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MongoDB Management Talks Atlas and Realm

By Daniel Sparks – Jun 20, 2019 at 10:05AM

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Investors should understand these two catalysts for MongoDB stock.

MongoDB (MDB -1.49%) has continued to power higher following the company's fiscal first-quarter earnings release. Shares of the cloud database company have surged about 20% since the company reported its outstanding quarterly results, bringing the stock's year-to-date return to an impressive 103%.

This wild momentum, of course, has brought a lot of new attention to the stock. If MongoDB has landed on your watchlist or in your portfolio and you're looking for a better understanding of the company, consider listening to the cloud database specialist's most recent earnings call, where management discussed the company's strong performance in detail.

Here are two key topics discussed during the call.

A diagram showing three laptops connecting to a cloud

Image source: Getty Images.

Atlas' impact on MongoDB's gross margin

MongoDB Atlas, or the company's fully automated cloud database service, is growing at an extraordinary rate. Atlas revenue was up 340% year over year during fiscal Q1. The product now accounts for a meaningful 35% of total revenue. 

While it's clear that Atlas was the main driver of the company's 78% year-over-year revenue growth, some investors may wonder how the fast-growing product is impacting Atlas' profitability. For now, Atlas, along with the company's recent acquisition of mLab, are the two biggest negative factors weighing on MongoDB's overall gross margin, management explained during the call. But the negative impact from Atlas is only modest.

The gross margin for Atlas itself is on the upswing as the product scales, explained MongoDB chief operating officer and chief financial officer Michael Gordon during the call. "However," he added, "we continue to expect that we will see some modest reduction in overall company gross margins as Atlas continues to be a bigger portion of our revenue." This is because Atlas' gross margin is lower than the company's consolidated gross margin.

Investing in mobile

In late April, MongoDB announced the acquisition of Realm, a leader in mobile databases. While the $39 million price tag MongoDB paid for the company may pale in comparison to MongoDB's $9.45 billion market capitalization, investors shouldn't underestimate the acquisition's importance to MongoDB's overall strategy.

"At MongoDB, we're always looking ahead of what's next and how the needs of our customers will evolve," explained MongoDB CEO Dev Ittycheria. He continued:

To accelerate our mobile efforts, we recently acquired Realm, one of the most popular mobile database and synchronization platforms. Data synchronization is the single biggest challenge in building compelling mobile applications and Realm has developed a comprehensive synchronization platform that is natural -- that is a natural complement to MongoDB Atlas and Stitch.

The company didn't waste any time putting together a more detailed plan for its Realm acquisition. This week, MongoDB announced that the mobile database and synchronization platform will merge with MongoDB Stitch under the Realm brand, giving "developers a better way to work with data all the way through the application lifecycle -- from the front to the backend."

There is, of course, far more to MongoDB's business than these two developments. But between Atlas' staggering growth and MongoDB's quick execution on its recent acquisition, the company's momentum is clear. A strong tailwind from Atlas and innovation on the mobile front are positioning the cloud database company for more strong growth.

Daniel Sparks has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends MongoDB. The Motley Fool has a disclosure policy.

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