MongoDB Stock Has Soared This Year. Is It Too Late to Buy?

MongoDB (NASDAQ: MDB) has been on a tear in 2025. After leaping more than 20% following its latest earnings report, the database software specialist's shares are up more than 70% year to date as of this writing -- far ahead of the broader market.

Of course, there's good reason for the market's optimism toward the stock. The tech company's third-quarter fiscal 2026 update showed that demand for its cloud database platform, Atlas, accelerated in fiscal Q3 compared to fiscal Q2. And management raised its outlook for the rest of the fiscal year.

But has the stock's run-up gone too far? Or can the underlying business live up to the high valuation the stock commands?

Image source: Getty Images.

Growth remains impressive

MongoDB's revenue rose 19% year over year to about $628 million in its fiscal third quarter, ended Oct. 31. Atlas, its cloud-based database service, saw revenue grow 30% year over year, and accounted for 75% of total revenue in the period.

"MongoDB delivered strong third quarter results that exceeded the high-end of our guidance driven by continued strength in Atlas," said MongoDB CEO CJ Desai in the earnings release.

Profitability trends are also moving in the right direction. MongoDB's non-GAAP (adjusted) income from operations was about $123.1 million -- up from $101.5 million in the year-ago quarter. But the company still reported a small net loss on a generally accepted accounting principles basis.

Meanwhile, free cash flow in the quarter reached $140.1 million, up from $34.6 million in the same period last year.

Guidance also moved higher. Management now expects full-year fiscal 2026 revenue between $2.434 billion and $2.439 billion, up from its prior outlook of $2.34 billion to $2.36 billion. That range implies revenue growth of about 21% versus the $2.01 billion MongoDB reported in fiscal 2025.

There are some nuances, though. MongoDB's revenue growth in the second quarter of fiscal 2026 was 24% year over year -- faster than the 19% growth reported in the third quarter. So, while the quarter's financial results did come in ahead of the high end of management's guidance, the tech company's revenue growth rate did decelerate during the period.

Valuation risk is a real concern

But are shares overvalued?

At today's price, the growth stock trades at 12 times sales. Paying that kind of multiple might still work out over the long term. But in order to live up to this valuation, MongoDB will likely have to sustain revenue growth around 20% for years while expanding margins meaningfully. After all, the company has clearly made progress on profitability. But it remains unprofitable on a GAAP basis, and free cash flow is still modest relative to its market capitalization of $33 billion.

With a valuation like this, strong execution in the years ahead is key. But there's no guarantee competition won't intensify and ultimately dampen the company's growth trajectory. MongoDB's document database model faces competition from heavyweight cloud providers that offer their own managed database services, including platforms from Amazon and Microsoft, and the fast-growing data cloud platform provider Snowflake. If large enterprises slow their database modernization plans or consolidate more workloads with these competitors, MongoDB's growth trajectory could soften faster than its valuation implies.

Overall, MongoDB's business appears to be performing well, as Atlas seems to be resonating with customers. Still, in light of the company's well-capitalized competition and a business model that remains unprofitable on a GAAP basis, it's difficult to justify a market capitalization as significant as MongoDB's. For this reason, I'd personally opt to stay on the sidelines, looking for better places to invest my capital. Shares simply seem too pricey relative to underlying business fundamentals and risks.

Daniel Sparks and his clients do not have positions in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon, Microsoft, MongoDB, and Snowflake. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.