MongoDB Q2 FY2025 Earnings Call Transcipt

MongoDB, Inc. (NASDAQ:MDB) released its second-quarter financial results after Tuesday’s closing bell.

Below are the transcripts from the second quarter earnings call.

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OPERATOR

Good day everyone and welcome to MongoDB’s second quarter fiscal year 2026 earnings call. @ this time all participants are in a listen only mode. After the presentation there will be a question and answer session. To participate you will need to press star 11 on your telephone. You will then hear a message advising your hand is raised to withdraw your question, simply press star 11 again. Please note this conference is being recorded now. It is my pleasure to turn the call over to Brian Deneau from ICR. Please go ahead.

Moderator

Thank you, Carmen. Good afternoon and thank you for joining us today to review MongoDB’s second quarter. quarter fiscal 2026 financial results which we announced in our press release issued after. the close of market today. Joining me on the call today are: Dave Vidacharya, President and CEO of MongoDB. Mike Berry, CFO of MongoDB and Jess Lubert, MongoDB’s new Vice President of Investor Relations. During this call we will make forward looking statements including statements related to our. Market and future growth opportunities, our opportunity. To win new business, our expectations regarding Atlas consumption growth, the impact of non-Atlas business and multi-year license revenue, the. Long term opportunity of AI, our financial. Guidance and underlying assumptions and our investments and growth opportunities in AI. These statements are subject to a variety of risks and uncertainties, including the results of operations and financial conditions that could. Cause actual results to differ materially from our expectations. For discussion of the material risks and uncertainties that could affect our actual results. Please refer to the risks described in our Quarterly report on Form 10Q for. The quarter ended April 30, 2025 filed with the SEC on June 4, 2025. Any forward looking statements made on this call reflect our views only as of today and we undertake no obligation to update them except as required by law. Additionally, we will discuss non GAAP financial. Measures on this conference call. Please refer to the tables in the earnings release on the Invest Relations portion of our website for a reconciliation of these measures to the most directly comparable GAAP financial measure. With that, I’d like to turn the call over to Dave.

Dev Ittycheria (President and CEO)

Thank you Brian and thank you to everyone for joining us today. Before discussing our strong quarter, I want to remind everyone about our upcoming Investor Day which will take place on September 17th at the Javits center in New York City. During our DOT Local conference, we’ll spend the day discussing the investments we’re making to drive durable growth and margin expansion and our view of the future. I look forward to seeing you there. Now onto Q2 I’m pleased to report another strong quarter as we continue to execute against our large market opportunity. Let me start with our results before giving you a broader company update. We generated revenue of $591 million, up 24% year over year and above the high end of our guidance. Atlas revenue grew 29% year over year, representing 74% of total revenue. We delivered non GAAP operating income of $87 million for a 15% non GAAP operating margin and we ended the quarter with over 59,900 customers. Atlas performance was strong, accelerating, to 29% year over year growth, up from 26% in Q1. Our customer additions were also robust. We have added over 5,000 customers over the last two quarters. These results reflect the strength of MongoDB’s platform, our flexible document model, expanded capabilities like search and vector search, enterprise readiness and the ability to run anywhere. Many of our recently added customers are building AI applications, underscoring how our value proposition is resonating for AI and why MongoDB is emerging as a key component of the AI infrastructure stack. At the same time, we significantly outperformed on operating margin, demonstrating that we can drive durable revenue growth while expanding profitably. In short, our results show that customers are choosing MongoDB. Let me tell you why. First, MongoDB is an enterprise ready database capable of meeting the most stringent enterprise requirements. Over 70% of the Fortune 500 as well as 7 of the 10 largest banks, 14 of the largest, 15 healthcare companies, 9 of the 10 largest manufacturers globally are MongoDB customers. MongoDB is a battle tested enterprise platform relied on by some of the most sophisticated and demanding organizations in the world, in part because of our strong enterprise posture across security, durability, availability and performance. Atlas enabled one of the world’s largest automakers to overcome postgres scalability and flexibility limits while reducing complexity. The company’s Magic console tracks over 8.5 million vehicles, requiring a modern schema to handle both structured and unstructured data, something postgres could not handle. Ultimately, Atlas consolidated infrastructure accelerate innovation and support the scale of millions of connected vehicles. Second, MongoDB is suitable for a broad range of use cases, including the most mission critical and transaction intensive applications. MongoDB has also supported full asset transactions for more than six years, ensuring strong consistency and data integrity at scale. This is why some of the world’s most demanding transactional workloads run on MongoDB today. For example, Deutsche Telekom selected MongoDB Atlas as the foundation for its internal developer platform, which includes mission critical workloads like contract management, device purchases and billing for 30 million customers. With 90 Atlas clusters managing over 60 million customer records, Deutsche Telekom’s customer data platform now handles 15 times the concurrent logins of legacy systems. By consolidating these high volume, transaction intensive applications on MongoDB, Deutsche Telekom has improved resiliency, accelerated innovation and delivered a step change in customer engagement. Third, MongoDB has redefined what’s core for the database by natively including capabilities like search, vector search, embeddings and stream processing. Comparing MongoDB to another database like Postgres is not an apples to apples comparison. Take a global e commerce application that manages inventory and order data while enabling product discovery through sophisticated search across millions of SKUs. The choice for this application not between MongoDB or Postgres is between MongoDB or Postgres, plus other offerings like Pinecone Elastic and Cohere for embeddings. MongoDB’s complete solution allows developers to spend less time stitching together and maintaining a patchwork of disparate systems and more time building differentiated functionality that drives the business forward. For example, Agibank, a Brazilian neobank with 2.7 million active customers, migrated their content management system storing customer records from postgres to Atlas. As data volumes grew, postgres inflexibility and task execution latency drove performance issues and the database lacked sophisticated secondary indexes and full text search, hurting sales of core offerings such as loans, insurance and card approvals. Agibank was constantly updating the database and manually scaling infrastructure, which is both time consuming and error prone. With Atlas, Agibank gained a resilient flexible system that handled rising demand and support new services delivering nearly five times better performance and 90% lower costs, all with no outages. Fourth, MongoDB is emerging as a standard for AI applications. Over the last few quarters we’ve seen a strength in our self serve channel, driven in part by AI native startups choosing Atlas as the foundation for their applications. In the enterprise segment, adoption is real but early Much of the activity today centers on employee productivity tools and packaged ISV solutions. Enterprises are still in the very early stages of building their own custom AI applications that will transform their business. We consistently hear from customers that when teams try to scale from vive coded prototypes built on relational back ends to enterprise grade deployments, these platforms quickly hit limits in flexibility, scalability and performance across startups and increasingly enterprises. Our unified platform is resonating strongly in the enterprise segment. A leading electric vehicle company chose Atlas and Vector Surge to power its autonomous driving platform after testing VectorSearch against Postgres PGVector for their in vehicle voice assistant. They selected Monodb for superior performance at scale and stronger ROI. They now rely on Atlas to handle over 1 billion vectors and expect 10 times growth in data usage by next year. Devred Devrev, a well funded AI native platform with proven founders disrupting the help desk market, built agent OS its complete agentI platform that autonomously handles billions of monthly requests on Atlas. DevRev Accelerated Development Velocity, lower cost and scale globally with low latency by using atlas. Agent OS also leverages Atlas vector search for semantic search, enriching its knowledge graph and LLMs with domain specific content Companies in nearly every industry and across every geography are choosing MongoDB because we deliver the features, performance, cost effectiveness and AI readiness they need all in one platform. As we look ahead, we remain confident in MongoDB’s position to lead both the current wave of digital transformation and the next wave powered by AI. With that, here’s Mike.

Mike Berry (Chief Financial Officer)

Thanks Dave. I’ll begin with a detailed review of our second quarter results and then finish with our outlook for the third quarter and fiscal year 26. I will be discussing our results on a non GAAP basis unless otherwise noted. As Dave mentioned, we had a great quarter as we exceeded all of our guidance ranges and are increasing our full year guidance across the board. Now onto the Results. In the second quarter total revenue was $591 million, up 24% year over year and above the high end of our guidance. Shifting to our product mix, Atlas revenue outperformed our expectations and year over year growth accelerated to 29% in the quarter and now represents 74% of total revenue. This compares to 71% in the second quarter of fiscal 25 and 72% last quarter we had an impressive Atlas growth quarter which benefited in part from the strong start to consumption in May that we referenced on our last call, as well as broad based strength especially in larger customers in the us. Let me provide some context on Atlas consumption in the quarter in Q2. Atlas consumption growth was strong and relatively consistent with last year’s growth rates. This drove the acceleration in revenue as well as the growth in absolute revenue dollars year to date for the first half of fiscal 26. Turning to non Atlas revenue came in ahead of our expectations in the quarter as we continue to have success selling incremental workloads into our existing Enterprise Agreement (EA) customer base. Non Atlas ARR, which reflects the underlying revenue growth of this product line without the impact of changes in duration, grew 7% year over year. In addition to the good underlying trends in non Atlas. In Q2 we also benefited from more multi year deals than expected reflecting our customers desire to commit to building with Mongodb long term. Approximately half of the non Atlas revenue outperformance versus Guidance was attributable to multi year outperformance. We had another strong quarter for customer adds in the second quarter as we grew our customer base by approximately 2,800 sequentially bring in the total customer count to 59,900 which is up from over 50,700 in the year ago period. This quarter we incorporated new customers added from the Voyage AI acquisition to our customer count representing 300 of the 2,800 added. The growth in our total customer count is being driven primarily by Atlas which had over 58,300 customers at the end of the quarter compared to over 49,200 in the year ago period. It is important to keep in mind the growth in our Atlas customer count reflects new customers to Mongo DB in addition to existing Enterprise Agreement (EA) customers deploying workloads on Atlas for the first time. Of our total customer count over 7,300 are direct sales customers, a decline of 200 customers sequentially and flat year over year. These metrics are largely due to our decision to reallocate a portion of our go to market resources from the mid market to the enterprise channel starting in the second half of last year. This does not impact our total customer count but is an output of fewer self serve originated customers being elevated to our direct sales team as we move upmarket. In Q2 our total company net AR expansion rate was approximately 119% which is consistent with recent quarters. We ended the quarter with 2,564 customers with at least $100,000 in ARR representing 17% growth versus the year ago period. Moving down the income statement, gross profit in the second quarter was $436 million representing a gross margin of 74% which is down from 75% in the year ago period. Our year over year gross margin decline is primarily driven by Atlas growing as a percent of the overall business. Our income from operations was $87 million for a 15% operating margin compared to 11% in the year ago period. We are very pleased with our stronger than expected margin result operating margin results which benefited mainly from our revenue outperformance. Additionally, I’d like to provide a little context on the modest restructuring we undertook in the quarter. It impacted less than 2% of employees and resulted in approximately $5 million of one time charges which we have excluded from our non GAAP financials. This action is consistent with the key priorities I outlined for you last quarter to identify ways to both reallocate existing spend to higher ROI opportunities and be more disciplined about incremental spending. We are focused on running an efficient, scalable business that supports growth in revenue and profitability to drive long term shareholder value. Net income in the second quarter was $87 million, or $1 per share, based on 87 million diluted shares outstanding. This compares to a net income of $59 million, or $0.70 per share, on 84 million diluted shares outstanding in the year ago period. Turning to the balance sheet and cash flow, we ended the second quarter with $2.3 billion in cash, cash equivalents, short term investments and restricted cash. During the quarter we spent $200 million to repurchase approximately 930,000 shares, which was under our previously announced $1 billion total share repurchase authorization. Operating cash flow was well above our expectations at $72 million and free cash flow was $70 million, which compares to negative 1 million and negative $4 million respectively, in the year ago period. Our strong cash flow results were driven primarily by strong operating profit and higher cash collections. Before turning to our outlook in greater detail, I’d like to share the key points driving how we are looking at the rest of fiscal year 26. Number one, we are raising our expectations for revenue based on our confidence in Atlas as well as a strong performance in the first half of the year, providing a higher starting point for Atlas heading into the second half. Number two, we are increasing our operating margin guidance by 150 basis points at the high end, reflecting our strong Q2 performance and continued focus on margin improvement. And number three, we are raising our operating margin guidance while still continuing to make incremental investments for growth with a focus on R and D and developer awareness. Now, moving on to our full year guidance, I’d like to provide some incremental comments on our expectations. First, as we discussed, we had a strong start to the year and are confident in our ability to drive continued revenue and profitability growth. We are raising our full year revenue guidance by $70 million, including the $38 million outperformance in Q2. This reflects. Excuse me, this reflects the strong Q2 consumption benefiting revenue in the second half and our continued confidence in Atlas growth All this implies mid-20s percentage growth for Atlas in the second half of the year. Second, incorporating our strong performance in the first half, we expect non Atlas subscription revenue will now be down in the middle single digits for the year compared to our prior expectation of high single digit decline. We also expect the headwind for multiyear license revenue for fiscal 26 to now be $40 million due to the Q2 outperformance compared to our prior expectation of approximately $50 million. Please note we expect non atlas ARR will continue to grow year over year. Finally, we are raising our expectations for operating margin to 14% at the high end up from 12.5% in our prior quarter guidance. This reflects the better than expected revenue performance, the impact of our more disciplined approach to investing for growth and our increased focus on efficiency for fiscal year 26. We now expect revenue to be in the range of 2.34 to $2.36 billion, an increase of $70 million from our prior guide. We are raising our non GAAP income from operations expectations by $44 million and are now targeting a range of 321 to $331 million and non GAAP net income per share to be in the range of $3.64 to $3.73 based on 87.4 million diluted shares outstanding. Note that the non GAAP net income per share guidance for the third quarter and fiscal year 26 assumes a non GAAP tax provision of 20%. Moving on to our Q3 guidance, a few things to keep in mind. First, we expect to see a low 20% year over year percentage decline in the non Atlas business and after the strong multiyear outperformance we experienced in Q3 of fiscal year 25. As a reminder, Q3 of last year was our strongest multi year revenue quarter and is the largest portion of the multi year headwind. Second, we expect operating margin will be lower than in Q2 primarily due to the expected sequential decline in non Atlas revenue which is very high margin revenue. In addition, it is also impacted by the timing of operating expenses, specifically R and D hiring and seasonality of our marketing investments. With that context, I will now turn to our outlook for the third quarter. For the third quarter we expect revenue to be in the range of 587 to 592 million dollars. We expect non GAAP income from operations to be in the range of 66 to 70 million dollars and non GAAP net income per share to be in the range of 76 to 79 cents based on 87.7 million diluted shares outstanding. To summarize, we had a very strong quarter. We are pleased with our ability to drive revenue growth across the business and increase our operating profit expectations we remain incredibly excited about the opportunity ahead and will continue to invest responsibly to drive long term shareholder value. I would also like to take a moment to extend a warm welcome to Jess Lubert, our new Vice President of Investor Relations, who started with us ...