What happened
Shares of new-age database software provider MongoDB (MDB 4.83%) rallied 4.1% today, as the up-and-coming disruptor announced an expansion of its partnership with cloud giant Microsoft (MSFT 1.82%).
Microsoft had its own rally today, jumping more than 5% at one point to a new all-time high on the back of exciting artificial intelligence (AI) product introductions at its Inspire conference, so it appears the announcement of this tie-up on the same day fueled a piggyback rally for MongoDB as well.
So what
Today, MongoDB announced it would significantly expand its current partnership with Azure parent Microsoft, making it easier for customers to access Atlas, MongoDB's cloud-based database-as-a-service offering, through the Azure commercial marketplace.
As part of the agreement, MongoDB will deepen ties with Microsoft through developer training and enablement programs that will hopefully boost the use of MongoDB within the Azure and GitHub developer circles. In addition, MongoDB will expand its integrations within the Microsoft analytics ecosystem via Microsoft data, AI and analytics, and low-code services offerings.
Alan Chhabra, executive vice president for Worldwide Partners and Asia at MongoDB, said in the press release: "Many of our customers want to run MongoDB Atlas on Azure, but have lacked the proper incentives and a smooth deployment experience. Through this expanded collaboration with Microsoft, we're making it easier for our customers to seamlessly integrate MongoDB Atlas into their Azure infrastructure to power the next generation of applications."
It's a feather in the cap for MongoDB that Microsoft has seemingly chosen it as one of its preferred database solutions, especially as Microsoft has its own in-house database offering as well, called Cosmos.
Arun Ulagaratchagan, commercial vice president for Azure Data at Microsoft, said in the release, "MongoDB is loved by developers all over the world, and in order to better serve our customers, we're expanding our business and technical partnership in order to provide a best-in-class MongoDB experience with MongoDB Atlas on Azure."
While the two companies were already partners, the announcement coming on the same day as Microsoft's Inspire conference likely fueled MongoDB's strong gains. Today, Microsoft unveiled several AI-powered tools for business, and appears to be seen as having the early lead in the age of generative AI.
Of course, artificial intelligence applications depend on data to run, which increases the importance of the database one uses. Given Microsoft's nod to MongoDB and its novel document-based architecture as a preferred provider, MongoDB likely rode the Microsoft optimism and AI wave higher today.
Now what
Microsoft is still probably the safer way to play the AI revolution, due to its diversified, high-margin business, whereas MongoDB is still inking net losses as it invests in growth and trades at a lofty 21.6 price-to-sales ratio.
That being said, MongoDB is a potential disruptor in the large and growing database market, and its market cap is only $30 billion, about one-tenth the size of database industry leader Oracle (ORCL 2.02%). So if one has conviction that MongoDB will continue to make market share gains, the stock could go higher. Just be aware that as an expensive growth stock, MongoDB could be vulnerable to big pullbacks, like the 70% or so drawdown experienced in 2022.
That being said, long-term investors will want to put this high-quality company on their watch lists, in case of either a pullback in the stock, or more favorable operational developments.
