MongoDB's (MDB -3.12%) stock surged by more than 20% on Tuesday in response to its latest earnings report. In its fiscal 2026 third quarter (which ended on Oct. 31), the database management company's revenue rose 19% year over year to $628 million, exceeding analysts' consensus estimates by $35 million.
Its adjusted earnings per share (EPS) of $1.32 also beat the consensus forecast by $0.53 and marked a big improvement from its adjusted loss per share of $1.16 a year earlier.
Management also raised its guidance. For the fiscal year (which ends in January), it expects its revenue to rise 21% as its adjusted EPS grows by 30% to 31%. It had previously forecast that its revenue would rise by 16% to 17% and that adjusted EPS would be close to flat.
Does that beat-and-raise performance make MongoDB a great growth stock to buy in this choppy market? Let's take a fresh look at its growth rates and valuations to decide.
Image source: Getty Images.
What does MongoDB do?
MongoDB's namesake platform helps companies store large amounts of data in non-relational databases. That sets it apart from older relational databases, which store data in rigidly structured tables and rows. Non-relational databases can usually be scaled, tweaked, and customized for specific tasks more easily than relational databases.
MongoDB also offers a subscription-based cloud platform, Atlas, which helps its clients analyze all of that data. It already serves more than 62,500 customers worldwide -- including blue chip giants like Verizon Communications, Adobe, and Cisco Systems -- and it's working with over 1,000 tech and service partners.
MongoDB faces competition from bigger database companies like Oracle, which offers both relational and non-relational databases, and cloud infrastructure giants like Amazon, which integrate database services into their own platforms. However, those tech giants often lock their customers into their sticky ecosystems.
By contrast, MongoDB can be integrated into Amazon Web Services (AWS), Microsoft Azure, and other cloud platforms, making it a more flexible choice. That's particularly useful for companies that run their services across multiple clouds.
How fast is MongoDB growing?
From fiscal 2018 to fiscal 2025, MongoDB's revenue grew at a compound annual rate of 44%, its adjusted gross margin expanded from 72% to 76%, and its adjusted operating margin improved from negative 19% to positive 15%. But over the past three years, its revenue growth has cooled off.
|
Metric |
Fiscal 2020 |
Fiscal 2021 |
Fiscal 2022 |
Fiscal 2023 |
Fiscal 2024 |
Fiscal 2025 |
|---|---|---|---|---|---|---|
|
Revenue growth |
58% |
40% |
48% |
47% |
31% |
19% |
|
Adjusted gross margin |
72% |
72% |
73% |
75% |
77% |
76% |
|
Adjusted operating margin |
(13%) |
(8%) |
(3%) |
5% |
16% |
15% |
Data source: MongoDB.
That slowdown, which the company mainly attributed to macro headwinds impacting enterprise software spending, suggested its hypergrowth days were over. But its revised outlook for 21% revenue growth in fiscal 2026 points to a halt in that slowdown.
MongoDB hiked its guidance in response to the rapid growth of the artificial intelligence (AI) market, which is driving more companies to analyze data on its Atlas platform. In the third quarter of fiscal 2026, Atlas revenue soared 30% year over year and accounted for 75% of the company's top line. That was up from just 66% in the prior-year period.
During the conference call, CEO CJ Desai said the company still saw a "large opportunity ahead for both core operational data and emerging AI workloads" and was well-positioned to become the "generational data platform of choice in the AI era."
Desai noted that MongoDB's focus on collecting unstructured data made it an ideal platform for making sense of the messy large language models (LLMs) that provide the data for AI agents, chatbots, and other generative AI applications.
NASDAQ: MDB
Key Data Points
How much higher could MongoDB's stock soar?
From fiscal 2025 to fiscal 2028, analysts expect MongoDB's revenue and adjusted EPS to grow at compound annual rates of 19% and 9%, respectively. But at around $409 per share, its stock already trades at 116 times next year's earnings -- so a bit too much hoped-for growth might be baked into the price.
It's possible that Wall Street's estimates will turn out to be a bit conservative, not fully accounting for the AI tailwinds that have been aiding the business, but even a few earnings upgrades wouldn't make MongoDB stock a bargain.
MongoDB also isn't yet profitable on a generally accepted accounting principles (GAAP) basis, and it has increased its number of outstanding shares by 35% over the past five years. That persistent pattern of dilution could keep its valuations high even if the stock pulls back.
Management's forecast for accelerating growth this year was encouraging, but the company is not out of the woods yet. Its stock could stabilize and steadily rise over the next year as more AI-driven customers feed their data to Atlas, but I don't expect the stock to soar by more than 40% and revisit the record high it set in November 2021.
