MongoDB (MDB)

Database software company MongoDB (MDB) beat Wall Street’s revenue expectations in Q1 CY2025, with sales up 21.9% year on year to $549 million. The company expects next quarter’s revenue to be around $550.5 million, close to analysts’ estimates. Its non-GAAP loss of $0.46 per share was significantly below analysts’ consensus estimates.

Company Overview

Started in 2007 by the team behind Google’s ad platform, DoubleClick, MongoDB offers database-as-a-service that helps companies store large volumes of semi-structured data.

Data is the lifeblood of the internet and software in general, and the amount of data created is accelerating. As a result, the importance of storing the data in scalable and efficient formats continues to rise, especially as its diversity and associated use cases expand from analyzing simple, structured datasets to high-scale processing of unstructured data such as images, audio, and video.

A company’s long-term sales performance is one signal of its overall quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Thankfully, MongoDB’s 29.1% annualized revenue growth over the last three years was impressive. Its growth beat the average software company and shows its offerings resonate with customers.

This quarter, MongoDB reported robust year-on-year revenue growth of 21.9%, and its $549 million of revenue topped Wall Street estimates by 4.1%. Company management is currently guiding for a 15.1% year-on-year increase in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to grow 11.9% over the next 12 months, a deceleration versus the last three years. Despite the slowdown, this projection is above the sector average and suggests the market sees some success for its newer products and services.

Billings is a non-GAAP metric that is often called “cash revenue” because it shows how much money the company has collected from customers in a certain period. This is different from revenue, which must be recognized in pieces over the length of a contract.

MongoDB’s billings punched in at $509.4 million in Q1, and over the last four quarters, its growth was impressive as it averaged 23.7% year-on-year increases. This alternate topline metric grew faster than total sales, meaning the company collects cash upfront and then recognizes the revenue over the length of its contracts - a boost for its liquidity and future revenue prospects.

MongoDB reported 57,100 customers at the end of the quarter, a sequential increase of 2,600. That’s a little better than last quarter and quite a bit above the typical growth we’ve seen over the previous year. Shareholders should take this as an indication that MongoDB’s go-to-market strategy is working well.

The customer acquisition cost (CAC) payback period represents the months required to recover the cost of acquiring a new customer. Essentially, it’s the break-even point for sales and marketing investments. A shorter CAC payback period is ideal, as it implies better returns on investment and business scalability.

It’s relatively expensive for MongoDB to acquire new customers as its CAC payback period checked in at 387.1 months this quarter. The company’s slow recovery of its sales and marketing expenses indicates it operates in a highly competitive market and must invest to stand out, even if the return on that investment is low.

For software companies like MongoDB, gross profit tells us how much money remains after paying for the base cost of products and services (typically servers, licenses, and certain personnel). These costs are usually low as a percentage of revenue, explaining why software is more lucrative than other sectors.

MongoDB’s gross margin is better than the broader software industry and signals it has solid unit economics and competitive products. As you can see below, it averaged a decent 72.9% gross margin over the last year. That means for every $100 in revenue, roughly $72.89 was left to spend on selling, marketing, and R&D.

In Q1, MongoDB produced a 71.2% gross profit margin, marking a 1.6 percentage point decrease from 72.8% in the same quarter last year. MongoDB’s full-year margin has also been trending down over the past 12 months, decreasing by 1.6 percentage points. If this move continues, it could suggest a more competitive environment with some pressure to lower prices and higher input costs.

MongoDB’s expensive cost structure has contributed to an average operating margin of negative 8.1% over the last year. Unprofitable, high-growth software companies require extra attention because they spend heaps of money to capture market share. As seen in its fast historical revenue growth, this strategy seems to have worked so far, but it’s unclear what would happen if MongoDB reeled back its investments. Wall Street seems to be optimistic about its growth, but we have some doubts.

Over the last year, MongoDB’s expanding sales gave it operating leverage as its margin rose by 6.8 percentage points. Still, it will take much more for the company to reach long-term profitability.

This quarter, MongoDB generated a negative 9.8% operating margin. The company's consistent lack of profits raise a flag.

Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.

MongoDB has shown mediocre cash profitability over the last year, giving the company limited opportunities to return capital to shareholders. Its free cash flow margin averaged 7.6%, subpar for a software business.

MongoDB’s free cash flow clocked in at $105.9 million in Q1, equivalent to a 19.3% margin. This result was good as its margin was 5.8 percentage points higher than in the same quarter last year, but we wouldn’t read too much into the short term because investment needs can be seasonal, causing temporary swings. Long-term trends trump fluctuations.

Over the next year, analysts predict MongoDB’s cash conversion will slightly fall. Their consensus estimates imply its free cash flow margin of 7.6% for the last 12 months will decrease to 7.1%.

One of the best ways to mitigate bankruptcy risk is to hold more cash than debt.

MongoDB is a well-capitalized company with $2.45 billion of cash and $37 million of debt on its balance sheet. This $2.42 billion net cash position is 14.9% of its market cap and gives it the freedom to borrow money, return capital to shareholders, or invest in growth initiatives. Leverage is not an issue here.

We were glad MongoDB raised its full-year revenue and EPS guidance. We were also impressed by how significantly the company beat analysts' revenue and adjusted operating income expectations. Zooming out, we think this quarter featured some important positives. The stock traded up 14.3% to $228.46 immediately after reporting.

Updated: June 20, 2025 at 10:11 PM EDT

We think that the latest earnings result is only one piece of the bigger puzzle. If you’re deciding whether to own MongoDB, you should also grasp the company’s longer-term business quality and valuation.

When it comes to MongoDB’s business quality, there are some positives, but it ultimately falls short. First off, its revenue growth was strong over the last three years. And while MongoDB’s operating margins are low compared to other software companies, its ARR growth has been splendid, showing it’s securing more long-term contracts and becoming a more predictable business.

MongoDB’s price-to-sales ratio based on the next 12 months is 6.9x. Beauty is in the eye of the beholder, but our analysis shows the upside isn’t great compared to the potential downside. We're pretty confident there are more exciting stocks to buy at the moment.

Wall Street analysts have a consensus one-year price target of $265.99 on the company (compared to the current share price of $201.11).