MongoDB’s (MDB) Surprising Recovery In Consumption Trends Fuels Beat-And-Raise Report

3:36 pm Wednesday, December 07th, 2022

To say that sentiment was negative heading into MongoDB’s (MDB) 3Q23 earnings report would be a major understatement. Since the database management software provider last reported earnings on August 31, shares have plunged by over 55% and have recently been hovering around multi-year lows. A combination of an expected slowdown in growth for MDB’s consumption-based model and the stock’s rich valuation with a P/S of around 10x have tag-teamed to drag shares lower. Last night, however, MDB dramatically turned the tables by posting an impressive beat-and-raise quarterly report.

The magnitude of upside certainly stands out — MDB’s Q3 EPS beat is its largest on record — but the fact that it turned a profit on a non-GAAP EPS basis for the second time in the past three quarters is especially promising. Prior to 1Q23, the company had never posted a positive EPS number. This swing to profitability and resilience on the top-line is catching investors by surprise.

In last night’s earnings report, though, its EPS and revenue outlook for Q4 was comfortably ahead of expectations. Notably, the company is anticipating its first back-to-back quarters of Non-GAAP profitability, forecasting Q4 EPS of $0.06-$0.08.

Like GTLB’s platform, MDB’s software enables developers to quickly improve productivity, while removing complexity and costs due to its broad range of capabilities. For instance, MongoDB Atlas, a multi-cloud database service, allows companies to deploy, run, scale, and repair deployments across the leading cloud service providers (Microsoft Azure, Amazon Web Services, Google Cloud). In Q3, Atlas generated revenue growth of 61% and now accounts for 63% of total revenue, compared to 58% in the year-earlier period.

The main takeaway is that MDB emphatically eased investors’ fears about a further deceleration in its consumption-based model, while its stronger-than-expected revenue growth underpins an unexpected swing to profitability.