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MongoDB (Nasdaq: MDB) reported stellar third quarter results last week. However, sudden leadership changes and worries about a weak sequential growth sent the stock falling 8% in the after-hours session.

MongoDB’s Financials

MongoDB’s revenues for the third quarter grew 22% to $529.4 million, ahead of the market’s forecast of $498 million. Adjusted net income grew from $0.96 a year ago to $1.16 per share for the quarter. The market was looking for an EPS of $0.67.

By segment, Subscription revenues grew 22% to $512.2 million, and Services revenue improved 18% to $17.2 million. Atlas revenues grew 26% and accounted for 68% of the total revenue for the company.

For the fourth quarter, MongoDB expects revenues of $515-$519 million and net income of $0.62-$0.65 per share. It expects to end the year with revenues of $1.973-$1.977 billion and net income of $3.01-$3.03 per share. The market was looking for revenues of $503.3 million with an EPS of $0.57 for the quarter and revenues of $1.93 billion with an EPS of $2.43 for the year.

MongoDB announced that Michael Gordon, its COO and CFO, will be stepping down at the end of January 2025. MongoDB is looking for internal and external candidates to fill the role. Additionally, MongoDB expects to see a seasonal slowdown in the current quarter driven by application usage during the holiday season. It also expects to see a sequential decline in non-Atlas revenue in the current quarter because it experienced a significant additional benefit from multi-year deals in the third quarter. The market was not pleased with the comments, and the stock price tumbled.

MongoDB’s Growth Strategy

MongoDB is focusing on three key areas for growth in the coming year. First, it is increasing investment in the enterprise channel. It is expanding its strategic account program besides investing resources to educate developers in large enterprise accounts and uplevel their MongoDB skills.

Second, it is focusing on the opportunity to accelerate legacy app modernization using AI. Earlier this year, MongoDB ran a few pilots where it demonstrated that AI tooling when integrated with professional services and relational migrator product can significantly reduce the time, cost, and risk of migrating legacy applications onto MongoDB. Its initial results have revealed that there is more than 50% reduction in the cost to modernize using AI. Given this performance report, MongoDB is increasing its professional services delivery capabilities, both directly and through partners. It is using the learnings from early implementations to develop new tools to accelerate future modernization efforts.

Third, it is investing to ensure that its platform is a key component of the emerging AI tech stack. In July this year, MongoDB had launched an AI Applications Program (MAAP) designed to help companies leverage AI and their data. It recently announced that Capgemini, Confluent, IBM, Unstructured, and QuantumBlack, AI by McKinsey have already joined the MAAP ecosystem, and are offering customers additional integration and solution options.

MongoDB believes that most customers are still experimenting with AI to understand its effectiveness and build early proof-of-concept applications. They are seeing a significant increase in the number of AI apps in production, but they are not yet seeing these apps achieve meaningful product-market fit and traction. It believes that as the usefulness of AI tech improves, the AI apps will finally begin to become more useful. Till that happens, MongoDB will continue to invest in its product capabilities, including enterprise-grade Atlas Vector Search functionality, to ensure that MongodDB platform remains popular with developers to help them build more sophisticated AI use cases.

Its stock is trading at $265.63 with a market capitalization of $19.9 billion. It touched a 52-week high of $509.62 in February and has recovered from the 52-week low of $212.74 that it had fallen to in June.

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