April 19, 2024


Epicurean computer & technology

MongoDB: A Software Developers Perspective (NASDAQ:MDB)


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Two years ago, I left a role managing foundation and endowment portfolios to launch a software service targeting professional service providers who work with F&E clients. Over the course of 2 to 3 years, I taught myself web development, product management, and software infrastructure.

You might think: “That’s a little strange for an investment manager to leave the field and start building software.” You might be right. But I’m sure it will become more and more common.

We are at a point where the tools for developers are so good that a single individual with no formal education in software development can build, deploy, and manage a subscription software service on their own.

Part of the reason this is possible is because of companies like MongoDB (NASDAQ:MDB).

Data Persistence For Young Companies

When I was educating myself on how I would build my product, the vast majority of tutorials that I came across touted the benefits of using NoSQL for data persistence, like MongoDB (the open-source product, not the company) in place of traditional SQL databases. So I learned it.

I’m glad that I did because there is no way I could move as fast as I do with an SQL database. For those who don’t use databases every day, MongoDB allows developers to make on the fly modifications to the structure of their documents. If I suddenly realize that I need five extra fields describing each of my users, adding them is no problem. This flexibility is vital because budding companies have no idea what their data structures should look like out of the gates. This flexibility is something you just don’t get with SQL solutions.

On top of that, MongoDB documents are stored in a format that is already native to the language of the web: JSON. When I need a record, I call it from the database, and it’s immediately ready for me to process and present to my users. This saves me dozens, maybe hundreds of development hours.

MongoDB, the open-source software, creates a fantastic developer experience – especially for young companies, where the primary constraint is capital and access to developer time.

What The User Base Means For MongoDB, Inc.’s Growth

MongoDB, Inc. hasn’t been around for a long time. The first version was launched just a bit over a decade ago, and its popularity has taken off within just the last five years.

To understand this, all you have to do is look at a chart of the “mongodb” package downloads on NPM (a registry that aggregates open-source packages for javascript developers).

MongoDB Open source downloads

Open-source downloads of MongoDB on NPM (NPM)

Because big, profitable, established products don’t just decide to migrate database architecture, it’s likely that the growth the open-source project has seen over the last five years is concentrated in young companies and new developers who aren’t heavily invested in the SQL ecosystem.

It’s important to remember that the company doesn’t directly capture revenue from users of the open-source MongoDB project. MongoDB, Inc.’s revenue is derived from users & companies who have products that warrant paying for the speed, reliability, and security that Cloud Database Hosting (the Atlas Product) and Enterprise Services provide.

New projects with little to no revenue can’t afford to pay much for cloud hosting services. But as these projects mature, their user base grows, and income starts coming in. Suddenly, getting fast, reliable database hosting becomes essential. The vast majority of new software projects fail, but those that do succeed typically take 24-36 months to achieve revenue sustainability. Because of this, MongoDB, Inc. will see a natural lag in its revenue relative to its open-source database software growth.

According to the International Data Corporation (IDC), the data management software market will be ~$121 billion by 2025. SQL-based solutions currently dominate this market, and as the shift towards NoSQL occurs, MongoDB (the company) is perfectly positioned to capture market share. Today, MongoDB represents less than 1% of the market. There is a lot of room for them to capture spend.

Analyst Growth Estimates

According to Tikr.com, analysts are projecting about 33% compound annual revenue growth for MongoDB, Inc out to January 2025. This is coming off of a sustained period of hyper-growth; see table below.

Revenue Growth at MongoDB

Revenue Growth at MongoDB (MongoDB 10K)

While I don’t question that revenue growth will slow, 33% revenue growth over the next three years feels far too pessimistic. Let’s look at what would need to occur to get there. Note I’m only looking at services revenue (Atlas & Enterprise Services), which makes up 95% of the company’s revenue.

  1. Enterprise Services growth would need to collapse to 5%
  2. The Atlas product would need to fall to 40% growth during a period when downloads of the open-source project (see chart above) have shown no signs of slowing and when we should be expecting user projects initiated over the last 2-3 years to become revenue-generating for MongoDB, Inc.

Analyst Growth Expectations Path

Analyst Growth Expectations Path (Tikr.com)

These assumptions strike me as more of a bear case than a reasonable base case. Suppose we rework the table, assuming that enterprise customers don’t fall to stable growth over the next three years and that Atlas can retain some semblance of its current momentum (in what appears to be a favorable environment for the product). In that case, you don’t have to stretch too far to see an opportunity for 40% growth out to 2025.

Tweaking MongoDB Growth Estimates

Tweaking MongoDB Growth Estimates (Personal Estimates)


From reading the comments and other writeups on MDB, it’s clear that people have trouble getting behind a stock trading at 20x forward revenue.

This viewpoint disregards the speed at which MongoDB is growing and how quickly this valuation will come back to earth after baked-in growth is realized. Let’s look at what happens if the stock appreciates by 7% over the next five years.

MongoDB Price/Revenue Decline

MongoDB Price/Revenue Decline (Personal Estimates)

Very quickly, Price/Rev falls back to a multiple that is much more in line with what you would expect to see in the industry.

Industry And Stock Pullback

There’s no question that tech stocks have fallen out of favor recently, the NASDAQ 100 is down over 25% from its highs in late 2021, and MDB itself is down nearly 40%.

MongoDB Price Chart

MongoDB Price Chart (Google Finance)

I won’t try to opine on what will happen to tech stocks generally over the next 12-24 months, and if the sector does poorly, MDB will likely follow suit.

What I will say is that MongoDB, Inc. is putting out fantastic open-source software and providing the infrastructure necessary so that companies can quickly and easily run that software in a production environment at scale.


MongoDB, Inc.’s open-source database is a boon to software developers and young companies. It makes product development faster and less expensive than traditional databases. The software development community is catching on, and usage of the tool is accelerating quickly.

The hosting service that MongoDB, Inc. operates becomes essential for products that reach viability, which we will start to see more of following the explosive growth of the tool.

While the company is richly valued at 20x forward revenue, it seems likely that the market is pricing in growth estimates on the low end of what is likely to occur.


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