MongoDB stock MDB fell sharply on Wednesday after the database software company reported second-quarter results that beat expectations but failed to deliver the faster Atlas growth investors had anticipated.
Shares were down 13% in trading at $375.72 after closing Tuesday down 4% ahead of the earnings release.
The selloff came despite 30% year-over-year revenue growth, a higher full-year outlook and several Wall Street firms raising their price targets.
Atlas growth misses investors’ expectations
MongoDB reported that revenue from its Atlas multi-cloud database service grew 29% year over year, exceeding the company’s guidance of 26%.
However, the growth rate remained unchanged for the fifth consecutive quarter.
Morgan Stanley analysts, led by Sanjit Singh, said the result disappointed investors who had been looking for Atlas growth to accelerate to 30%.
The analysts described this as the key issue in an otherwise solid earnings report.
MongoDB shares had rallied 29% over the previous month, leaving the stock vulnerable to a pullback after the Atlas result failed to exceed heightened expectations.
Revenue beats forecasts as MongoDB raises guidance
MongoDB reported second-quarter revenue of $771.8 million, up 30% from a year earlier and above FactSet’s analyst forecast of $735 million.
Chief Executive CJ Desai said the company had delivered “strong second quarter results,” highlighting 30% revenue growth, which he described as the company’s highest growth level in several years, along with continued profitability.
MongoDB raised its fiscal 2027 revenue forecast to a range of $3 billion to $3 billion, compared with its previous outlook of $2.9 billion to $3 billion.
It also increased its adjusted earnings-per-share guidance to between $6.39 and $6.58, from $5.95 to $6.14 previously.
Rosenblatt maintained its Buy rating and raised its price target to $445 from $395. The firm noted that Atlas accounted for 73% of total revenue and had reached a run rate exceeding $2 billion.
MongoDB also added a record 2,900 customers during the quarter, while its Voyage customer count nearly doubled from the previous quarter.
Its non-Atlas on-premise business grew 36% year over year, while second-quarter operating margins reached 24%.
AI opportunity supports analysts’ longer-term outlook
Despite the market reaction, Morgan Stanley said the company’s business “remains very solid” and raised its price target to $430 from $380.
Cantor also lifted its price target to $540 from $434.21. Analysts led by Thomas Blakey said they continued to view MongoDB as “a beneficiary of secular app modernization trends and dynamic AI growth trends.”
Analysts pointed to MongoDB’s position in artificial intelligence-enabled application development as a potential long-term growth driver.
Canaccord raised its price target to $480 from $400 while maintaining a Buy rating. Analyst David Hynes said MongoDB now has two durable growth engines where the firm had previously identified one.
The company’s net revenue retention rate stood at 122%, while 48% of customers spending at least $100,000 used two or more MongoDB products, compared with 42% a year earlier.
Canaccord also noted that AI’s direct contribution to revenue remains small, but said the company’s AI pipeline is shifting from narrative toward more observable data.
The firm expects expectations for enterprise agreement growth to be revised at MongoDB’s upcoming investor day.
While the latest results highlighted continued revenue growth, stronger profitability and improved guidance, Wednesday’s selloff showed that investors remain focused on whether Atlas can return to faster growth.
MongoDB now expects Atlas revenue to grow 27% in fiscal 2027, although growth in the second half is projected to slow from first-half levels.
With price targets on MongoDB ranging widely across Wall Street following the Atlas growth debate, investors may want to track updated forecasts and ratings through investment platforms before the company’s upcoming investor day.
The post Why is MongoDB stock falling 13% despite strong Q2 results appeared first on Invezz