Shares of the database software developer soared after the report. It's a beneficiary of the AI race

Shares of database software developer MongoDB jumped by a third on Wednesday, August 27, following the release of its quarterly earnings. Investors recently feared the company was doing poorly due to high competition, slowing growth of its cloud platform and the firing of several top executives, but the software developer has raised revenue forecasts for two consecutive quarters thanks to demand in the AI platform segment.

MongoDB, which makes database software, jumped 34.4% to $288.1, its highest since Feb. 21. The rally began after MongoDB, reporting quarterly results, raised its full fiscal year outlook for the second straight year. The stock was down 8% from the beginning of the year through Tuesday's close, and now - as of this text's publication - it's trading up 24%.

MongoDB's soaring quotes pushed up the iShares Expanded Tech-Software Sector core exchange-traded fund, up 0.3%, Barron's noted.

MongoDB offers cloud-based solutions for developers to help manage and scale databases. Competition among database companies looking to capitalize on the AI boom is extremely high, and analysts feared that MongoDB's products would lose out to PostgreSQL, an alternative open source database management system that is free, Barron's writes.

At the end of 2024, investors were alarmed by the slowdown in growth of the cloud platform MongoDB Atlas and the unexpected departure of two top managers - Chief Operating Officer and Chief Financial Officer. Timothy Sykes, a stock trader and owner of a popular news resource for retail investors, drew attention to this. He noted at the time that despite an increase in the annual forecast, Atlas' customer churn and staff instability could affect the stock's short-term trajectory.

The fear that MongoDB's work could lose out in the race for customers was reinforced by news from competitors: earlier this year, Snowflake announced plans to buy Crunchy Data, a startup that helps customers work with PostgreSQL, and another player in that market, Databricks, acquired a similar startup, Neon, for about $1 billion.

For the second quarter of fiscal 2026, ended July 31, MongoDB's revenue increased 24% year-over-year to $591.4 million and adjusted earnings of $1 per share. The FactSet consensus forecast called for revenue of $553.9 million and adjusted earnings of $0.67 per share, Barron's noted.

In addition, the company revised its full fiscal year 2026 revenue outlook to $2.34-2.36 billion from $2.25-2.29 billion. Adjusted earnings expectations also rose to $3.64-3.73 from $2.94-3.12 per share.

During a conference call with analysts, MongoDB executives cited examples of customers choosing its solutions over PostgreSQL. Among them was a "leading electric car manufacturer" that uses MongoDB for its autonomous driving platform. What that company is, management did not specify.

"We believe the results support our thesis that Mongo will continue to gain share in the huge database market. The platform is highly flexible in dealing with unstructured data, scalable and universally deployable, which is ideally suited for AI applications," William Blair analyst Jason Ader, whose note was cited by Barron's, wrote Wednesday. He reiterated a buy recommendation on MongoDB shares, but did not specify a target price.

"MongoDB's Xi results have challenged the balance of power in the market in terms of PostgreSQL," said Cantor Fitzgerald analyst Thomas Blakey. - We believe MongoDB's value proposition is in its independence from hyperscale providers, high performance and scalability, and a fully integrated platform that supports requirements for AI applications. All of this positions the company favorably in managing heterogeneous data sets for large organizations, especially in the AI space." Blakey maintained a buy recommendation and raised the target on MongoDB stock from $271 to $312, suggesting a potential upside of 45% relative to Tuesday's closing price.

In total, according to MarketWatch, 39 analysts track the dynamics of the securities of the developer of software for databases. Most of them advise to buy these shares (25 ratings Buy and six Overweight). Another eight recommend holding MongoDB securities in the portfolio (Hold). There are no "sell" suggestions. The Wall Street consensus price target is $316.2, up 47.5% from the close of trading on August 26.

This article was AI-translated and verified by a human editor