Shares of MongoDB (MDB) have been awarded an AI premium.
Bullishness about the company’s long-term AI opportunity has provided an added tailwind for the stock, which hit a 52-week high of $439 in July. Recently trading around $394, the shares have doubled YTD.
There’s a trend emerging in which more customers are selecting the company’s Atlas cloud database as a key platform to both build and run new AI applications, according to MongoDB CEO Dev Ittycheria.
He thinks the shift to AI will favor modern platforms that offer a rich set of capabilities. Ittycheria also believes many existing applications will be re-platformed to be AI-enabled, arguing that this is a compelling reason for customers to migrate to MongoDB from legacy technologies.
At the MongoDB developer conference held this summer, the company announced several new products along with advanced features for its Atlas cloud platform that make it faster and easier for customers to build modern applications for any workload or use case. Included among the new features and products were Atlas Vector Search (for highly relevant information retrieval) and Atlas Stream Processing (for high-velocity streams of complex data).
Atlas Vector Search simplifies bringing generative AI and semantic search into various applications to deliver more engaging end-user experiences, while Atlas Stream Processing transforms the building of event-driven applications that respond in real-time by unifying how developer teams work with data in motion and data at rest. With Atlas Stream Processing, customers have a single interface to easily extract insights from high-volume streaming data.
One of MongoDB’s major goals is to bring in new workloads from existing customers. The company recently announced the general availability of Relational Migrator, a tool that simplifies application migration and transformation from legacy relational databases to the company’s document-based model. The Migrator tool enables customers to quickly, easily and cost-effectively move off of older database technology, improving operational efficiency.
At the developer conference, Sahir Azam, chief product officer at MongoDB, said legacy relational databases remain the main competition. But he noted that they were optimized for a time when hardware was very expensive. Today, scalable hardware is quite cheap, but hiring developers and making them productive is the challenge. The document model makes it “very natural” for developers to build, iterate and improve applications over time, Azam said.
He explained that rows and tables in relational databases are not how developers think. Instead, developers see things such as managing a sale or managing products in a catalog as objects. Thus, the rise of object-oriented programming over the past 20 years. Azam said MongoDB gives developers a natural way to map object-oriented programming directly into the data model. With MongoDB, developers have a flexible database that is easy to scale effectively.
As more organizations see that MongoDB offers many of the mission-critical features offered by traditional relational databases, demand should continue to grow for the company’s document-based database. Demand will come in the form of new workloads as well as the shifting of workloads over from relational offerings. The Migrator tool helps users create a document-oriented schema within MongoDB, transfer data out and even rewrite associated code.
In fiscal Q2 (ended July), MongoDB’s total revenue rose 40% to $423.8 million, well above the consensus estimate of $393.3 million. It’s impressive that top-line growth reaccelerated from 29% in the previous quarter. Atlas cloud revenue (representing 63% of total revenue) advanced 38%.
MongoDB in FQ2 added 1,900 new customers, including a number of AI accounts (with smaller workloads that will expand over time). The company now has more than 45,000 total customers, up 22% year over year.
For FQ3 (Oct.), MongoDB’s total revenue outlook of $400 million to $404 million came in above the consensus of $389.1 million.
Piper Sandler called out the FQ2 revenue acceleration in raising its MongoDB price target to $425 from $400, noting that the upside was aided by large, multi-year licensing deals and renewal expansions. Needham raised its target to $445 from $430. The firm views MongoDB as a key beneficiary of generative AI, especially as organizations continue to iterate and discover new use cases.
RBC Capital believes MongoDB has the ability to become a major developer data platform by consolidating more workloads. The firm thinks MongoDB is well-positioned to be a long-term beneficiary of the generative AI platform shift.
Goldman Sachs is becoming increasingly constructive on MongoDB’s ability to sustainably land new customers and add workloads that can ultimately translate into $6 billion in revenue longer-term. MongoDB is enriching its platform with new functionality to meet the requirements of the “next big paradigm shift” of generative AI, according to the firm. Goldman sees MongoDB as a big beneficiary of accelerated app development.
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