Cloud computing has caused a dramatic shift in the database software market. Gone are the days of oppressive software licenses and on-premises installations. Today, spinning up a database in the cloud is dead simple and extremely affordable.
MongoDB (MDB -0.09%) has been a big beneficiary of this sea change. The company has taken its flexible database software and built a managed, cloud-based platform that has been winning customers left and right. Annual revenue has now topped $1 billion, and the company's long-term growth prospects are as bright as ever.
Here are three reasons growth-oriented investors should consider buying MongoDB stock.
1. Growing popularity
MongoDB's specializes in NoSQL databases. Unlike relational databases, which have been standard fare for decades and arrange data in well-defined rows and columns, a NoSQL database stores data differently. MongoDB offers a document-based database, where each document can store an arbitrary chunk of data in a form that doesn't need to be predefined by the developer. This flexibility is one reason why NoSQL databases have grown in popularity.
According to DB-Engines, MongoDB is the fifth-most popular database, and the most popular NoSQL database by a wide margin. Ahead of MongoDB are Oracle, the king of enterprise-level database software; Microsoft's SQL Server, No. 2 in the world of proprietary database software; and two open-source databases, MySQL, and PostgreSQL.
MongoDB's core database software is open source as well, and it's been downloaded more than 325 million times. That's enough inertia to make it difficult for any document-based competitor to surpass MongoDB.
2. Blistering Atlas growth
While MongoDB's database software can be downloaded by anyone and run anywhere, the best way to use it is through the company's cloud-based Atlas product.
Atlas handles the nitty-gritty of database management and scaling. An Atlas database can span multiple cloud providers and cloud regions for resiliency, has security built in by default, and comes with automatic backups to prevent data disasters.
On top of these features, Atlas allows customers to run code right next to their data. A change to a document can trigger execution of a chunk of code, for example, enabling some of the typical server-side code necessary for any application to be run directly on Atlas. Atlas can also handle user authentication and static website hosting, making it possible to build a full, production-ready application on the Atlas platform.
Atlas has been a big hit for MongoDB. Before Atlas, the company made its money selling its Enterprise Advanced offering, which customers would run on their own infrastructure. That's still a meaningful piece of the business, but Atlas is now the primary source of revenue. Atlas accounted for 63% of total revenue in the third quarter, and the product now has more than 37,600 paying customers.
MongoDB's total revenue rose by 47% year over year in the third quarter, while Atlas grew revenue by 61%. Businesses are embracing the platform, and while growth may slow in a tough economy, Atlas is mission critical for many of its customers.
3. An enormous opportunity
MongoDB doesn't address the entire database software market. There are plenty of workloads that are a good fit for relational databases, and it would make little sense to move those over to MongoDB.
And databases are sticky. An Oracle customer isn't going to switch database providers on a whim because the switching costs and potential for disruption are extreme.
The market is big enough and growing fast enough, though, that this shouldn't put a ceiling on MongoDB's growth anytime soon. The database software market neared $80 billion in 2021, doubling over the previous five years. What's more, cloud database spending is now nearly on par with on-premises database spending, marking a big shift in the market.
That's around $40 billion of annual cloud database spending that's up for grabs, and that number will likely grow faster than the overall market. MongoDB is far from the only player in the cloud database market, but the popularity of its software should give it a meaningful edge.
MongoDB should top $1.25 billion of revenue in fiscal 2023. Given the size of the opportunity, that number could grow into many billions of dollars over the next decade.
