Source URL: https://www.tomtunguz.com/mdb-earnings-2025-08-27/
Source: Tomasz Tunguz
Title: The Second-Order Effects of AI
Feedly Summary: AI vendor revenue will double classic software in terms of new bookings this year.
This trend is so large it’s starting to have second-order effects.
MongoDB reported strong Q2 FY’26 results, delivering $591M in revenue with 24% year-over-year growth. AI is causing a second-order effect & a resurgence in growth in Atlas, the cloud-hosted version of MongoDB, which represents 74% of total revenue. We’ve seen a reacceleration within the hyperscalers already, but now the impacts are felt beyond.
The Atlas product shows a pronounced deceleration pattern when examined quarterly, but with clear signs of recent revival :
Looking at the previous 22 quarters, Atlas grew incredibly quickly until Q3 of 2021. The post-COVID surge re-accelerated it to 85%, falling to 24% & today bouncing again up to 29%. Could AI be as impactful on growth rates as COVID?
MongoDB is emerging as a standard for AI applications. Over the last few quarters, we’ve seen a strength in our self-serve channel, driven in part by AI native startups choosing Atlas as the foundation for their applications.
Atlas’s growth aligns with broader changes in software distribution channels as AI-native companies adopt different procurement patterns.
After testing vector search against Postgres pgvector for their in-vehicle voice assistant, they selected MongoDB for superior performance at scale & stronger ROI. They now rely on Atlas to handle over 1 billion vectors & expect 10x growth in data usage by next year.
Vector search has the potential to become a significant workload for customers. Vectors are used for information retrieval for AI applications.
Atlas performance was strong, accelerating to 29% year-over-year growth, up from 26% in Q1. Our customer additions were also robust. We have added over 5,000 customers over the last 2 quarters.
MongoDB has added 10% of its customer base by count in the last two quarters.
In Q2, Atlas consumption growth was strong & relatively consistent with last year’s growth rates. This drove the acceleration in revenue as well as the growth in absolute revenue dollars year-to-date for the first half of fiscal ‘26.
The enthusiasm from the team suggests the trend is durable.
MongoDB’s overall revenue trajectory shows consistent growth from $65M in FY2016 to over $2.2B today, representing a 34x increase over nine years.
We ended the quarter with over 59,900 customers… Of our total customer count, over 7,300 are direct sales customers, a decline of 200 customers sequentially & flat year-over-year.
MongoDB is moving up-market, focusing on larger enterprise customers rather than expanding total customer count. The data implies a $9.8k ACV.
AI is providing a new tailwind not just to the major infrastructure players but to vendors who supply software that are components of AI. Hyperscalers’ growth rates suggest the effect on some of these adjacent businesses could be dramatic.
AI Summary and Description: Yes
Summary: The text highlights a significant trend in the growth of AI-related cloud services, specifically through MongoDB’s Atlas product. With AI emerging as a standard for software applications, this development is affecting procurement patterns and driving strong revenue growth in the cloud space. The implications for infrastructure and software security, especially in relation to AI workloads, are profound.
Detailed Description:
The provided content focuses on the financial performance of MongoDB and its cloud product, Atlas, within the context of an accelerating trend driven by AI adoption. Here are the major points:
– **AI’s Financial Impact**: AI vendor revenues are expected to surpass that of traditional software, causing major shifts in market dynamics.
– **MongoDB’s Performance**:
– MongoDB reported $591 million in revenue with a 24% year-over-year growth for Q2 FY’26.
– Atlas, its cloud-hosted service, accounts for 74% of total revenue and experienced a revival after a marked deceleration.
– **Quarterly Growth Analysis**:
– Atlas’s growth patterns indicate a significant rebound with a year-over-year increase to 29%, highlighting a recovery from previous lower growth rates.
– Customer acquisition is robust, with over 5,000 new customers added in the last two quarters.
– **Emergence of AI in Software**:
– AI is influencing traditional software procurement as companies adapt their operations to leverage cloud services like MongoDB Atlas.
– The use of vector search capabilities for AI applications signifies an evolution in workload management and infrastructure needs.
– **Long-Term Revenue Trends**:
– MongoDB’s overall revenue has multiplied significantly, indicating a solid market position and increasing reliance on cloud services.
– **Shift to Larger Enterprises**: MongoDB appears to be focusing on securing larger enterprise clients rather than increasing the number of customers, which aligns with the trend of higher average contract values.
– **Broader Industry Implications**:
– The growing demand for AI capabilities among larger infrastructure players hints at a more pronounced effect on adjacent software and service vendors.
– **Future Growth Projections**:
– Analysts suggest that AI workloads such as vector search could drive dramatic enhancements in performance and scalability, potentially reshaping the cloud service landscape further.
In conclusion, the growth of AI technologies and their integration into cloud computing products like MongoDB’s Atlas highlight the necessity for enhanced security measures within infrastructure setups. AI’s increasing relevance in software distribution necessitates a reevaluation of security strategies in cloud environments to manage new vulnerabilities introduced by evolving workloads and procurement patterns. Security professionals must remain vigilant and proactive to ensure compliance and protect sensitive data in increasingly AI-centric systems.