MongoDB, Inc. (MDB) Earnings Call Transcript & Summary

Welcome to our next session. Really happy to have CJ here with us.

Thank you.

Thanks for kind of making a travel. I just talked and you just came straight from London. So that's really great commitment here. Maybe like since you just joined recently, maybe just talk a little bit about your due diligence that you did when you joined MongoDB and like what excited you, but also like what you could bring to the company, given your experience and kind of a slightly larger organization as well?

Absolutely. So I did do quite a bit of diligence on MongoDB before joining MongoDB, mainly spoke to customers who use MongoDB or if they were not using MongoDB, asked them, why not they were using MongoDB. Second is also talk to some hardness on how do they think about it? Everybody from technology partners to system integrators and others on how do they think about MongoDB. And Raimo, I mean, at the end, you need to participate in a large market. That has always been the hallmark of my career. My first job out of college was Oracle because I felt Oracle was a large market. That time, Oracle was not that big. Oracle was actually as big as MongoDB when I joined Oracle. And then when I joined ServiceNow, same thing, I thought it was a large market. And then Cloudflare was the same. So first, you need to participate in a large market. Do you have conviction that this could be truly a data platform. In Cloudflare, I thought it was a great platform on which you can build many products. The network was the platform. ServiceNow, you and I work together. ServiceNow also, I made the pivot from product company or applications company when I joined to a truly platform company and MongoDB has that. So that's why I joined MongoDB, large market, platform opportunity. And the company has been only around 18 years. Database market, my first employer, Oracle in the next couple of years will celebrate their 50th anniversary. So -- and we are just 18 years old. So we have a lot of room to grow.

Yes. And then the -- if you think about the -- what you can bring to the table, like obviously you said, like you've been in -- on these journeys before. Like if you look at Mongo and kind of now that you spend a little bit of time on the organization, what's your thinking there?

Yes. So I'll give you an example. I was talking to a large French customer last Thursday. And they have built mission-critical, which was an important point for me, mission-critical 40-plus applications on MongoDB okay? So their business runs on MongoDB. When somebody tells you that, that means MongoDB has already arrived that you are getting mission-critical applications to be built on top of MongoDB, which is their business, right, which is their customer-facing business. And then he said, CJ, as I'm creating a few AI workloads, I'm going to add MongoDB for those AI workloads as well, but we are still early for that AI workload. Raimo, my personal value add is the massive connections I have in Fortune 500, not in just United States, but in Global 2000, specifically Europe and United States, including Middle East and so on. I have lots and lots of connections top down. And that will just help for us to become a strategic platform. So MongoDB nailed the developer motion. Otherwise, we won't be here today, right, to where our database developer says, I'm going to build on MongoDB and that community that exists, you go on Reddit threads, you go on social media. And there is a lot of energy about MongoDB. If you go to YouTube and when I was doing diligence, there are like videos created in multiple Indian languages on how to get started with MongoDB. Look at India has how many developers, right? That's nontrivial, right? That didn't happen at my previous company. So that, like viral moment is there. And now with me joining, how can I also help our sales team at a C-suite level, so we become truly the strategic platform.

Yes. Okay. Yes, makes sense. And then if you think about it and you talked a little bit about it, Mongo is operational database. So their operational databases from my experience as well, like running long cycles. How do you see that market evolving? We still have -- Oracle still there, apparently doing better. The Microsoft, Postgres, Yuga, it's like how do you think about that?

I think -- I'm a very simple person, okay? And if somebody tries to make this too complex, I say, please time out. Let's just get to simplicity. Database market, like we discussed, has existed for 50-plus years. If you believe somebody, they will say 60-plus years. The reason it has existed this long, it is a very sticky market because data is core part of your infrastructure. So let's start there. Now number two, 80%, depending on whose numbers you believe or maybe 85% or maybe it's 75% of the enterprises, their data is unstructured or semi-structured data. Relational databases are suited for certain workloads really well when it is very textual and I can put rows and columns, text, numbers, things like that, very simple. But when you look at e-mails, PDF files, my insurance policy, my credit card transaction where I had a dispute, my voice call, and I can go on and on. And in the AI world, the unstructured data, you go to your favorite AI tool today. They're like, "Hey, do you want to create an image here? Do you want to upload an image and modify it?" Today, you see the announcement between Disney Corporation and OpenAI, which is around videos, right? So you look at this AI world is forcing how do I leverage my unstructured data documents that I have on my Google Drive or OneDrive or whatever. And MongoDB, which was just created in 2007, is the best database for unstructured data. It has a scale-out architecture, so you don't really need to worry about the scale up and it is portable across multiple clouds. And by the way, if you are a regulated industry, you are just going to use our on-prem version because which is necessary. Certain banks, as you know, do not want to move to cloud. Yes, I talked to Craig in the past about transformation you guys are driving. So it's ideally suited. And the reason I bring up the 18 years point, you look at all the other -- even Postgres has been now around 40 years. So that's how I think about it, that we are still fairly early, and we have a long ways to go, and we will celebrate our 50th anniversary someday, too.

Yes, yes, yes. Okay. No, I'm looking forward to that. And -- the one thing that drives database adoption or that was always kind of mentioned a lot with developers. Do you remember Steve Ballmer, developer?

Yes, yes I remember that in 90s, yes.

How do you think about that -- like a few years ago, Mongo was like the next one. Now I think there's kind of more work that you could be doing there to kind of get that kind of move towards a little bit back...

I think, totally fair. And I shared briefly and you were there on the earnings Q&A last week is we lost specifically in San Francisco Bay Area or maybe Seattle or New York or as the company grew, in the Bay Area, we lost that mind share, and we were not top of mind for some of the new developers here. We were doing really well about 10 years ago. 10 years ago, MongoDB was cool here. People wanted to base some of the tech companies at the time, built on MongoDB. But then we kind of lost our way because we were doing really well in other parts and are growing like crazy. 2017, Atlas was only 2% of the revenue. Now it's 75% of the revenue. So the company was doing a great job. And Dave will personally tell you yes, we could have done a better job. So we started to reclaim the Bay as in the San Francisco Bay initiative where we meet with the founders, do founder dinners and say, here is what MongoDB can do for you. And we are relaunching MongoDB on January 15 after a few years to -- and I'm personally kicking that off to be with the developers here. And that's one of the reasons when I got hired, many customers are excited because I have dual Coast, I do New York and San Francisco, and I've been here for 25 years. I have deep relationship in venture ecosystem as well as tech companies here. And leverage that to be top of mind.

Yes, yes, yes. And the -- like I guess part of that problem was that we were somewhat stable and then Gen AI came in and then all of a sudden, developer world got crazy again. Talk a little bit about how you see that kind of Gen AI world playing out from a database perspective?

Right. So the way -- if you look at late '90s and what happened here as in Silicon Valley specifically, late '90s, early 2000s, you had a lot of digital natives, what I would call it. They were figuring it out what infrastructure they use and software as well as hardware. And then around 2,000 -- because I was here, 2008, '09, you started seeing AWS being really aggressive here in San Francisco Bay Area and the entire company like Netflix, got built on AWS, right? That's a public information. You think about that. Same thing will happen, right? So you look at Netflix growth from 2008, '09 when they switched from CDs to online streaming. And then that journey is still going on, and Netflix is still doing very, very well, now 17, 18 years later. I would say the same thing on AI natives. What really encouraged me -- we used the example of Mercor last week in the earnings remarks. Mercor is fully built on MongoDB, and it's an AI-native company that is doing really well. Most of the Raimo AI investments happened between '23, '24, '25. It's still happening, like a lot of new companies are getting created every day here. And what really, really encourages me besides the Mercor example, 2 prominent AI companies are fully built on MongoDB. So if they someday become like Netflix, imagine what that would look like, right? And they are doing very well right now, but been around for 2 years. And I just -- I'm really proud of the team. This one AI-native company that used to give us a few thousand dollars a year, then it became somewhere around 2 years ago, $130,000 a year, 2 years ago, okay? $130,000 a year. And today, they are giving us $9 million a year. So that's an order of magnitude growth, but they're built on MongoDB. I mean -- so when I talk to the enterprises, and I say because this is a prominent company, we don't have permission to share their name. But when I talk to other enterprises, I say, if these guys are building their entire AI business on MongoDB, why are you not? And they're like, oh, CJ, we didn't know that. This is early still and so on. So that's what -- coming back to your question on AI-native companies, us now being focused here in San Francisco Bay Area, but I've asked our CMO, Seattle is where a lot of companies are still getting created. New York City also has some AI companies that are being built. Of course, Tel Aviv is another area. And then even in Bangalore, India and in China, and we need to...

Yes, yes. And then more a conceptual question on AI because like -- even like the debate feels very much like black or white, like it's one guy or the other. But if you think about it, the market seems to be evolving so fast. There's so much going on there. Like should that all be like just in terms of need for databases to be the persistent layer around all these new AI apps, like you don't need to be -- like everyone is going to benefit like depending on -- independent of market share. Is that kind of the me dreaming too much? Or...

It's a totally fair question. I'm going to touch on one important thing, right? Whether you pick 2007 as the year where AWS really got serious or 2006 or 2008, cloud migration is still going, right? You speak to even Craig, he will tell you that it's still going on, right? Banks, health care, we are in 2025. So now 18, 19 years in, and you look at next 5 years, and if you speak to leaders at Azure, AWS GCP, they feel that it will be still double-digit growth for foreseeable future. So you look at the cloud migration, we are in the -- we are going to approach 20th year of cloud migration. So at the highest level, AI will be the same. It will take 10, 15, 20 years, and we are in the year 2 of that. So that's why I don't get like too worked up on, "Oh, my God, CJ, are you guys present here, not present here and so on." And to answer persistent layer, which is a very important point you made, you cannot create an agent on top of a data warehouse. You want -- if you are going to say this agent is going to replace human and either do a domain-specific tasks, say, a legal task or a finance task or do multiple things. The agent is going to have like a human personality that I can do this and I context switch to that and all of that, you cannot do that without a real-time database. And that's why these AI native companies who are building on MongoDB, of course, they are smart. They know the real-time database. And AI also has a lot of unstructured and semistructured data, images, PDF files, this, that, whatever needed. So that's why persistent layer is a must-have and a modern data basis a must-have.

Yes. Okay. Makes total sense. Yes. And then -- going a little bit more current on the questions in terms of like you guys had a like out of the gate as a CEO, a very good first quarter, share price reacted, nicely. Well done. Like -- but if you look at -- so if you look at Atlas, which is on the cloud side, there's 2 components. There's the direct Atlas, which is kind of, in a way, you came from Enterprise world, enterprise sales guys doing stuff, NNS self-service, both of them look kind of started to come through better, like can -- from your first look into that, like what drove that?

Yes. So I just want to acknowledge that it was Dave and the entire team of MongoDB.

Yes, yes, I know, yes.

They deserve all the credit for what happened in Q1, Q2, Q3 and how that continues to grow, right? And when I was during my diligence phase, I was seeing the signs that the business is on the right trajectory, and that was just fantastic to see even after I got into the details and how we think about Q4 guidance and so on. So it is a tale of 2 cities. You want your product-led growth motion to work really well. Even this AI example I shared where we grew orders of magnitude with that company, that particular company, we got through our product-led motion, right? And that product-led growth motion, both in Q1, Q2, Q3 overall has done really, really well. So our CMO has focused on making it easy, removing the friction and how we make sure that Atlas is so easy to use from a product-led growth motion perspective. And that's why you look at -- we added 8,000 customers -- you how at ServiceNow, I used to talk about new logos and not every logo is created equal. So that, for me, over time, becomes top of the funnel, right? Today, they may be paying a small amount, but over time, they will pay a big amount, some of them, not all of them, right? So that motion is working well and signs are very encouraging on the product. Product-led growth motion is very, very hard to do, very hard to execute on. You need developer mind share for them to come and then do the credit card transaction. And then where I gave team also a lot of credit, our go-to-market team, we saw broad-based strength in Europe, Middle East, Africa across -- and I was there 2 weeks ago with our sales teams, northern Europe, Southern Europe, pick whatever, we go to market, we have 4 regions: Northern, Southern Europe, Central Europe and Israel. And that -- the team is doing very well. We have a great leader and continue to execute. And in Americas, where we saw the consumption growth was on the high end of the enterprise, where Dave and the team with the go-to-market leaders decided to focus on the strategic accounts. And when they're focused on it, it expanded. So those were the 2 main reasons that the growth has reaccelerated. You look at 26% Atlas growth in Q1, 29% in Q2 and 30% in Q3. So -- but the self-service motion, Raimo, all goes to Atlas.

Okay. Yes. And then how do you think about -- like that's a task for you as a new CEO. How do you think about EA? Like there's -- from our investor side, it's like, oh, you need to push the clients into Atlas? And then like, well, I'm Barclays, it's not going to work. How do you think about like dealing with EA in the future? .

So Raimo, it's a very insightful question. So I was with a very large bank, one of the largest banks in Europe in London on Monday with a head of their infrastructure, who has the whole technology, okay? First meeting in Canary Wharf, 8 a.m. And he told me, CJ, we use EA. We love it. we just renewed the contract for EA because that class of application, which are customer-facing, banking application that they have created for commercial banking will always be on-prem. So if you're going to come and pitch to me Atlas, this is going to be a very short conversation. However -- and then we talked about EA and making sure that the road map we continue to nurture on EA. He said, however, he is focused on GCP and AWS are the 2 cloud providers he's using. And for some net new workloads, he is going to think about Atlas. And he said, "My team is currently -- my Head of Database platforms is working with MongoDB's team to figure out which workloads we can move, create in Atlas in 2026 calendar." But he said this property that they have built on EA, which customer-facing commercial banking system that is high online transaction processing...

That's always...

Yes. We'll still stay on MongoDB. So EA is 25% of our business. And when I think about regulated industry like financial services, when I think about public sector, where they want to create an air gap network and they want to use EA, you may have a health care company that may still want to use EA. That will be for foreseeable part. I'm not going to come and tell you, we are constantly asking people to move from EA to Atlas. Some will because they are migrating to cloud and whatever, but some will not.

The other thing that will be on your agenda, I would assume, is go-to-market. And you can see because Mongo is smaller, they still have to adopt. The company is growing and they need to do more work there or change things. A few years ago, like we move towards more consumption kind of model in -- on the go-to-market side. Like you've been in the industry for a long time, like walking in there, like how do you think about that?

So Mongo, when you look back at 2017, 8 years ago, while they were going public, Atlas was 2% of the revenue, and they nailed the cloud transition well because you know so many companies, software companies even could not nail the cloud transition well. They nailed it, and now it's 75% of the business. So Dave and the go-to-market leadership team did a phenomenal job. When they switched to consumption, which was the right call, they were one of the early ones to do that, right? Snowflake, course, did it with Frank and Mike and what they did there. It was, as you know, a little bumpy, but now that's behind us, okay? It was a little bumpy on how we did that consumption migration from a sales compensation perspective, how do we capitalize the cost and so on. But now that is behind us. Mike Berry has done a great job even in the short tenure, he has been here. The teams now understand it. When we hire our go-to-market sellers, they understand it. I've been spending a lot of time with them. They're like we get it now, that if we drive the consumption, we get paid. And what do we need to do to really drive that consumption for Atlas specifically. And so I think that's behind us. Now we just need to scale.

Yes. Okay. Yes. Okay. That's good. I apologize, there was a question for Mike, but he couldn't be here. So I'll try it, but -- and Jess is getting all nervous here. No it's not that bad. If you think about it, like one question you will get asked from us is obviously around profitability. And you are in that peer group of like high-quality, high-growth software. So that's like Datadog, Mongo, Snowflake Profitability-wise, Mongo was always a little bit behind versus that peer group. How do you think about like structural reasons for that? Operational database is longer cycles. You have a longer customer lifetime value that could explain it maybe a little bit. But how did you think about it?

Even I can just go back in time, even with ServiceNow, when I started, ServiceNow was growing 40-plus percent year-over-year, and we have $1.3 billion in ARR between Frank, Mike and me and our Head of go-to-market at the time, Dave Schneider, we were always aligned on durable, profitable growth. And Mike will always say that, hey, while we are trying to hit for $4 billion in ARR by 2020, Mike will say that in 2015 and '16, we will still see the op margin improvement by 100 basis points, he would say, at that point in time. And then Cloudflare, Thomas, very clear that we want to be Rule of 40, and that's what we are solving for. Same thing is here, Raimo. When I came in, Mike had already figured out with Dave that we want to be durable, profitable growth company. And that's why on September 17 at our Investor Day, we provided the long-range model that we want Atlas to grow at least 20% plus and we will, on an average, improve the op margin by 100 to 200 basis points. So if you look at today, I think we said that we will exit this fiscal year at 18% op margin, which is a significant improvement compared to when we guided for the year, right? And number two, we said our growth -- top line growth is somewhere going to be 21% to 22% when you combine the Atlas with EA. You're almost approaching Rule of 40. And then how do we continue to just improve that op margin. And we are looking for efficiency. So just to be very clear, how do we leverage low-cost location for engineering? How do we make sure a lot of our back office is driven through our low-cost locations we have. We've already made some progress. We can do that. We were so focused on growth in the past that those things were not taken into account, but now there is a very conscious efforts to do that.

Then the last question for me is like I need to start with the funny anecdote. So when you left ServiceNow, all the bankers in Wall Street were like, oh, finally, because CJ was the one that stopped all the M&A because he always thought and believed in internal software development and didn't believe in buying stuff.

I'm glad you guys knew that because that's true, that's 100% true.

How is the situation for you at Mongo now? Like I mean, you always were a believer in development.

Yes. And even Cloudflare, when I was there, even though it was a 1-year tenure, I still believed in organic growth, and we expanded product lines there. That is 100% true here. The TAM is large. We already have the right elements between core database, vector, search and others that the team introduced a couple of years ago, which is still growing, but small percent of our customers use it. And then now with Voyage acquisition, which was a very people acquisition, a fantastic team and great IP that they have built on embedding. Those in itself have all the makings of the data platform that I want. And I'm a big believer in organic growth, and that's also why I joined MongoDB because there is a huge runway. Will we acquire -- yes, we'll acquire some teams or some small tech like we did at ServiceNow, but never like do something massive or whatever, that's not the plan right now.

Yes, yes, yes. And then last 50 seconds, like your first 100 days, is that like just traveling the world?

Raimo, one of the things I think you know about me that I am very customer-focused. So one, just deepening the relationship with our customers, the large or medium, including the AI natives right here in the city. That is focus number one, that I've already started doing that. Number two, as I listen to these customers, is the product really headed in the right direction? And is our innovation velocity high, it's the second. And third, we have all the elements, but how do we truly create a data platform, the generational data platform? I meant it when I put this in the remarks last week rather than us being part of just a database company, truly a data platform company. Those are the 3 things that are my 150% focus on it.

Yes. Perfect. And it's -- our time is up, but it's a great closing statement as well. Thank you. Really enjoyed our conversation. Thank you.

Thank you. Appreciate it. Thank you.