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MongoDB: Making a profitable move

Past performance does not predict future returns. You may get back less than you originally invested. Reference to specific securities is not intended as a recommendation to purchase or sell any investment.

Innovation cash kings of the next decade - In this series we look at the standout companies that are ‘pivoting to profit’ and are at an inflection point of converting customer-driven innovation into shareholder value. In the penultimate article of this series, we take a closer look at MongoDB.

This is the eighth article in the series, you can read the other articles here:

Twilio  delivering the message on profitability

Airbnb: booking beds and profits

Shopify – the engine of ecommerce refocusing on its core

Uber's road to profitability

Atlassian – fostering collaboration and cashflow

Toast – serving a side order of profitability

Service Now – Tidying the Mess

 

You might not be familiar with MongoDB yet while this American company which provides a popular NoSQL database solution might not always be in the limelight, its impact on the tech world is undeniable.

Directly or indirectly, you will have encountered platforms and services powered by MongoDB. If you’ve engaged with Adobe’s digital platforms, MongoDB plays a pivotal role, powering Adobe Experience Manager to provide consistent digital experiences. Fitness enthusiasts tracking their performance on apps like Strava indirectly leverage MongoDB’s efficient data handling capabilities. Meanwhile, shoppers worldwide, browsing through Gap’s vast collection, experience a smooth digital journey, thanks in part to MongoDB’s scalable database solutions.

MongoDB’s inception by co-founders Dwight Merriman and Eliot Horowitz was driven by their experiences at DoubleClick, acquired by Google for $3.1 billion in 2007, where they grappled with the inflexibilities of traditional relational databases. Recognising a growing need for scalability and agility in the digital era, they sought a solution that would enable horizontal scaling – when you increase the capacity of a system by adding additional machines – offer a flexible data model, and boost developer productivity. They also saw the potential in an open source model, believing it would catalyse innovation and broaden adoption.

This ethos led to the creation of MongoDB, a NoSQL database tailored for the modern web’s demands. Today, MongoDB has established itself as the clear next-generation database leader with over $1 billion of annual revenue, while its core Atlas (database-as-a-service) offering has grown 85% year on year (MongoDB 2023 report).

The global database market is estimated by the International Data Corporation to reach $138 billion by 2026. With MongoDB still having market share in low single digits – the market being dominated by known names such as Oracle, IBM and Microsoft – the company arguably has a real growth opportunity ahead. Its core product Atlas differentiated itself in the market due to its developer-centric simplicity, multi-cloud support, and robust security. It is designed to allow developers to focus on building applications, as Atlas handles operational intricacies with features like automatic scaling, integrated backups, and performance optimisation tools. The Atlas product has been downloaded 240 million times since 2009, including 85 million times in the last 12 months (MongoDB 2023 report). MongoDB has a consumption-based model, offering a free tier for beginners and scaling costs as usage intensifies, ensuring customers only pay for what they use, similar to other cloud service providers such as Snowflake.

MongoDB, like many other tech startups, initially pursued aggressive growth, emphasising adding new users rather than making a profit. This strategy has resulted in the company growing by 35,200 customers in total and even adding 2,200 new customers in the last quarter.

While these strategic foundations strengthened the company’s status as the top NoSQL database provider, questions emerged last year about the longer-term profitability of the business. In response, this year MongoDB has shifted its focus towards sustainable growth. It has streamlined operational costs, enhancing efficiency without sacrificing product quality. While maintaining its core product as open source, it emphasised monetising premium services, with MongoDB Atlas being a notable example, targeting businesses seeking managed solutions.

Moreover, rather than just expanding its customer base, Mongo DB concentrated on deepening ties with existing clients, prioritising tailored solutions and retention. In response, the company has recorded a profit of 6.1% last quarter versus -1.5% a year ago. We expect this to be the beginning of MongoDB’s path to profitability.

While prioritising profit, the company has not forsaken innovation, continuing substantial R&D investments to stay ahead of competitors. MongoDB’s evolution away from aggressive expansion to sustainable growth is an example of a tech startup’s maturation and the start of its next phase of growth. This could provide an attractive opportunity for long-term investors. 

Understand common financial words and terms See our glossary
KEY RISKS

Past performance is not a guide to future performance. The value of an investment and the income generated from it can fall as well as rise and is not guaranteed. You may get back less than you originally invested.

The issue of units/shares in Liontrust Funds may be subject to an initial charge, which will have an impact on the realisable value of the investment, particularly in the short term. Investments should always be considered as long term.

The Funds managed by the Global Innovation Team:

May hold overseas investments that may carry a higher currency risk. They are valued by reference to their local currency which may move up or down when compared to the currency of a Fund. May have a concentrated portfolio, i.e. hold a limited number of investments. If one of these investments falls in value this can have a greater impact on a Fund's value than if it held a larger number of investments. May encounter liquidity constraints from time to time. The spread between the price you buy and sell shares will reflect the less liquid nature of the underlying holdings. Outside of normal conditions, may hold higher levels of cash which may be deposited with several credit counterparties (e.g. international banks). A credit risk arises should one or more of these counterparties be unable to return the deposited cash. May be exposed to Counterparty Risk: any derivative contract, including FX hedging, may be at risk if the counterparty fails. Do not guarantee a level of income.

The risks detailed above are reflective of the full range of Funds managed by the Global Innovation Team and not all of the risks listed are applicable to each individual Fund. For the risks associated with an individual Fund, please refer to its Key Investor Information Document (KIID)/PRIIP KID.

DISCLAIMER

This is a marketing communication. Before making an investment, you should read the relevant Prospectus and the Key Investor Information Document (KIID), which provide full product details including investment charges and risks. These documents can be obtained, free of charge, from www.liontrust.co.uk or direct from Liontrust. Always research your own investments. If you are not a professional investor please consult a regulated financial adviser regarding the suitability of such an investment for you and your personal circumstances.

This should not be construed as advice for investment in any product or security mentioned, an offer to buy or sell units/shares of Funds mentioned, or a solicitation to purchase securities in any company or investment product. Examples of stocks are provided for general information only to demonstrate our investment philosophy. The investment being promoted is for units in a fund, not directly in the underlying assets. It contains information and analysis that is believed to be accurate at the time of publication, but is subject to change without notice. Whilst care has been taken in compiling the content of this document, no representation or warranty, express or implied, is made by Liontrust as to its accuracy or completeness, including for external sources (which may have been used) which have not been verified. It should not be copied, forwarded, reproduced, divulged or otherwise distributed in any form whether by way of fax, email, oral or otherwise, in whole or in part without the express and prior written consent of Liontrust.

Storm Uru
Storm Uru
Storm is a lead fund manager of the Liontrust Global Innovation, Liontrust Global Dividend and Liontrust Global Technology funds. He has 12 years industry experience, including as a fund manager and trader and prior to Liontrust worked at Neptune Investment Management running global funds and covering the global industrials sector. He holds an BBS in finance and MBS in international business from Massey University, an MBA from Oxford University and is a CFA Charterholder. He represented New Zealand in rowing at the 2008 and 2012 Olympic Games, winning bronze in London in 2012.

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