertainty. 

On the other hand, MongoDB exceeded analysts' revenue expectations. Overall, this was a mixed but weaker quarter for MongoDB.

MongoDB is down 26.2% since the beginning of the year, and at $284.13 per share it is trading 43.3% below its 52-week high of $500.90 from February 2024. Investors who bought $1,000 worth of MongoDB’s shares 5 years ago would now be looking at an investment worth $1,865.

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