MongoDB Stock Soars Nearly 40% After Earnings. Why Wall Street Is Cheering the Software Company.

MongoDB raised its annual sales guidance to a range of $2.34 billion to $2.36 billion. (Dreamstime)

MongoDB stock was surging on Wednesday after its latest earnings reassured Wall Street that the database-software company is set to gain market share in the artificial-intelligence era.

MongoDB raised its full-year outlook for a second successive quarter in its earnings report late on Tuesday. Its shares were up 35% to $289.11, positioning the company to more than wipe out a roughly 8% loss this year so far through to Tuesday’s close.

Mongo’s earnings also gave a boost to the iShares Expanded Tech-Software Sector exchange-traded fund, which was up 0.5%.

MongoDB provides cloud-based products for software developers to manage and scale up their databases. Competition between data-software companies seeking to capitalize on the AI boom is fierce, and there have been concerns its products will lose out to PostgreSQL, a different database system that is open-source.

The latest earnings suggest the risk might be overblown. On a call with analysts, MongoDB executives cited multiple cases where clients chose its products over a PostgreSQL-based system. The list includes what the company called “a leading electric vehicle company” using MongoDB for its autonomous driving platform.

“We believe results reinforce our thesis that Mongo will continue to gain share in the massive database market and that its platform’s unstructured data fluency, scalability, and deployment flexibility are highly differentiated and well aligned with the needs of AI applications,” wrote William Blair analyst Jason Ader in a research note.

Ader kept an Outperform rating on MongoDB with no target price.

Rival Snowflake earlier this year said it had agreed to acquire start-up Crunchy Data, a specialist in helping clients use PostgreSQL. Privately held rival Databricks purchased Neon, a similar database start-up, in a deal valued at about $1 billion.

“Positive results raised questions around the validity of the competitive landscape with regard to Postgres,” wrote Cantor Fitzgerald analyst Thomas Blakey in a research note. “We believe that MongoDB’s value proposition in its hyperscaler agnostic position, its performance and scalability, alongside a fully integrated data platform that can support transactional data, vector embeddings, vector search and stream processing, positions the company well in organizing large organizations’ diverse data sets, particularly in AI.”

Blakey raised his target price on the stock to $312 from $271 and kept an Overweight rating.

MongoDB raised its forecast for annual sales to a range of $2.34 billion to $2.36 billion, up from $2.25 billion to $2.29 billion. It also increased its prediction of adjusted earnings per share to a range of $3.64-$3.73, from $2.94-$3.12. The company had already raised its guidance in the previous quarter’s earnings report.

In the July quarter, revenue rose 24% to $591.4 million while adjusted earnings were $1 a share. Analysts surveyed by FactSet forecast revenue of $553.9 million and adjusted earnings of 67 cents a share.

Write to Adam Clark at adam.clark@barrons.com