MongoDB Stock Fell 19% Despite Solid Earnings. Is it a Buy?

MongoDB released its second-quarter earnings report on Sept. 1. Here’s Morningstar’s take on MongoDB’s earnings and stock.

Key Morningstar Metrics for MongoDB

• Fair Value Estimate
  : $335.00
• Morningstar Rating
  : ★★★
• Morningstar Economic Moat Rating
  : None
• Morningstar Uncertainty Rating
  : Very High

What We Thought of MongoDB’s Q2 Earnings

MongoDB recorded a solid beat in the second quarter. Total revenue grew 30%, outpacing the 24% implied growth from the previous quarter’s guidance. Rapid revenue scaling also helped quarterly non-GAAP operating margin reach a new high of 24%, up over 900 basis points year over year.

Why it matters: MongoDB Atlas and Enterprise Advanced both posted strong growth of 29% and 36%, respectively. The company is enjoying healthy artificial intelligence momentum backed by real use cases, and we view AI as a stable tailwind that reinforces our 18% revenue growth forecast over the next five years.

• The selection of Atlas by a leading AI lab for chat memory highlights MongoDB’s capability to handle high-throughput workloads. MongoDB’s document-based structure should give more flexibility to developers using large language models when they handle various data forms.
• Voyage AI’s customer count roughly doubled quarter over quarter, and it has become a powerful go-to-market tool that onboards new Atlas customers. We think the synergy between Voyage and Atlas is better than we expected when the deal initially closed 18 months ago.

The bottom line: We lift our fair value estimate for no-moat MongoDB to $335 per share from $312, as we raise revenue forecasts based on solid recent performance. Shares remain overvalued, and we think the market’s enthusiasm around MongoDB’s potential has outstripped its fundamentals.

• We think management’s guidance raise is smaller than the market expected, leading to a 14% after-hours selloff. Updated full-year revenue guidance of $2.92 billion-$3.03 billion implies a sharp revenue growth deceleration from 30% in the quarter to 21% in the third quarter and 16% in the fourth quarter.
• Enterprise AI deployment is a multiyear process. We doubt near-term progress alone can support MongoDB’s current market valuation. Over time, switching costs will matter more to MongoDB’s investment case, and the firm’s net revenue retention improvement to 122% is a good sign.

The following are excerpts from Morningstar’s company report on MongoDB.

Fair Value Estimate for MongoDB

With its 3-star rating, we believe MongoDB stock is fairly valued compared with our long-term fair value estimate of $335 per share, which implies a fiscal 2027 enterprise value/sales multiple of 8 times. We expect MongoDB to achieve a five-year compound annual growth rate of 18%. We anticipate that MongoDB Atlas should benefit from incremental data workloads from the existing customer base and become the primary growth driver for the company, as more clients move their databases to public clouds.

Expanding workloads from existing customers is key to supporting MongoDB’s double-digit top-line growth through fiscal 2035. The boom in new AI-powered applications should provide a continued tailwind for MongoDB’s expansion. We expect to see moderate GAAP gross margin expansion of around 400 basis points for MongoDB over the next 5 years. We believe MongoDB’s GAAP operating margin should turn positive for the first time in the next year or two and continue to expand, reaching 31% by fiscal 2036. The Non-GAAP operating margin should experience a similar upward trend, increasing from 19% to 43% over the next decade.

Read more about MongoDB’s fair value estimate.

Economic Moat Rating

We assign MongoDB a no-moat rating because we currently see limited adoption of document-oriented databases for mission-critical workloads that embody strong switching costs. MongoDB’s structural design makes it an optimized tool for agile software development. However, too much flexibility can also lead to maintenance headaches in the long run. Therefore, customers tend to stick with relational databases like PostgreSQL for easier data governance.

While MongoDB’s annual recurring revenue expansion rate is high at around 120%, and it is a widely regarded leader among document-oriented databases, we need more evidence that MongoDB can remain an integral part of the enterprise tech stack in the long term before awarding the company a narrow moat. Also, the ramping trajectory of MongoDB’s new AI functionalities can bring higher uncertainty to the company’s future expansion of return on invested capital.

Read more about MongoDB’s economic moat.

Financial Strength

We think MongoDB is financially stable, thanks to its prudent acquisition approach. As of fiscal year-end 2026, MongoDB had over $2.3 billion in cash and equivalents, and its cash and equivalents balance has grown steadily over the past five years. MongoDB’s $220 million Voyage AI deal is the only major acquisition in the company’s history, which added some goodwill to MongoDB’s balance sheet. That said, goodwill should remain a very small part of MongoDB’s total assets, and we don’t view goodwill impairment as a major concern for MongoDB’s balance sheet strength.

MongoDB redeemed all its convertible senior notes in fiscal 2025, and the company is now debt-free. We recognize that MongoDB has a limited track record of generating positive operating cash flow, and management’s underwhelming outlook for fiscal 2027 adds another layer of uncertainty to MongoDB’s cash flow trajectory. However, we believe that MongoDB’s cash balance is at a healthy level, and the company’s leverage should remain very low in the foreseeable future.

Read more about MongoDB’s financial strength.

Risk and Uncertainty

We assign MongoDB a Very High Uncertainty Rating, due to intense market competition and uncertainty around new workloads arising from AI-powered application development. Given the number of players in this space and the potential for future technology to evolve, there is high uncertainty about customers’ perception of MongoDB’s long-term role in their tech stack.

MongoDB’s performance does not always stand out from alternatives. To seize further market opportunities, MongoDB has to identify additional workloads that document-oriented databases are optimized for. We believe the two scenarios MongoDB has been focusing on in the near term are migrating legacy applications from SQL databases and developing new AI-powered applications.

Considering the technical challenges of transferring data from SQL to NoSQL format, we see a bigger opportunity for MongoDB in the emerging demand for AI-powered applications. Although MongoDB has made recent strides in supporting vector search, there are alternative SQL-based search products. Additionally, the rise of generative AI could lead to transformative changes in how applications leverage data. New trends like data streaming could alter how developers utilize MongoDB for new application development.

Read more about MongoDB’s risk and uncertainty.

MDB Bulls Say

• Demand for new applications powered by artificial intelligence should continue to increase and fuel growth for MongoDB.
• MongoDB Atlas should enjoy an extended growth runway as the cloud migration of OLTP databases is still at an early stage.
• MongoDB’s friendly user experience and free Community Server should continue to increase its penetration among the developer community and incentivize the adoption of commercial offerings.

MDB Bears Say

• The rise of new database technologies can reduce the number of optimized use cases for document-based databases, limiting MongoDB’s long-term growth potential.
• MongoDB faces heavy competition to earn AI-driven demand for new applications from SQL-based data pipelines.
• Competition could further intensify for MongoDB as hyperscalers and other NoSQL database vendors invest more resources into product development.

This article was compiled by Irza Waraich.