Q4 2025 MongoDB Inc Earnings Call
One, two, three, four.
Speaker Change: Good day, and welcome to MongoDB's Q4 fiscal year 2025 earnings call. At this time, all participants are in a listen only mode.
Speaker Change: After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is rated. [inaudible]
Speaker Change: To withdraw your question, press star one one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker Brian Denyeau from ICR. Please go ahead. Thank you, Brad.
Brian Denyeau: Thank you, Sheree. Good afternoon, and thank you for joining us today to review MongoDB's fourth quarter of Figuil 2025 financial results, which we announced in our press release issued after the close of the market today. Jordan and the calls for their Dave Ittycheria, President and CEO of MongoDB and Serge Tanjga, MongoDB's Interim CFO . Thank you.
Brian Denyeau: The impact of non-atmos business, the long-term opportunity of AI, the opportunity of application modernization, our expectations regarding our win rates and Salesforce productivity, our financial guidance underlying assumptions and our planned investments in growth opportunities
Brian Denyeau: These statements are subject to a variety of risks and uncertainties, including the results of operations of the financial condition, because actual results differ materially from our expectations. [inaudible]
Brian Denyeau: For discussion on material risks and authorities that affect our actual results, please refer to their risk described in our Corbay Report on Form 10Q for the quarter-ended October 31, 2024. Follow the FEC on December 10, 2024.
Brian Denyeau: Andy Ford, we can say what's been in this call reflect our views only as of today, and we undertake no obligation to update them except as required by law.
Dave Ittycheria: With that, I'd like to turn the call over to Dave.
Dave Ittycheria: Thanks, Brian , and thank you to everyone for joining us today. I'm pleased to report that we had a good quarter and executed well against our large market opportunity. Let's begin by reviewing our fourth quarter results before giving you a broader company update. Thank you very much. Thank you very much.
Dave Ittycheria: We generated revenue of 548.4 million, a 20% yearlier increase, and above the high end of our guidance.
Atlas Revenue, Group 24% year of a year representing 71% of revenue.
Dave Ittycheria: We generated non-GAAP operating income of 112.5 million for a 21 percent non-GAAP operating margin. We ended the quarter with over 54,500 customers.
Dave Ittycheria: For the full year, we crossed a $2 billion revenue mark while growing 19%, and our roughly 20 times the size we were at the year before we went public. [inaudible]
Dave Ittycheria: Overall, we were pleased with our fourth quarter performance. We had a healthy new business quarter led by continued strength and new workload acquisition within existing Atlas customers. In addition, we again benefited from a greater than expected contribution from multi or not Atlas deals. [inaudible]
Speaker Change: Moving on to Atlas Consumption, the quarter played out better than our expectations, with consumption growth stable compared to the year ago period. Surge will discuss consumption trends in more detail. Finally, retention rates remain strong in Q4, demonstrating the quality of our product and the mission criticality of our platform.
Speaker Change: As I look into fiscal 26, let me share with you what I see as the main drivers of our business. [inaudible]
Speaker Change: First, we expect another strong year of new workload acquisition. As you said, many times the past, in today's economy, companies build competitive manage through custom build software. With fiscal 26, we expect that customers will continue to gravitate towards building their competitive differentiation on MongoDB.
Speaker Change: Usage Grotes to start fiscal 26 is consistent with the environment we have seen in recent quarters. This consistency coupled with an improved fiscal 25 cohort of workloads gives us confidence that Atlas will continue to see robust growth as it approaches a $2 billion run rate this year. [inaudible]
Speaker Change: Third, as Serge will cover more detail, we expect our non-Atlas business will represent a meaningful headwind to our growth in fiscal 26 because we expect fear of multi- or deals and because we see that historically non-Atlas customers are deploying more of their incremental workloads on Atlas.
Speaker Change: Fourth, we are very excited about our long-term opportunity in AI, as I will explain a bit later. In fiscal 26, we expect our customers will continue on their AI journey from experimenting with new technology stacks to building prototypes to deploying apps and production.
Speaker Change: We expect the progress to remain gradual as most enterprise customers are still developing in-house skills to leverage AI effectively. Consequently, we expect the benefits of AI to be only modestly incremental to revenue growth in fiscal 26.
Speaker Change: Fifth, we'll continue scaling our application modernization efforts. Historically, this segment of the market was not widely available to us because of the effort, cost and risk of modernizing old and complex custom applications. So, we're going to start the presentation.
Speaker Change: In fiscal 25, our pilots demonstrate that AI tooling combined with services can reduce the cycle time of modernization.
Speaker Change: This year we will expand our customer engagements so that app modernization can meaningfully contribute to our new business growth in fiscal 27 and beyond.
Speaker Change: To start with, and based on customer demand, we are specifically targeting Java apps running on Oracle which often have thousands of complex store procedures that need to be understood, converted, and tested to successfully modernize the application.
Speaker Change: We address this recombination of AI tools and agents along with inspection verification by delivery teams.
Speaker Change: Though the complexity of this work is high, the revenue opt-e for modernizing these applications is significant. For example, we successfully modernize a financial application for one of the largest eyes used in Europe , and we're now in talk to modernize the majority of the Lexi Estate.
Speaker Change: As I take a step back, I see fiscal 26 as a year of solid outless growth, enabled by a large market, superior product, and strong go-to-market execution. We expect continued strong win rates as we require incremental workloads across the customer base.
Speaker Change: We will continue building on our core land expand, go-to-market motion to further accelerate workload acquisition. In fiscal 25, we saw improved Salesforce productivity and we are forecasting continued improvements in fiscal 26. [inaudible]
Speaker Change: In addition, we will continue investing to become a standard in more of our accounts.
Speaker Change: We are not marking constraint in even our largest accounts. For example, we finished the year with 320 customers with over 1 million in ARR, a year of year growth rate of 24%. This reinforces our move up market. To that end in fiscal 26, we will make significant incremental investment in our strategic accounts program.
Speaker Change: Looking beyond fiscal 26, I'm incredibly excited about a long-term opportunity, particularly our opti to address the expanded requirements of a database in the AI era. Let me tell you what we're seeing in our customer base as they work to adopt AI.
Speaker Change: We joke that the world will move so fast that tomorrow's plans will happen yesterday. The winners will be those companies that can transform and dab quickly to this new pace of change. Those cannot will fall rapidly behind. The winners will be the winners.
Speaker Change: AI's transforming software from a static tool into a dynamic decision-making partner.
Speaker Change: No longer limited to predefined tasks, AI-powered applications will continuously learn from real-time data, but this software can only adapt as fast as the data infrastructure is built on and legacy symptoms that systems simply cannot keep up. [inaudible]
Legacy Technology Stacks were not designed for continuous adaptation. [inaudible]
Speaker Change: MongoDB was built for change. MongoDB was designed from the outset to remove the constraints of legacy databases, enabling businesses to scale, adapt and innovate at AI speed. Our flexible document model handles all types of data while seamlessly scalability ensures high performance for unpredictable workloads.
Speaker Change: With the Voyager acquisition, MongoDB makes AI applications more trustworthy by pairing real-time data and sophisticated embedding and retrieval miles that ensure accurate and relevant results. [inaudible]
Speaker Change: We also simplify AI development by natively including vector and text search directly in the database, providing a seamless developer experience that reduces cognitive load, system complexity, risk and operational overhead. [inaudible]
Speaker Change: All with the transactional, operational, and security benefits intrinsic to MongoDB.
Speaker Change: But technology alone isn't enough. MongoDB provides a structured solution-oriented approach that addresses the challenges customers have with the rapid evolution of AI technology, high complexity, and a lack of in-house skills. [inaudible]
Speaker Change: We are focused on helping customers move from AI experimentation to production faster with best practices that reduce risk and maximize impact.
Speaker Change: Our decision to acquire Voyage AI addresses one of the biggest problems customers have when building and deploying AI applications, the risk of hallucinations.
Speaker Change: AI-powered applications excel where traditional software often fall short particularly in scenarios that require nuanced understanding, sophisticated reasoning, and interaction and natural language.
Speaker Change: This means they are uniquely capable of handling tasks that are more complex and open-ended.
Speaker Change: Imagine a financial services agent that autonomously allocates capital on behalf of its customers or a cancer screening application in the hospital that analyzes scans to detect early signs of pancreatic cancer. For any mission-critical application...
Minakrit, a low-quality results are simply not acceptable.
Speaker Change: The best way to ensure accurate results is through high-quality data retrieval, which ensures that not only the most relevant information is extracted from an organization's data with precision, high-quality retrieval is enabled by veteran bedding and re-ranking models.
Speaker Change: VoyJS embedding and re-ranking models among the highest rated in the hugging-faced community for retrieval, classification, clustering, and re-ranking in our used by AL leaders like Anthropic, Langchained, Harvey, and Replet. [inaudible]
Speaker Change: Boy J.I. led by Stanford Professor Tangy Mark, who has assembled a world-class AI research team from AL labs at Stanford, MIT, Berkeley, and Princeton. With this acquisition, MongoDB will offer a best-in-class embedding and rewracking models to power native AI retrieval.
Speaker Change: Put simply, MongoDB demarcatizes the process of building trustworthy high applications right out of the box.
Speaker Change: Instead of cobbling together all the necessary piece parts, an operational data store, a vector database, and embedding and re-ranking models, MongoDB delivers all of it with the compelling developer experience. As a result, MongoDB is redefined the database for the AI era. The AI era, the AI era, the AI era, the AI era, the AI era.
Speaker Change: Now I'd like to spend a few minutes reviewing the adoption trends of MongoDB across our customer base.
Speaker Change: Customers across industries and around the world are running mission critical projects and atlas, leveraging the full power of platform including Informatica, Sonos, Zebra technologies, and Brad.
Speaker Change: Grab, Southeast Asia's leading super app, which provides everyday services like delivery, mobility, digital financial services, and serves over 700 cities in eight Southeast and Asian countries. Successfully migrated its key app, Grab Kios to Atlas. [inaudible]
Speaker Change: Alice provide grab with an automated, scalable and secure platform, which empowers engineering teams to focus on product development to accommodate grab's rapid growth. By leveraging Alice, grab achieved significant efficiency gains, saving around 50% of the time previously spent on database maintenance.
Speaker Change: The Associated Press, the Catalan Department of Health, Urban Outfitters, and Lombard ODA are turning to MongoDB to modernize applications.
Speaker Change: Urban Outfitters chose MongoDBS database platform to provide a flexible, scalable foundation for its infrastructure. With a vision of integrating data across systems for elevated and consistent customer experiences, the retailer found legacy databases inadequate.
Speaker Change: By adopting Atlas and its flexible document model, Urban Outfitters accelerate development, boosted scalability, while seamlessly integrating data. [inaudible]
Speaker Change: This transformation facilitated the introduction of AI-driven personalization and cutting-edge search features, enriching the shopping experience across both digital and physical spaces.
Speaker Change: mature companies and startups alike are using MongoDB to help deliver the next wave of AI-powered applications to their customers, including SwissCom,
Speaker Change: Swisscom, Switzerland's leading provider, Mobile, Internet, and TV services deployed in New Gen AI app in just 12 weeks using Alice.
Speaker Change: Schlisscom implemented at-list of power a RAG application for the eSportside library transforming unstructured data such as reports, recordings and graphics into vector embeddings that large language models can interpret.
Speaker Change: This enables vector search to find any relevant context, resulting in more accurate and tailored responses for users.
Speaker Change: In summary, we had a healthy cue for, we saw stabilizing Atlas consumption growth along with a few new business, a strong new business quarter and we remain confident in our ability to execute on a long-term opportunity. [inaudible]
Speaker Change: Fiscal 26 is a transition year as we execute on our go-to-market motion while investing to prepare to capture the AI opportunity both through Greenfield AI applications and AI assisted modernization of legacy applications. We want to capitalize on a once-in-a-generation opportunity. With that, here's search.
Serge Tamja: Thanks, Dave. I'll begin with a detailed review on force quarter results and then finish with our outlook for the first quarter in full fiscal year 2026.
Serge Tamja: First, I will start with our force quarter results. Total revenue in the quarter was $548.4 million, up 20% year over year, and above the high end of our guides. We are now at the end of the quarter. We are now at the end of the quarter.
Serge Tamja: Shifting to our product mix, let's start with Atlas. Atlas grew 24% in the quarter compared to the previous year and now represent 71% of total revenue compared to 68% in the fourth quarter of fiscal 2024 and 68% last quarter. [inaudible]
Serge Tamja: Atlas Revenue is recognized primarily based on customer consumption of our platform, and that consumption is closely related to end user activity of their applications. [inaudible]
Serge Tamja: Let me provide some context on Atlas consumption in the water. In Q4, consumption was ahead of our expectations.
Serge Tamja: If we compare this year's Q4 with Q4 or fiscal year 24, both usage and consumption growth were stable on a year over your basis.
Serge Tamja: While this is only one quarter, and consumption trends around the holidays can be particularly volatile, we are encouraged to see signs of stability and consumption growth.
Serge Tamja: Turning to Non-Alice Revenue, Non-Alice came in ahead of our expectations in part due to greater than expected contribution from multi-year deals, as they've mentioned. As you know, due to ASC 606, we recognize the entire term license component of a multi-year contract at the start of that contract.
Serge Tamja: This multi-year license revenue benefit was over $10 million more than was contemplated in our Q4 guidance.
Serge Tamja: We realize that ASC 606 introduces increased variability into our non-atlas revenue, making it harder to understand underline trends. To address that, we wanted to provide some incremental color.
Serge Tamja: If we look at non-Atlas ARR growth rather than revenue, in Q4 of fiscal year 25, the growth was in the mid-single digits year over year compared to low double digit growth in the year ago period.
Serge Tamja: We observe that customers who are predominantly non-Atlas historically are deploying a growing share of incremental workloads on Atlas. In other words, your revenue growth of those customers is increasing the showing up in Atlas. [inaudible]
Serge Tamja: Turning to customer growth, during the fourth quarter we grew our customer based by approximately 1900 sequentially, bringing our total customer count to over 54,500, which is up from over 47,800 in the year ago period.
Serge Tamja: Of our total customer count, over 7,500 are direct sales customers, which compares to over 7,000 in the year ago period.
Serge Tamja: The growth in our total customer count is being driven primarily by Alice, which had over 53,100 customers at the end of the quarter because they're the over 46,300 in the year ago period. The growth in our total customer count is being driven primarily by Alice, which had over 53,100 customers at the end of the quarter.
Serge Tamja: It's important to keep in mind the growth in our Atlas customer account reflects new customers to MongoDB in addition to existing EA customers adding incremental Atlas workloads.
In Q4, our net ARR expansion rate was approximately 118% [inaudible]
Serge Tamja: The decline versus historical period is attributable to a smaller contribution from expanding customers.
Serge Tamja: We ended the quarter with 2,396 customers with at least $100,000 in ARR and annualized MRR out from 2052 in the year of open period.
Serge Tamja: As they mentioned, we also finished the year with 320 customers spending 1 million or more annualized on our platform, compared to 259 a year ago.
Serge Tamja: Moving down the income statement, I will be discussing our results on a non-GAAP basis unless otherwise noted.
Serge Tamja: Gross Profit in the quarter was 411.7 million, representing a gross margin of 75%, which is bound from 77% in the year ago period.
Serge Tamja: Our year-over-year gross margin decline is driven in part by att was growing as a percent of the overall business.
Serge Tamja: Rankham from Operations was 112.5 million, or a 21% operating margin for the 4th quarter, compared to a 15% margin in the year-of-year period. Our operating income results versus guidance benefited from our revenue performance. In addition, we benefited from timing of hiring around year-of-year-of-year-of-year.
Serge Tamja: Net income in the fourth quarter was $108.4 million, or $1.28 per share, based on $8.4.6 million
Serge Tamja: This compares to a net income of $71.1 million or $80.5 per share on $82.9 million diluted weighted average shares of standing in the year-of-old period.
Serge Tamja: Turning to the balance sheet in cashflow, we ended the fourth quarter with $2.3 billion in cash, cash equivalence, short term investment and restricted cash. [inaudible]
Serge Tamja: During Q4, we also completed their redemption of our 2026 convertible notes and as a result our balance sheet is debt-free. [inaudible]
Serge Tamja: Operating Casthola in the fourth quarter was 50.5 million. After taking into consideration approximately 27.6 million in capital expenditures and principal repayments of finance lease liabilities, Freed Casthola was 22.9 million in decor.
Serge Tamja: This compares to free cash a little 50.5 million in the year ago period.
Serge Tamja: Our Q4 Capix included approximately 24 million for purchase of IPv4 addresses as we discussed previously. This concludes our IPv4 address purchase. [inaudible]
Serge Tamja: I'd now like to turn to our outlook for the first quarter in full fiscal year 2026.
Serge Tamja: We expect non-GAAP income from operations to be in the range of 54 million to 58 million, and non-GAAP net income per share to be in the range of 63 cents to 67 cents, based on 86 million estimated diluted weighted average shares of state. [inaudible]
for the full fiscal year 2026.
Serge Tamja: and non-GAAP net income per share to be in the range of $2.44 in $2.62 based on 87.3 million estimated diluted weighted average shares of Stain.
Serge Tamja: Note that the non-GAAP net income for share guidance for the first quarter in full fiscal year 2026 include a non-GAAP tax provision of approximately 20%.
Serge Tamja: I'll now provide some more context in our guidance starting with the full year.
Serge Tamja: First, as they mentioned, we expect a roughly stable Atlas consumption growth compared to fiscal year 25
Serge Tamja: Atlas consumption will benefit from stronger contributions from workloads acquired in fiscal year 25 compared to the contribution that fiscal year 24 workloads had last year. [inaudible]
Serge Tamja: As you know, we made changes to sales compensation plans at the start of last year to focus more on the size of new workloads acquired and will believe that those changes are having a desired impact.
Serge Tamja: Second, we expect our non-ATLAS subscription revenue will be down in the high single digits for the year.
Serge Tamja: The primary reason is that we expect an approximately $50 million dollar headwind for multi-year license revenue in fiscal year 26, an estimate that is based on a bottoms up analysis of our non-atlas renewal base.
Simply put, after two years of very strong multi-year performance.
Serge Tamja: We expect the mix of multi-year non-Atlas revenue to not only be lower than the last two years, but also below the historical trend.
Serge Tamja: This is due to the fact that in fiscal year 26, we have a more limited set of large non-Atlas accounts that can sign multi-year deals. [inaudible]
Serge Tamja: Finally, I wanted to provide some context to better understand that operating margin guides. [inaudible]
Serge Tamja: We expect operating margin of 10% at the midpoint of the range, down from 15% that we reported in fiscal year 25. We expect operating margin of 10% at the midpoint of the range.
There are three primary reasons for the margin decline. [inaudible]
Serge Tamja: First, the $50 million of fiscal year 25 multi-year license revenue that won't repeat in fiscal year 26 is very high margin, making for a difficult margin compare. This will primarily impact the second half of the year. [inaudible]
Serge Tamja: Second, we are investing aggressively in R&D, inclusive of the recently announced acquisition of Voyage AI. We see an opportunity to further distance ourselves from the competition in terms of performance and scalability, and to redefine what it means to be a database in the age of AI.
Serge Tamja: Third, we are increasing our marketing investments, specifically to drive improved awareness and understanding of MongoDB's capabilities. Our goal is to better educate new and existing customers on the full power of our platform and highlight the widening gap between us and the legacy competitors.
Serge Tamja: Moving on to our Q1 guidance, a few things to keep in mind.
Serge Tamja: First, we expect Atlas Revenue to be flat to slightly up sequentially. Please keep in mind that Q1 has three fewer days than Q4. [inaudible]
Serge Tamja: Also, the typical seasonally slower Atlas consumption growth during the holidays has a bigger impact on incremental Q1 revenue than it did in Q4, thereby negatively impacting sequential revenue growth.
Serge Tamja: Second, we expect to see a meaningful sequential decline in EA revenue. As discussed in the past, Q4 is our seasonally highest quarter in terms of our EA renewal base, which is a strong indicator of our ability to win new EA business. This is our seasonally highest quarter in terms of our ability to win new EA.
In Q1, the year renewal date is sequentially much lower.
Serge Tamja: Finally, let me address how the acquisition of Voyage AI will impact our financials.
Serge Tamja: We disclosed last week that the toll consideration was 220 million.
Serge Tamja: Most voyaged shareholders received the consent consideration in MongoDB stock, with only 20 million being paid out in cash. [inaudible]
Serge Tamja: To offset the deluded impact of the acquisition, today we are announcing that our board has authorized a 200 million stock buyback.
Serge Tamja: In fiscal year 26, we expect an immaterial amount of revenue from the acquisition as we work to expand the reach of the technology and integrate it into the MongoDB data.
Serge Tamja: To summarize, MongoDB delivered strong force quarter results. We are pleased with our ability to win new business and see stable consumption trends in ours.
Serge Tamja: With that, we'd like to open it up for questions. Operator?
Speaker Change: Thank you. As a reminder to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, press star 11 again. Due to time restraints, we ask you please limit yourself to one question and one follow-up question. Please stand by while we compile the Q&A roster. Thank you.
Thank you for watching!
Speaker Change: And our first question will come from the line of Raimo Lenschow with Barclays. Your line is open. [inaudible]
Perfect, thank you and...
Speaker Change: Two quick questions from me. Once on the multi-year guidance, on the multi-year situation.
Speaker Change: Like, if you look like this quarter and the quarter is before you overperformed there [inaudible]
Speaker Change: The guidance is obviously your expense for slightly young people.
Dave Ittycheria: Weaker, because you have a lower renewal portfolio. Is it just a portfolio of you see it change in trend, Dev? So it's just a mechanical problem, or like, you know, or a mechanical situation, or is there also a change of behavior? And then I had one follow up. [inaudible]
Speaker Change: Yeah, so Raimo, why don't I take that one? Thank you for the question. So let me just make sure that I repeat and level set. So in fiscal year 24, we had exceptionally strong multi-air performance led by our Alibaba deal. And going into fiscal year 25, we expected a $40 million headwind based on the assumption that fiscal year 25 would be in line with the long-term trends. So in fiscal year 25, we expected a $40 million headwind based on the long-term trends.
Speaker Change: Instead, after strong Q3 and Q4, the ultimate headwind was significantly lower than that 40 million. And that creates the renewal-based effect that sets us up for fiscal year 26. So what I mean by that is because we've done so many more...
Speaker Change: Morta Yardillo, Cisquio 24 and 25, the renewal base in the opportunity is just much lower to begin with. So it's not a change in trends. In fact, we assume same conversion rates is historically. It's just the opportunity set is lower in fiscal year 26.
Speaker Change: Okay, perfect. And then if you think about the Voyager acquisition, like how do you think about that in terms of getting that into the organization and into the market? Is that kind of…
Speaker Change: Going to be a lesson of attachment to what you were doing or do you think it's going to be so broader than just into the MongoDB install base? Thank you. Thank you.
Speaker Change: Thanks, Raimo. I'll take that question. But today, Voy, J.I., it does offer its models to other third parties and we will continue to do that. We think it's important for people to have access to the best in class models. We also believe that that would be a great way to bring people new to MongoDB into the MongoDB. We will continue to do that.
You know, here and that's a way for us. [inaudible]
Speaker Change: There will be, in the short to medium term, a better together story where we will basically integrate Voyget into the MongoDB platform and do things like auto embeddings where data will be embedded as soon as it's basically entered into the MongoDB platform, which will make a developer's life that much easier versus having to go to some third party to get
Thank you. One moment for our next question. Let's begin.
Speaker Change: And now we'll come from the line of Sanjit Singh with Morgan Stanley , your line is open.
Great, thank you, you are here soon, I'm just in jeep [inaudible]
Speaker Change: With a look on your portfolio, what were the aspects that either this thing when new customers couldn't do with your portfolio that they can now pursue with the technology that you're required to avoid AI?
And then as a second question...
As it relates to your operating...
Speaker Change: Exence guidance that's implied in your investments there. Last quarter you talked a lot about reallocating investments, but the curious is just if you can double click on what's changed over the last 90 days that really pushed you to make those incremental investments. Thank you very much.
Speaker Change: From, I appreciate the reasons that you gave some of those like the $50 million most year, they, you probably had some visibility on that 90 days ago, so sort of what has changed in those 90 days that pushed you to make those incremental investments? Thanks.
Serge Tamja: So great, I'll start, I'll address the voyageric question and I'll hand it off to Serge to talk about the op-x [inaudible]
Serge Tamja: So stepping back and just thinking from a customer's perspective, one of the main reasons what gives customers pause in terms of deploying mission and critical AI use cases is the risk of hallucinations because AI systems are probabilistic.
Serge Tamja: You can't always guarantee what the output will be. And if you're in a regulated industry, whether it's financial services of healthcare or other industries where precision of the response of the quality of response really matters, it really prevents people from deploying these production level AI use cases. [inaudible]
Serge Tamja: So, the reason we acquired Voyage AI is to provide what's called embedding and re-ranking models. And let me just explain, you know, how this all works. So think about the LLM as the brain.
Serge Tamja: Think about the database is about your memory in the state of where how things are are.
Serge Tamja: And so, and then think about embeddings as an ability to find the right information for the right question.
Serge Tamja: So imagine you have a very smart person, say like Albert Einstein on your staff and you're asking him, in this case the LLM, a particular question. Well Einstein still needs to go, you know, do some homework based on what the question is about finding some information before he can formulate an answer. [inaudible]
Robin reading every book in a library. [inaudible]
Serge Tamja: What the embedding models do is essentially act like a librarian pointing Einstein to the right section, the right aisle, the right shelf, the right...
Serge Tamja: book and the right chapter and the right page to get the exact information to formulate an accurate and high quality response.
Serge Tamja: So, the performance gains you get by leveraging embedding models is significant and even embedding models themselves have different qualities [inaudible]
Serge Tamja: from other model providers, and they got far better performance. So the value of voyage is being able to increase the quality and enhance the trustworthiness of these AI applications that people are building in order to serve the most demanding and mission-critical use cases.
Speaker Change: Yeah, and I'll take the off-ex question. So you're absolutely right. We are both reallocating and reinvesting at the same time. [inaudible]
Speaker Change: And so, 90 days ago, we talked about some reallocations in our sales and marketing line, reducing our investments in the mid market in order to deploy those resources in the up market. And then we also talked about this continuing or de-emphasizing a few products so that we can focus more on the remaining portfolio or receive attraction and the opportunity. And so, we talked about this continuing or de-emphasizing a few products so that we can focus more on the remaining portfolio or receive attraction and the opportunity.
Speaker Change: We are investing over and above while we're reallocating and that was the plan all along and the reason for that is because of the opportunity that we see. [inaudible]
Speaker Change: You've heard Dave talk to his prepared remarks about the unique opportunity that AI will present for people to revisit their infrastructure stack. And we see that as a unique once in a lifetime opportunity that we want to capitalize on. [inaudible]
Speaker Change: And what we don't want to do as a management team is sit here five years from now and wonder whether we invested enough to fully maximize our loans from opportunity. [inaudible]
Speaker Change: And what gives us comfort in this investment is, frankly, our margin strike record. So if you go back and take a step back, and go back as far as the IPO, our margin is going in the negative 30%, and obviously we've come a long way in terms of growth and margin expansion at the same time. And what gives us comfort is, we've come a long way in terms of growth and margin expansion at the same time.
Speaker Change: And even if you look more recently over the last couple of years, at the moments when we slowed investments, we saw margin spike, including Franklin Q4, where we printed 21% operating margin, which is in line with our long-term guidance.
Speaker Change: So we have confidence that the economics of the business are strong and that the business scales, but it's about investing at the right moment in time and the conviction that we have to really play offense and optimize on our opportunity.
Thank you. One moment for our next question.
Speaker Change: And that will come from the line of Mike Sekos with Needham. Your line is open.
Mike Sekos: Hey guys, thanks for thinking of the questions here. I wanted to come back and know what we're talking about seeing Atlas consumption.
Mike Sekos: Trans and how they're shaking out where we sit today. Just curious, when we think about the full year, you guys are talking about taking most recent couple of quarters as far as how that consumption is played out. And is there anything...
Mike Sekos: A specific key for consumption that started to drive this dynamic on the growth. I'm interested in what you would point to, was it's improving the sales, the nation is in the cold, is you guys are capturing, or is there something else you could point at to on that plus?
Speaker Change: Yeah, I'll take a break that might, so when he comes to you. [inaudible]
Mike Sekos: First of all, as we discussed in the past, it's sort of the seasonally slowest quarter of the year in terms of consumption growth because we do see both usage and consumption slow down around the holiday. And so that happened, youth work consumption was slow within two, three. [inaudible]
Mike Sekos: Aaron Volatility, when it comes to the holiday season. [inaudible]
Mike Sekos: When it comes to table consumption growth in 50 years, 26, I would assumption it's recomponent.
Mike Sekos: So the foot plan is the base itself, which is obvious to the largest
Mike Sekos: But it grows as a cenodrade because, you know, it's the emphasis of the oldest workforce. [inaudible]
Mike Sekos: Now, in any given year, you need the workloads of the prior year and the workloads of the current year to basically offset the growing base effect. [inaudible]
Mike Sekos: And so last year we were not able to do that, you know, for three reasons. Number one is the base itself slowed down, which was a macro phenomenon that we call that in Q1.
Mike Sekos: Secondly, Fiscal Year 24 workloads didn't meet our expectations going into Fiscal Year 25. Fiscal Year 25.
Mike Sekos: And then new workloads in fiscal year 25 were off to a slow start slightly for operational reasons and that kind of was the headwind that we faced for the rest of the year.
Mike Sekos: So now turning the calendar forward for this year, we are calling for stable macro environment and usage growth in the base.
Mike Sekos: Rishi, we don't have a crystal ball but that's what we see currently.
Mike Sekos: Then we're expecting more from fiscal year 25 workloads. We're optimistic that those are doing better based on the data that we have.
Mike Sekos: And because of our move up market, we expect to get more new workload ARR and sales productivity in fiscal year, fiscal year 26 cohort. And those two things ought to offset the fact that the basis, again, larger than it was a year ago in resulted stable consumption growth.
Speaker Change: Thank you for that. It's really appreciated. And for follow-up here, I know that we're citing this $50 million more a year headwind as it relates to the non-Atlas business.
Speaker Change: Can you kind of chunk that up? If I'm thinking about Q1, Q2, is there any way you can help us get a sense of what those headwinds are on a quarter by quarter basis? [inaudible]
Speaker Change: It sort of is the mirror image of the outperformance that we've seen here in Q3 and Q4 that we called out, and so I would think of it as a back half-weighted phenomenon.
Thank you so much, guys. Thank you so much.
Thank you. One moment for our next question. Let's begin.
Speaker Change: And that will come from the line of Brent Bracelin with Piper Sandler. Your line is open.
Speaker Change: Thank you, afternoon. I wanted to double-click into Atlas. If we normalize for the unused credits last year, the implied Atlas growth here in the low 20s is actually a bit of a bigger step down in growth.
Speaker Change: So, could you just revisit the growth levers as we think about atlas here? I know it's a larger business going into this year than last, but it does look like normalized growth after accounting for this unused credits last year is decelerating a little bit more, just curious why.
Speaker Change: Yeah, so I'm gonna go through the puts and takes a little bit but I think it will help with the math so the first thing I would reiterate is that
On average, we expect consumption growth in fiscal year 26.
Speaker Change: To be stable, we've always seen in fiscal year 25, so it's point number one. [inaudible]
Speaker Change: Point number two is you have the total guidance, and then you can take the high single digit rate of decline in the non-Atlas business, and that will give you a sense of what's left in Atlas, and that's with the roughly stable Atlas consumption growth in fiscal year
Speaker Change: The final thing I would say is, as you think about the growth in fiscal year 25, just a reminder that what matters is the exit rate as opposed to the average throughout the year because we have seen revenue slowed down on a year basis because we have had lower consumption in all quarters, consumption growth in all quarters except Q4 of last year. The final thing I would say is, as you think about the growth in all quarters, consumption growth in all quarters, consumption growth in all quarters, consumption growth in all quarters.
Got it, and then Dave is a follow-up for you.
Speaker Change: We've seen AI workloads, I would argue, in an experimental phase for the last two years, we're now seeing AI go into production, starting to see early signs of some of these agentic functions show up in revenue. What's your expectation as you think about customer conversations?
Speaker Change: Customers that are in experimentation, going to production. When do you expect to see a bit of a lift there on your business? Yes.
Speaker Change: Yeah, so, again, we do see, I mean, we have some high-profile AI companies who are building on top of Atlas. I'm not at Liberty's name who they are.
Speaker Change: It's very hard for them to kind of think about like what's to act to use and so on and so forth. The second, as I mentioned earlier on the voyage question, there's also a real worry about the trustworthiness of a lot of these applications. So I would say the use cases you're seeing are fairly simplistic, you know, customer chat bots.
Speaker Change: Maybe Documents Summarization, maybe some, you know, very simple, agenteic workflows. But I do think that that is, you know, we are in the early innings and I expect that sophistication to increase as people get more and more comfortable. We think architecturally we have a huge advantage of the competition. [inaudible]
Speaker Change: One, the document model really supports different types of data, you know, structure, semi-structure, and unstructured. We embed, you know, a search and vector search onto a platform. No one else does that.
Speaker Change: We then we now with Voy Jal, we have the most accurate embedding and rewracking models to really address...
Speaker Change: The Quality and Trust Issue, and all this is going to be put together in a very elegant developer experience that reduces friction and enables them to move fast. So we feel we are really well positioned.
Speaker Change: for this opportunity, and we're really excited. We are already obviously excited about what voice brings to us and excited by what customers are telling us, but we do things going to take some time because customers, again, are naturally, you know, getting their arms around this technology and starting slowly.
Thank you. One moment for our next question.
Speaker Change: And now we'll come from the line of Karl Keirstead with UBS. Your line is open.
Speaker Change: Thanks, Dave, on the last call and even the prior when you talked quite a bit about this go-to-market pivot where
Speaker Change: Revenue Guidance, and Conversely, does that require a decent amount of sales investments that might be a factor in your margin guidance, and how is that effort going at a high level? Thank you.
Speaker Change: Yeah, thanks for the question, Karl. We're really pleased with the progress we're making. It was as evidenced by just even the data point we shared on the million dollar customers. I mean, that customer count is growing faster than the rest of our customer base. So we're already seeing dividends from the investors are making up market. And we did see sales productivity gains last year from the move up market. And so we expect even for the sales productivity gains this year. In terms of the margin, we actually reallocate it.
David Investments and Sales.
You know, moving resources.
Speaker Change: from the mid-market to the up-market. So, I wouldn't say that there was a demonstrable increase in sales investments. The investments are really more in R&D and driving more awareness of our platform and educating, spending more time, educating customers because it's still fine. [inaudible]
Speaker Change: that a lot of people are still not completely aware of MongoDB's full capabilities and also not don't necessarily have the skills to use all of our capabilities, so you're seeing a lot of investments going there. And that's what we're really focused on, but in terms of the move up market, we're really happy with the results we're seeing. And Karl, the only thing I would add is that that increased productivity is definitely a part of the guidance. And that increased productivity is definitely a part of the guidance.
Okay, terrific. Thank you both.
Speaker Change: Thank you. One moment for our next question. And that will come from the line of Kingsley Crane with Canon Core Genuity. Your line is open.
Speaker Change: Hi, thanks for taking the question. So, again, on Voyage AI, you mentioned that technology is not enough in the program arc. So, to what extent do you think feature sets like that of Voyage can drive workload creation within AI apps? [inaudible]
Speaker Change: Or is that more market oriented? And then it's voyage additive in its ability to reduce spectrostorage costs similar to your efforts in quantization.
Speaker Change: VoyJI addresses a trust gap, enabling to build high-quality applications where the results, you know, they have a high degree of confidence in. [inaudible]
Speaker Change: But the skills gap is still inherent to these organizations, so what we are doing is not just bringing technology, but we're really taking a solutions approach where we're coming together with a combination technology that's practices, experience so that we can really help customers deal with their business problems, not just for technology of them. And customers really appreciate this approach, and so you'll see us really take more of a solution approach. Thank you very much.
Speaker Change: to help, for example, in modernizing their existing legacy applications as well as helping them build new AI applications.
in terms of...
Speaker Change: Storage. Yes, the advances we made in quantization really reduce the storage cost and improve the performance of Existor. I would say with these embedding models are slightly different. What that's doing is essentially helping really quickly find the precise information needed based on the query being posed to the application or to the underlying LLM to get the best quality answer. So...
Speaker Change: So, we really feel like this is all about increasing the trustworthiness and the accuracy through the accuracy of the results that are generated from these AI applications. Thank you very much.
Speaker Change: Great, really helpful and a quick follow up. How did GCP partner influence deals fair in the quarter? You called out strengths last quarter and that you were looking to do more of them and you four. Also saw that they made some cuts more recently. Thanks.
Speaker Change: No, our relationship with Google Cloud is still a very constructive and productive. I mean, generally I would say our relationship with all the hyperscalers is very positive and so we're working with them depending on the customers. You know, some customers have relationships with only one hyperscaler. Sometimes they have relationships with multiple hyperscalers. [inaudible]
Speaker Change: and we work closely with GCP as well as AWS and Azure, and I'm saying all three are actually quite productive.
Speaker Change: Thank you. One moment for our next question. Then that will come from the line of Patrick Wall Ravens with Citizens Bank. Your line is open.
Speaker Change: Oh, great. Thank you. I was wondering if you could just step back for us and give us sort of the five-year trajectory on
Non-Atlas. [inaudible]
Speaker Change: As I look at the growth rates going back, you know, 21 was 23 percent, 22 19 percent, 23 25 25.
Speaker Change: 24 24 25 4 So was there a period where it exceeded your expectations and then and then where it it came in below which you thought what sort of what was the what was the ebb and flow of non-netless. [inaudible]
Speaker Change: Yeah, I wanted to say we don't really manage a business, necessarily by product, we manage it by channel and really work from a customer orientation working backwards. What we do see at the high end of the customer segment is that customers do like choice. They don't necessarily believe that every workload will go to the cloud and in many cases some customers are still very much focused on building their technology stack on prem. In fact, a lot of large banks in Europe and an actually a number of banks here in the US have a predisposition to earn workloads on
Prem, so it's really about serving the customer's needs. [inaudible]
Speaker Change: They customers do like the ability to have choice on how they run their workloads.
Speaker Change: And, but we do also see, and this was called out in the prepared remarks, for those customers who start with the EA who have a significant amount of EA, we are seeing them, seeing more of this incremental workloads move to Atlas, and some of these new capabilities like Voyager, that will be available only on Atlas. And so, so there are some things that we're doing that, you know, you'll see customers probably inherently do more on Atlas. So, let's move on to the next slide.
Speaker Change: And I'll hand the, you know, let's search comment on the, on the, on the question on the guide. Yeah, so I think that I would just stress a couple of things Pat. One is,
Speaker Change: We talked and prepared remarks about non-ALS ARR growth being in the mid single digit year over year in Q4 and that being a slowdown from double digits.
Speaker Change: Growth in Q4, Fiscal Year 24, and that's the phenomenon on the day is talking about, which is that we are seeing increasingly customers who are historically non-Atlas deploying incremental workloads on Atlas.
Speaker Change: They do the blowing incremental workloads on EA, that's why that one continues growing and we expect that you continue growing.
Speaker Change: But we see more and more of it actually coming on Atlas. So if you look at the ARR of those customers, it's actually growing more than what the Justin on Atlas component was suggests. And that's based into both the Atlas and the on Atlas portion of the guy.
Speaker Change: Okay, and then just as a follow-up, and you might not be able to comment on this, but as we look out past 26,
Speaker Change: I know you don't run the business this way, but we do model it this way. So as we look out past 26, should we expect the growth to stay really muted? Yeah.
Yes, I would say two things. One is...
Speaker Change: The puts and takes are the following. We do still have low market share.
So we do expect to continue growing workloads.
Speaker Change: that we can acquire in NEA number one. Number two, we do expect them move to the clouds to continue, so we do expect those customers for us to gain even more sharing those customers by getting incremental Atlas workloads.
Speaker Change: And then a bit of a question mark at this point is sort of how the app modernization initiative is going to play out. We think that will benefit both Atlas and non-Atlas or EA Ratter. And so obviously that's still an asset and it's sort of hard to ascertain, but that actually ought to be helpful across the board. And so it's going to be a bit of a question mark at this point. And so it's going to be a bit of a question mark.
Thank you. One moment for our next question.
Brad Sills: And that will come from the line of Brad Sills with Bank of America. Your line is open.
Brad Sills: Oh, great. Thank you so much. The question for you, Dave, you mentioned fiscal 26 kind of being a year of transition. One of the get your thoughts on what that means exactly. It seems to me that the consumption patterns are stabilizing. You're seeing some traction with new workloads last year was a year of kind of go to market changes. [inaudible]
Speaker Change: It feels like this would be the year where you would start to see some progress on some of the transition items you saw last year. So maybe transition is a little bit strong as a way to describe this year, but I just wanted to kind of double click on your thoughts on that. Thank you very much.
Speaker Change: Yeah, so let me be clear. I feel very bullish about the future of this business. I have not been excited like this for a long time. I think
Speaker Change: The way people are building these new applications are ready-made for a platform like MongoDB in terms of the ability to handle different...
Speaker Change: Data types, the scalability of the platform to be able to natively support.
Speaker Change: Electrical and Semantic Search, and obviously now to be able to also give a very elegant experience to be able to leverage embedding and re-ranking models. So I feel very bullish, and I think this business can grow tremendously faster than this today, but we are obviously making the right investments. We believe the right investments to kind of position the company for that growth.
Speaker Change: We're pleased to see that the Atlas business is stabilizing and that was obviously mentioned by both myself and Serge in the prepared remarks. I know that's been a question for a lot of investors. I think obviously with the A business that puts in takes with this multi-year, but the long-term trends are in our favor. It's a big market. We're going after essentially...
Speaker Change: You know, a big opportunity because customers are essentially looking to run their business through
Speaker Change: And I believe that when we think about like a competitive differentiation against the other players in space, I think we are very, very differentiated and that will show up in the numbers over time. Yeah, the only thing I would have Brad is that it's a transition year in a sense that some of our largest...
Speaker Change: Initiatives and focus areas, those being application modernization and then generally winning the AI stack are going to only incrementally be beneficial to our revenue this year but we expect them to be meaningful growth drivers in years beyond.
Speaker Change: Wonderful. Thanks for that. And then we'd love to get your thoughts on where you're seeing new workloads, strength that you called out, any categories in particular. Thank you.
Speaker Change: Yeah, the short answers were seeing it everywhere. We were seeing it both at the height of the market as well as at the low end of the market. If you see our customer accounts, our customer account, new customer account of this quarter, this past quarter was quite strong. And as we called out, our move up market is generating our million dollar customer account as we've grown faster than our overall customer base. So we're seeing results at both the top and the bottom end of the market. We're seeing results at both the top and the bottom end of the market as we've grown faster than our overall customer account.
Thank you. One moment for our next question.
Patrick Colville: And I will come from the line of Patrick Coleville with Scotiabank, your line is open. Thank you very much.
Patrick Colville: Thanks so much for taking my question. I guess this one's for you, please. MongoDB is obviously doing
A lot of things right. [inaudible]
Patrick Colville: So, I guess I just want to ask around the competitive environment as of today, you know, how is MongoDB competing with the hyperscalers and Postgres as of today? And is that any different to the competitive environment? [inaudible]
Patrick Colville: You know, call it this time of year at March 2024. Thank you.
Patrick Colville: Yeah, well, I'll say that I'll make two main points and I'll explain what they are. One, a lot of people do compare MongoDB to Postgres and I think that's actually a false comparison. [inaudible]
Patrick Colville: Because Postgres is just an OLTP database, you know? With MongoDB, the red comparison is Postgres, Prestolastic, plus something like Pine Cone, plus maybe like a embedding model from like either like OpenAI, Oko here.
Patrick Colville: So when you package all those components together, you get a light for light comparison with MongoDB. And I think obviously Kasthuri's much prefer to have a much more elegant solution than trying to cobble all these pieces together and try and figure out how to make it all work.
Patrick Colville: The second point I would say is MongoDB is frankly a much better OLTP database than Postgres. [inaudible]
Patrick Colville: Postgres is based on a relational architecture. It's very rigid. It doesn't handle unstructured data well. It claims to support JSON data, but the performance of anything north of two-tailed bites of JSON data, the performance of Postgres really suffers. It's very rigid. It's very rigid. It's very rigid. It's very rigid.
and it's not very skillable. [inaudible]
Patrick Colville: competing for the same workloads we are. Our win rates against Postgres are very high.
Patrick Colville: When we talk to our salespeople, when we can explain the value proposition of MongoDB against Postgres or wind rates are incredibly high, we just want to get into more battles.
Patrick Colville: And what we recognize is people who don't know MongoDB may just gravitate to Postgres as their solution because they just don't know how to use MongoDB. And that's what we're working on in terms of generating more awareness and infusing more skills into our existing customers as well as the new customers who we want to come to our platform.
Very helpful, and I guess just touching the hyperscalers briefly.
Patrick Colville: The hyperscalers, they have their own variants of post-cress offerings, and they have their clones. I mean, we haven't seen the clones as much lately. Our win rates against the clones are very, very high. There's something we should talk about for a few years ago, but we seem to, our relationship with the hyperscalers I mentioned in the previous question is actually very positive. We are salespeople partnered with the hyperscalers all around the world. And what we find is that together [inaudible]
Patrick Colville: We win more business, and yes, there may be situations where they try and lead with the first party services, but usually we find that, you know, when we partner with them, that they're very accommodating and that we all can do well working together. So I would say there's no structural issue with the hyperscalers. [inaudible]
Thank you. One moment for our next question.
Speaker Change: And that will come from the line of Rishi Jaluria with RBC Capital Market. Your line is open.
Rishi Jaluria: Oh wonderful, thanks so much for taking my question. Dave, I want to follow up on a comment you made, which is, you know, a lot of the postgres successes from lift and shift of existing sequel applications and we're seeing the same thing in our own checks.
Speaker Change: What needs to happen as companies think about net new generative AI applications?
Speaker Change: For them to think about kind of reconstructing or re-architecting the solutions from scratch, especially when they want to leverage unstructured data, and what role can you play in kind of driving that conversation more towards rebuild rather than just lift and shift?
Speaker Change: And what that means is that you need a data infrastructure and a data foundation that is designed to enable change. [inaudible]
Speaker Change: MongoDB was built for change. The whole notion of our document model was unable to have a very flexible schema so you can make changes quickly. Please.
Speaker Change: Then, obviously, over time, we added a lexical search and then somatic search through a vector database functionality. So all that comes out of the box and now with a Voy J.I. acquisition, we bring all these speed spars together.
And we feel that...
Speaker Change: Staying on a relational database will no longer be a viable option, just given the rate of change that every business will have to deal with, and they need a very flexible and adaptable data foundation, and that's where we come in. Obviously, our job is to educate those customers on our advantages, but we feel, and that's why I feel so bullish about our futures, because I think the puck is essentially coming to us.
just given our architectural advantages in this space.
Speaker Change: Yeah, that's really helpful, Dave. And then maybe just related to that, you've talked about the opportunity to do its relational migrator in the past and really how AI can help in accelerating that, remapping the data schema, etc. What sort of momentum have you seen with relational migrator and maybe how should we be thinking about that as a growth driver going forward? Thank you.
Speaker Change: Yeah, our confidence in bullishness of the space is even higher today than it was before. I do want to say that what we're going after is a very hard problem, and I should say we knew this from the start, right?
Speaker Change: For example, when you're looking at a legacy app that's got hundreds, tens of thousands, not tens of thousands of stored procedures, being able to reason about that code, being able to decipher that code and ultimately to convert that code takes, it's a lot of effort. And the good news is that we are seeing a lot of progress in that area. We see a lot of interest from our customers in this area because they're in so much pain with all the technical debt that they've assumed.
Speaker Change: Second is that when they think about the future and how they enable AI and these applications, there's no way they can do this on their legacy platforms. And so they're motivated to try and modernize as quickly as possible. [inaudible]
Speaker Change: We are initially focused on Java apps running on Oracle because that seems to be the most paying their customers are seeing and we feel like, you know, FY26 this year is we're going to scale out this work and then it's really going to start showing up on numbers in FY27
Speaker Change: Thank you. That is all the time we have for today's question and answer session. I would now like to turn the call back over to Dev Ittycheria for any closing remarks.
Dev Ittycheria: Thank you. Thank you for everyone for joining us today. I just want to remind and summarize that we had a really strong quarter in year as we executed on a large opportunity.
Dev Ittycheria: We expect this coming fiscal year to play out similar to last year with healthy new business and stable atlas consumption trends.
Dev Ittycheria: We are more excited than ever about the long-term outlook, particularly on our opportunity to address expand requirements of a database in the AI era. And we'll continue to invest judiciously to focus on our execution and focus on our execution to capture the long-term opportunity ahead of us. So thank you for joining us and we'll talk to you soon. Take care.