Shares of database company MongoDB (MDB 1.60%) soared earlier this month following a second-quarter report that blew away expectations. The database market is moving to the cloud, and MongoDB is angling to be the provider of choice.

Here are five things investors need to know about this innovative database company.

1. Open source is paying off

MongoDB's core database software is completely free. The company offers it for download on its website, and the source code is available on GitHub. Anyone can download the Community version of MongoDB's database software and run it anywhere they like.

This open-source strategy has led to over 200 million downloads of MongoDB's software. In the past 12 months alone, the software has been downloaded over 75 million times. By making it easy and free to get a modern NoSQL database up and running, many millions of people have become familiar with MongoDB's database.

That widespread familiarity is one reason MongoDB has had such success with Atlas, its cloud-based subscription database product. Atlas frees developers from needing to install and maintain the database, and it includes features like advanced security, automatic backups, and triggers that make life easier. By giving away its database software for free, MongoDB has built up a vast pool of potential customers.

A cloud.

Image source: Getty Images.

2. Atlas is wildly popular

MongoDB's database can be run anywhere, including on all the major cloud platforms. There are even some managed MongoDB database products out there that remove much of the pain of dealing with databases. DigitalOcean, for example, teamed with MongoDB to launch an inexpensive managed MongoDB service.

But MongoDB's own Atlas aims to be the best way to run the database in the cloud. With Atlas, things like running some code anytime a database entry is updated or upgrading database versions can be done with ease. Atlas supports the major cloud providers, and it can even use multiple clouds at once for added resiliency.

Atlas is growing by leaps and bounds. Revenue from Atlas shot up 83% in MongoDB's second quarter, and the service now has over 25,000 customers. More than 1,000 customers are spending over $100,000 annually.

Atlas now accounts for 56% of MongoDB's total revenue. Based on the company's guidance, Atlas is on track to generate more than $400 million of revenue this year if that percentage holds.

3. More than a database

A major benefit of MongoDB Atlas is that it's part of a full-fledged application development platform. MongoDB Realm is built around Atlas, offering developers a way to develop apps using Atlas as the backend. Realm handles user authentication, runs functions in the cloud, and provides seamless and secure access to the data stored in Atlas.

Atlas plus Realm isn't the best solution for every use case, and MongoDB Realm falls short in terms of usability for developers compared to other app development platforms. But Realm and any other products built around Atlas offer MongoDB additional revenue opportunities beyond its core database business.

4. New features are making Atlas better

MongoDB continually launches new versions of its database software. The latest major release, MongoDB 5.0, includes one change that makes Atlas a much better product.

MongoDB 5.0 introduced a versioned API. Developers can now specify an API version in their code when interacting with the database, and that API version will continue to be supported in newer iterations of the database software. Previously, upgrading to a new version of MongoDB could break an application dependent on an API feature that was changed or removed. That won't be a problem anymore.

Atlas makes it easy to upgrade MongoDB versions, but that ability is less useful if an upgrade requires a bunch of code changes. With the versioned API, Atlas users can freely upgrade the database software without worrying about their applications breaking.

5. Profits are yet to come

Despite MongoDB's success, the company still isn't turning a profit. Heavy spending on sales and marketing is one reason. MongoDB poured $109 million into that category during the second quarter, eating up about 55% of revenue. Research and development is another major source of spending. MongoDB spent $72 million on R&D efforts in the second quarter.

MongoDB is aiming to be the undisputed leader in the cloud database era. Tech giant Oracle dominated the database market for decades, and it's still the leader by far in the relational database market. But cloud computing and NoSQL databases have shaken things up.

Startups and developers are up for grabs, and MongoDB wants them as customers. Big companies looking to modernize their infrastructure are potential customers as well. To take advantage of the immense opportunity in front of it, MongoDB needs to spend big on winning customers and improving its products. The company has the potential to be supremely profitable in the long run if it can emerge as the Oracle of the cloud era.