MongoDB Has Growth Opportunities Beyond the Database

Cecilia Nysing

The vast majority of revenue for MongoDB (NASDAQ:MDB) comes from its namesake database. Just over half of total revenue is derived from Atlas, the company’s cloud database service, while much of the rest comes from its Enterprise Advanced service aimed at large customers looking to run MongoDB on their own hardware.

Atlas has been at the core of MongoDB’s growth story over the past few years. While the company’s database software is open source and free to download by anyone, a managed database service like Atlas frees customers from having to manage the underlying infrastructure. Atlas is nearing an annual revenue run rate of $400 million, and it grew revenue by 73% in the first quarter.

A cloud.

Image source: Getty Images.

An ecosystem around the database

The heart and soul of MongoDB will always be the database. Any modern web or mobile app relies on some sort of database, and MongoDB Atlas is a good choice for a lot of use cases.

Modern apps also rely on other infrastructure. Static content needs to be hosted somewhere, user authentication needs to be implemented, and back-end servers need to be spun up. An app that uses Atlas as its database but otherwise relies on a major cloud provider for everything else needs a server application to sit between the application running on a user’s browser or phone and the database.

MongoDB can make life easier for developers that use Atlas by allowing those developers to build their entire application on MongoDB’s platform. This effort started a few years ago with MongoDB Stitch, a back end as a service that combined serverless functions, user authentication, and data access rules. Instead of running a server elsewhere, Atlas users could use Stitch to access the database.

Stitch has now been rolled into MongoDB Realm, a name taken from a mobile database company MongoDB acquired in 2019. Realm is a full-fledged app development platform, offering static hosting, cloud functions, user authentication, and simple access to the underlying Atlas database. Developers using Atlas can host their entire application on MongoDB Realm without the need for servers.

Realm also offers the ability to sync data stored in Atlas with an app running on a mobile device. This feature is particularly useful for something like a messaging app, which requires each device to always be in sync.

A Realm user pays for Atlas on top of usage-based fees for Realm. MongoDB charges Realm users based on the number of requests made from client applications, the run time and memory usage of cloud functions, and the time spent syncing data. Depending on the nature of the application, Realm can be significantly less expensive that spinning up cloud servers elsewhere to handle back-end tasks.

Realm isn’t a significant source of revenue right now compared to Atlas, but that could change over time. CEO Dev Ittycheria had this to say on the company’s latest earnings call about products beyond Atlas:

And so today, the revenue does show up mainly in Atlas versus separate [products], but you should not assume that that will be the case long term. We have a pretty aggressive … innovation agenda. And so over time, you’ll see us add more products and more SKUs.

MongoDB’s database is going to remain at the center of everything the company does. With Realm, MongoDB has the opportunity to capture a greater share of cloud infrastructure spending. Realm isn’t a solution that works for every use case, but it gives customers already relying on Atlas a good reason to spend more with the company.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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