MongoDB Unfiltered: Straight Talk on Q1 Results, Macro Headwinds, and AI Aspirations
How the Company Plans to Navigate Macro Headwinds and Emerge Stronger
MongoDB (NASDAQ: MDB) recently reported its first-quarter results for fiscal year 2025, which received a mixed response from investors. The company's stock experienced a sharp decline of 25% following the earnings release.
Let's take a closer look at the factors contributing to this sell-off and assess whether the stock may now be oversold.
In Q1 FY2025, MongoDB's revenue reached $450.6 million, surpassing the high end of guidance and consensus estimates of $439-441 million. Atlas revenue, which makes up 70% of total revenue, grew 32% year-over-year to $314.2 million. The company also expanded its customer base to 49,200, up from 43,100 a year ago. Non-GAAP operating income of $32.8 million and an operating margin of 7% exceeded expectations due to the revenue beat.
Our Q1 results will impact our growth rate for this year, however we do not believe that our fiscal 2025 growth is an indication of our long-term potential.
- Michael Gordon, CFO & COO of MongoDB
However, the company reduced its full-year fiscal 2025 outlook, citing broad-based macro headwinds, slower growth from recent workloads, and fewer multi-year Enterprise Advanced deals. MongoDB now expects revenue of $1.88-1.90 billion (12-13% growth), down from the previous guidance of $1.92-1.95 billion (+14% growth at midpoint). Non-GAAP operating income is projected to be $168-183 million (9% margin), below prior expectations. The guidance for Q2 FY2025 also fell short of consensus, implying just 9% year-over-year revenue growth.
What we learned from the earnings call:
Macro impact: MongoDB witnessed a broad-based slowdown in consumption across customer cohorts, industries, geographies, and tenures. This suggests that the slower growth is primarily driven by macroeconomic factors affecting end-user activity and application usage.
Recently acquired workloads: The company noted that workloads acquired last year started to grow more slowly than expected. MongoDB has made adjustments to its processes and incentives to focus on acquiring workloads with higher growth potential.
New business performance: MongoDB had a slow start to the quarter in terms of new business, but mostly caught up by the end of Q1. The company remains confident in its ability to win new business, with strong win rates.
Investment priorities: Despite the near-term challenges, MongoDB is committed to investing in three key areas: enterprise customers, legacy application modernization using AI, and positioning itself as a key platform for emerging AI applications.
Product announcements: At MongoDB's recent user conference, the company announced several new products and enhancements, including MongoDB 8.0, queryable encryption, and Atlas serverless. These innovations aim to address important customer needs and position MongoDB as a leader in the age of AI.
When asked about competition from hyperscalers, MongoDB's management downplayed any share losses and highlighted strong partnership activity with cloud vendors. They believe that the hyperscalers' strength is more tied to model training investments than production AI applications, an area where MongoDB is well-positioned.
Given MongoDB's strong market position, innovative product offerings, and focus on emerging AI applications, the recent 25% stock decline may present an attractive entry point for long-term investors (EV/Sales of 6x). While near-term challenges persist, the company's long-term growth potential remains intact.
Disclaimer: This article is for informational purposes only and does not constitute financial advice or a recommendation to buy, sell, or hold any securities mentioned. The content is based on the author's analysis of MongoDB's Q1 FY2025 earnings release and should not be relied upon as a substitute for thorough research.
Investors should conduct their own due diligence and consider their individual financial situation, risk tolerance, and investment objectives before making any investment decisions. The author and the publication do not accept any responsibility for any loss or damage arising from the use of this information.
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