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MongoDB Likely to See AI as Growth Tailwind Soon Following Quarterly Beat, Morgan Stanley Says

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MongoDB Likely to See AI as Growth Tailwind Soon Following Quarterly Beat, Morgan Stanley Says

MongoDB (MDB) is likely to see artificial intelligence as a growth tailwind soon with senior management's commentary on the technology turning "more constructive," following the company's better-than-expected fiscal first-quarter results, Morgan Stanley said in a client note emailed Friday.

During a late Thursday conference call with analysts, MongoDB Chief Executive CJ Desai highlighted early AI deployments with enterprise customers and expanding momentum with AI natives, according to Morgan Stanley. Desai also indicated that the database software maker is being deployed for mission-critical use cases and expressed confidence in its ability to expand within these customers over time, the brokerage said.

While MongoDB's growth is currently being driven by enterprise applications, it has consistently said for several quarters that AI will eventually emerge as robust driver for long-term gains, Morgan Stanley wrote in the note.

"Management tone on the AI opportunity shifted more positive and suggests that an AI-powered inflection is on the horizon," the brokerage added.

The company late Thursday reported adjusted earnings of $1.32 per share for the quarter ended April 30, up from $1 a year earlier. Revenue advanced 25% to $687.6 million. Both metrics topped Wall Street's estimates.

Shares of MongoDB rose 2% in the most recent premarket activity.

Revenue growth from the firm's cloud-based Atlas developer data platform increased 29% on a yearly basis in the quarter, but came in below investors' expectations for an increase of 30% to 31%, according to Morgan Stanley. For the ongoing three-month period, Chief Financial Officer Michael Berry told analysts on the call that the company is projecting Atlas revenue to rise by roughly 26%.

Atlas has become "more predictable" and "less sensitive" to revenue movements with any individual customer or cohort as it has gotten larger, Barry said late Thursday, according to a FactSet transcript. As a result, the company doesn't expect "large swings versus guidance for the current quarter," as consumption changes during the period only has a "modest impact" on revenue, the CFO added.

"On a beat-adjusted basis, this suggests that Atlas growth is more likely to sustain rather than accelerate, which given the major rally in shares leading up to results and on the back of blockbuster guidance raises from Datadog (DDOG) and Snowflake (SNOW) may be viewed as slightly underwhelming," Morgan Stanley said.

The brokerage maintained its overweight rating on MongoDB's stock and lifted the price target to $380 from $355.

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