Nearly every software company is talking up the potential of artificial intelligence, but not every software company will benefit in a meaningful way. Database software provider MongoDB (MDB 0.30%) reported disappointing results and provided lackluster guidance last week, and the company's optimistic talk about AI wasn't enough to prevent the stock from tumbling.

The most important question to ask

MongoDB CEO Dev Ittycheria opened the company's earnings report with a statement about the opportunity presented by AI. MongoDB sees AI spurring companies running legacy workloads to modernize those workloads, thus opening the door for MongoDB's database to replace legacy alternatives. "We are confident MongoDB will be a substantial beneficiary of this next wave of application development," Ittycheria said.

The big question to ask is this: Is MongoDB any better positioned than its myriad competitors to win market share as AI drives workload modernization? I think the answer is no. Developers are spoiled for choice in the database software market. Managed database products like MongoDB's Atlas are everywhere.

Every major cloud computing platform offers multiple managed database products. Amazon Web Services, for example, has the MongoDB-compatible DocumentDB service in addition to relational database services. Microsoft Azure offers a similar lineup of database options, as does Alphabet's Google Cloud.

There's also a slew of privately held technology companies that offer managed database services based on battle-tested open-source database software that run on one of the major cloud platforms. To name a few, there's Aiven, Crunchy Data, PlanetScale, and EDB. Many of these providers are now pushing the AI angle just like MongoDB is doing.

MongoDB doesn't appear to have any real edge in the age of AI.

Atlas weakness

Shares of MongoDB crumbled last week following the company's first-quarter report. Revenue grew by 22% year over year, and revenue from Atlas rose 32%. However, Atlas consumption growth and new workload wins during the first quarter were weaker than expected. This weakness will hurt revenue and earnings during the rest of the fiscal year.

For fiscal 2025, MongoDB now expects to produce revenue between $1.88 billion and $1.90 billion, and adjusted earnings per share between $2.15 and $2.30. Revenue will be up just 12.5% at the midpoint of that range, and EPS will be down 33%. Ouch.

MongoDB's confidence that AI will drive new workload wins is tough to square with its awful outlook for the year.

If you're thinking about buying MongoDB stock on the dip, you should know that the stock's valuation remains in the stratosphere. MongoDB isn't profitable on a GAAP basis, and based on its outlook, the stock trades for over 100 times adjusted earnings. This is a stock that could fall much further before it bottoms out.

AI could drive some business MongoDB's way, but the company and its technology don't stand out as outsize beneficiaries. With growth slowing dramatically and competition intensifying, MongoDB is an AI stock to avoid.