Atlas Adoption Will Drive Enterprise Cloud Transformation

Key Takeaways

• Rising enterprise adoption and AI-focused demand propel recurring revenue growth, while platform innovations drive deeper customer engagement and operating margin potential.
  
• Upmarket expansion, international reach, and strong developer focus position MongoDB for enduring revenue streams and long-term earnings strength.
  
• Rapid cloud growth faces margin and differentiation pressures from integrated competitors, open-source advances, and regulatory complexities, risking slower growth and long-term share dilution.

Catalysts

Provides general purpose database platform worldwide.

• The exponential growth of data from digital transformation and AI initiatives is increasing demand for MongoDB's scalable, flexible platform, as evidenced by strong customer uptake among large enterprises and new AI-native companies, suggesting continued revenue growth opportunities.
  
• MongoDB's Atlas platform is capturing a higher share of workloads as enterprises migrate to cloud-native architectures, with Atlas now 74% of revenue and delivering 29% YoY growth, improving recurring revenue scale and gross margins that support future earnings expansion.
  
• Ongoing product innovation-including integrated capabilities like search, vector search, and embeddings-increases platform stickiness and wallet share, enabling deeper penetration of current accounts and higher net revenue retention, which can drive both top-line and operating margin improvement over time.
  
• Accelerated movement upmarket is leading to acquisition of higher quality, larger enterprise workloads that grow faster and for longer, creating durable, long-term revenue streams and greater operating leverage as new use cases scale.
  
• Continued international expansion and success onboarding AI-native startups, combined with strategic investment in developer awareness and R&D, positions MongoDB to benefit disproportionately as organizations standardize on modern, developer-centric data platforms, supporting sustained revenue growth and long-term earnings power.

MongoDB Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming MongoDB's revenue will grow by 15.5% annually over the next 3 years.
• Analysts are not forecasting that MongoDB will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate MongoDB's profit margin will increase from -4.1% to the average US IT industry of 7.0% in 3 years.
• If MongoDB's profit margin were to converge on the industry average, you could expect earnings to reach $226.8 million (and earnings per share of $2.27) by about August 2028, up from $-86.1 million today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 154.2x on those 2028 earnings, up from -203.4x today. This future PE is greater than the current PE for the US IT industry at 30.7x.
• Analysts expect the number of shares outstanding to grow by 7.0% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 8.72%, as per the Simply Wall St company report.

MongoDB Future Earnings Per Share Growth

Risks

• The rapid expansion in Atlas (cloud) business is driving solid revenue growth, but margin pressure may persist as cloud provider-native NoSQL competitors (e.g., AWS DocumentDB, Azure Cosmos DB) offer tightly integrated, lower-cost alternatives, which could force MongoDB into more aggressive pricing and R&D spending, negatively impacting net margins and future profitability.
  
• The company's current growth is heavily supported by existing and upmarket enterprise workloads rather than new AI-driven use cases or net new customers, raising the risk that as these large enterprise customer additions and workload expansions mature or saturate, future revenue growth rates could decelerate.
  
• Open-source document databases and community-driven solutions (such as DocumentDB via the Linux Foundation) continue to develop, and increased reliance by hyperscalers on open source ecosystems may threaten MongoDB's proprietary differentiation, risking both market share erosion and downward revenue pressure.
  
• While management touts strong self-serve and developer-driven adoption, ongoing migration from on-premise (EA) to cloud (Atlas) could be hampered by tighter global data regulations and data sovereignty laws-especially as enterprises increasingly require hybrid or multi-cloud deployments-potentially increasing compliance costs and limiting international revenue growth.
  
• The company's share count is rising as non-GAAP net income per share guidance is based on a growing number of diluted shares outstanding (reflecting significant stock-based compensation and share issuance), which increases the risk of long-term earnings per share dilution and may suppress share price appreciation despite profitability gains.

Valuation

• The analysts have a consensus price target of $272.211 for MongoDB based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $405.0, and the most bearish reporting a price target of just $170.0.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $3.2 billion, earnings will come to $226.8 million, and it would be trading on a PE ratio of 154.2x, assuming you use a discount rate of 8.7%.
  
• Given the current share price of $214.34, the analyst price target of $272.21 is 21.3% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.