Why MongoDB Shares Soared Today

Actions of MongoDB (MDB 14.65%) rose today after the cloud software company delivered a better-than-expected second-quarter earnings report, beating top- and bottom-line estimates and raising guidance for the year.

As of 10:11 a.m. ET, the stock was up 14% on the news.

Image source: Getty Images.

MongoDB is back

After falling after its first-quarter earnings report in the spring, the NoSQL database software specialist rallied on Friday with its results.

Revenue for the quarter rose 13% to $478.1 million, beating estimates of $464.1 million, and the company showed strong growth in its cloud-based Atlas segment, where revenue rose 27 % and now represents 71% of revenues. Meanwhile, on-premises business continued to decline as customers moved to the cloud version.

Customers grew from more than 49,200 in the first quarter to more than 50,700, and the company added 52 customers with annual spend of at least $100,000.

Gross margin fell from 75% to 73% and the operating loss widened on a generally accepted accounting principle (GAAP) basis as operating expenses also grew faster than revenue. Bottom line, the company’s adjusted EPS fell from $0.93 to $0.70, although it beat the consensus estimate of $0.49. Declining profits appear to be linked to increased investment in artificial intelligence (AI).

CEO Dev Ittycheria said the company saw “strong new acquisition workload and better-than-expected Atlas consumer trends.”

The company also made product progress by launching the MongoDB AI Applications Program, which offers an end-to-end AI technology stack, including generative AI companies like Anthropic and major cloud infrastructure platforms.

What’s next for MongoDB?

Looking ahead, MongoDB called for revenue of $493 million to $497 million in the third quarter, up 17% on the midpoint, which would represent an acceleration from the third quarter. Bottom line, it called for adjusted earnings per share of $0.65 to $0.68, down from $0.96 in the year-ago quarter.

It also raised its full-year revenue estimate to between $1.92 billion and $1.93 billion, and now sees adjusted EPS of $2.33 to $2.47, above analysts’ consensus.

While the earnings decline is concerning, MongoDB should soon return to bottom-line growth in the coming quarters as it moves through the investment cycle. Against this backdrop, today’s earnings appear to be an increase in relief after the previous decline, as the company is making faster-than-expected progress.