MongoDB stock traded lower Friday as traders digested the company's quarterly earnings report. The database software firm's results easily topped estimates for earning and sales, but MongoBD offered what analysts called conservative guidance for the current quarter. Chief Executive Dev Ittycheria said the company's products are "resonating" with AI startups.
MongoDB late Thursday said that it earned an adjusted 86 cents per share on sales of $458 million for the January quarter. On average, analysts projected the New York-based company would post adjusted earnings of 46 cents per share on sales of $437 million, according to FactSet.
Earnings per share increased by 51% year over year in the quarter while sales advanced 27%. The quarter marks the end of MongoDB's fiscal 2024 period.
For the current quarter, MongoDB guided for sales of $438 million, based on the midpoint of its range. Analysts were projecting MongoDB would tally $452 million in sales for the April-ending period, according to FactSet. For the full fiscal year ending in January 2025, MongoDB projected sales of $1.90 billion to $1.93 billion. Analysts were looking for $2.04 billion, according to FactSet.
On the stock market today, MongoDB stock was down 4% at 395.55 in morning trades. That marked a slight recovery from double-digit declines seen in after-hours trading Thursday.
MongoDB's 'Conservative' Guidance
The guidance miss didn't come as a shock to MongoDB stock analysts. William Blair analysts Jason Ader wrote in a client note Thursday that "MongoDB management is notoriously conservative in its guidance approach."
Ader maintained a positive outperform rating for MongoDB, writing that investors "should not lose sight of the strength in the business exiting fiscal 2024, which is enabling accelerated investments in sales and marketing that should boost share gains in the out years."
MongoDB's guidance projects its fiscal 2025 revenue will increase 14% year over year at the midpoint of its range, and adjusted earnings will decrease 28.5% to $2.38 per share. That compared with sales growth of 31% and an earnings increase of 311% for its fiscal 2024.
MongoDB Chief Financial Officer Michael Gordon told analysts Thursday that there was an $80 million headwind for fiscal 2025 revenue, partly driven by a change in MongoDB's sales strategy. But the company sees a "stable" environment for consumption-based software revenue after volatility in prior years. Customers of MongoDB's subscription products are charged based on how much storage and computing power they consume.
Still, at least eight analysts set their target price lower for MongoDB following the report, according to FactSet. On the other hand, D.A. Davidson upgraded its outlook for MongoDB following the report, to buy from neutral.
"We are buyers on the weakness as the FY25 guide is very conservative, particularly on implied Atlas growth," D.A. Davidson analyst Rudy Kessinger wrote. "We see significant upside to estimates as likely throughout the year."
MongoDB shares are attractive while trading at an enterprise value 13 times its calendar-year 2025 revenue, Kessinger added. Companies with similar revenue growth rates trade at a median of 11.5 times 2025 sales, he added.
AI Still In 'Dial-Up Phase'
MongoDB's main platform, Atlas, is a leading provider of what's known as a NoSQL, or nonrelational, database. It is the type of advanced database that analysts expect will help power data-hungry generative artificial intelligence products for enterprises. That view helped MongoDB stock more than double in value last year, as investors flocked to it as an AI bet.
MongoDB CEO Ittycheria told analysts Thursday that the company's products are "resonating with innovative AI startups." But he cautioned against expecting a rush of enterprise AI spending in the next 12 months. Companies are still early in the process of launching AI products. AI-related spending is focused on training and running large language models, Ittycheria said.
That's good news for AI chip company Nvidia, but other potential AI winners will have to wait.
"While I strongly believe that AI will be a significant driver of long-term growth for MongoDB, we are in the early days of AI, akin to the dial-up phase of the internet era," Ittycheria told analysts.
AI tailwinds, Ittycheria added, will "show up in the business when people are deploying AI apps at scale, right? So I think that's going to be at least another year."
MongoDB Stock: Technical Ratings
The company said it reached more than 47,800 customers in the January quarter, up 17% year over year. Meanwhile, 2,052 of those customers pay more than $100,000 annually, MongoDB said, an increase of 24% from a year earlier.
Coming into the report, MongoDB stock had a perfect IBD Composite Rating of 99, according to IBD Stock Checkup. The score combines five separate proprietary ratings into one rating. The best growth stocks have a Composite Rating of 90 or better.
But MongoDB's Relative Strength Rating was 84 out of 99. The RS Rating measures a stock performance against the broader market. MongoDB's RS score is down since February, when the stock began retreating from a 52-week high of 509.62, according to IBD MarketSurge.
MongoDB stock is on the IBD Tech Leaders list.
