Good day, and welcome to the MongoDB third quarter fiscal year 2022 earnings call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touchtone phone. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Brian Denyeau from ICR. Please go ahead.
Thank you, Allie. Good afternoon, and thank you for joining us today to review MongoDB's third quarter fiscal 2022 financial results, which we announced in our press release issued after the close of the market today. Joining the call today are Dev Ittycheria, President and CEO of MongoDB, and Michael Gordon, MongoDB's COO and CFO. During this call, we will make forward-looking statements, including statements related to our market and future growth opportunities, the benefits of our product platform, our competitive landscape, customer behaviors, our financial guidance, and our planned investments. These statements are subject to a variety of risks and uncertainties, including those related to the ongoing COVID-19 pandemic and its impacts on our business, results of operations, clients, and the macroeconomic environment. They cause actual results to differ materially from our expectations.
For a discussion of material risks and uncertainties that could affect our actual results, please refer to the risks described in our SEC filings, including our most recent quarterly report on Form 10-Q. Any forward-looking statements made on this call reflect our views only as of today, and we undertake no obligation to update them. Additionally, we will discuss non-GAAP financial measures on this conference call. Please refer to the tables in our earnings release on the investor relations portion of our website for a reconciliation of these measures to the most directly comparable GAAP financial measure. With that, I'd like to turn the call over to Dev.
Thank you, Brian, and thank you to everyone for joining us today. I will start by reviewing our third quarter results before giving you a company update. Looking quickly at our third quarter financial results, we generated revenue of $227 million, a 50% year-over-year increase and above the high end of our guidance. Atlas revenue grew 84% year-over-year, representing 58% of revenue and is now over $0.5 billion revenue run rate. We had another strong quarter of customer growth, ending the quarter with over 31,000 customers. Our third quarter results demonstrate that customers are increasingly choosing MongoDB to build modern apps that run their businesses. We had another strong quarter of customer additions led by our self-service channel. Both our field sales and inside sales teams again performed well.
A key driver of results is the healthy expansion of our customers, as many of them are meaningfully increasing their adoption of MongoDB. As you'll hear from Michael, some of our largest customers made increased multi-year commitments to MongoDB in Q3. Our performance is clear evidence that MongoDB is emerging as an enterprise standard in a growing number of accounts. Our excellent Q3 performance is the result of continuously strong go-to-market execution, as well as a confluence of two factors, secular trends that reinforce our technical advantages and our growing credibility and influence with customers. Let me start with the secular trends that play to our strengths. First, the ability to move fast and innovate quickly, whether it's pivoting to a digital-first strategy, quickly seizing new market opportunities or responding to new threats, has never been more important.
MongoDB's document model maps data to the way developers think and code, removing friction from the development process to enable developers to move incredibly fast. Second, while there's been a proliferation of single-purpose databases that address specific needs, the result is that most customers find the challenges of learning, managing, and supporting a myriad of technologies and resulting data silos to be overwhelming. Consequently, there's growing demand for a modern general-purpose database platform that supports a broad range of workloads to dramatically reduce the cost and complexity of a company's data infrastructure. MongoDB's application data platform is designed to address this specific need. Third, the performance and scale expectations of modern applications continue to grow.
MongoDB's distributed architecture supports unlimited horizontal scaling, allowing organizations to linearly scale costs as applications grow and to easily address data sovereignty regulations or to ensure responsive and predictable performance, whether users are local or across the world. Today, we have customers who have workloads doing over 1 million transactions per second with data sizes of hundreds of terabytes. Legacy platforms struggle to address these demanding performance and scale requirements. Fourth, the accuracy, availability, and security of data are of paramount importance. MongoDB allows developers to easily build resilient mission-critical applications with native replication, fast and automatic failover, and retriable operations. MongoDB also offers sophisticated security controls for access, auditing, and end-to-end encryption, whether data is in use or at rest. Fifth, customers want choice on where and how they deploy their applications.
Developers can build and run MongoDB applications in their own data center, in any cloud, and at the edge. However, technical advantages are not enough unless there are customer proof points to validate these technical claims. As a disruptor of a massive market with a long-standing entrenched technology, we had to build our credibility one workload at a time. We usually land in an account by identifying a pain point that simply cannot be addressed by legacy technology. We then leverage the success of the first workload to expand across divisional and geographic boundaries.
Eventually, we up-level the conversation to the C-suite and become a standard for future app development. While it's still early days, we believe a key driver of our success this year has been the growing trend of customers choosing MongoDB as an enterprise standard, which is having a positive impact on our ability to increase our penetration of these accounts over time. With more than 31,000 customers, which is up 10x since our IPO four years ago, we have all types of customers using MongoDB to do a wide variety of amazing things to run and transform their businesses. We have had tremendous success in acquiring customers from large Global 2,000 organizations to cutting-edge startups across all major industries and most geographies. This creates a compelling social proof effect.
When we are able to reference customers in particular industries or geographies who are aggressively adopting MongoDB, other customers in those same industries or geos are more interested in engaging with us. While we feel confident about our position in the marketplace, we are not standing still. We recently moved to a quarterly product release schedule starting with MongoDB 5.1 to bring new features and capabilities more quickly to market. Highlights of MongoDB 5.1 include time series enhancements such as support for sharding, improved capabilities for joins and graph traversals to do more sophisticated real-time analytics and enhancements to our client-side field level encryption security feature to work with any KMIP compliant key management system. In addition, we announced a preview of our ability to provide 100x faster facets and counts in Atlas Search.
Faceted search allows users to filter and quickly navigate search results by categories. Fast facets and counts are essential in a search-first application such as product catalogs and content search. MongoDB combines the core database and search database into one unified developer and operational experience, differentiating it from all other standalone application search offerings in the market. Last but not least, we also announced Atlas Data API, which allows developers to easily access the MongoDB data via standard REST-like interface. It exposes MongoDB's rich query and aggregation capabilities via fully managed, scalable, and resilient API, which allows customers to quickly build microservice on Atlas and easily integrate with a wide array of tech stacks. We made these product announcements at our MongoDB.local developer conference in London, which was our first in-person event since the start of COVID-19.
We also just returned from AWS re:Invent, where we announced the expansion of relationship with AWS, including the launch of a pay-as-you-go MongoDB Atlas on the AWS Marketplace. Customers who are used to buying services from the AWS Marketplace can find a simple and integrated way to subscribe to MongoDB Atlas, starting even with a free trial, and use Atlas without the need for an upfront commitment. This makes it even easier to start using Atlas. Now, I'd like to spend a few minutes reviewing some customer wins and interesting use cases from the quarter. Coinbase, which is dedicated to increasing economic freedom in the world by building more accessible, transparent, and equitable financial system, is the trusted choice of more than 73 million individuals, businesses, and institutions to interact with the crypto economy.
The company is moving more workloads to MongoDB Atlas so it can build new products and services quickly and meet the scale and availability requirements of the unprecedented growth in the cryptocurrency markets. The adoption of Atlas Data Lake gives their engineers a simple and powerful way to create resilient data pipelines that enable downstream analytics on the large volumes of data generated by their platform. Global technology and communications leader Verizon is working with MongoDB to bring data closer to the edge as part of its multi-access edge computing and 5G data architecture. This can enable the next generation of low latency applications such as machine learning, intelligent edge, robotics, AR/VR, autonomous vehicle, telemedicine, and more. Cue Health is a healthcare technology company that makes it easy for individuals to access health information and places diagnostic information at the center of care.
Their revolutionary new device, the Cue Health Monitoring System, paired with their COVID-19 test, is the first at-home molecular COVID-19 test available over the counter without a prescription, and is used by the NBA, Johnson & Johnson, and the Mayo Clinic. The company chose MongoDB, Atlas Search, and Realm Sync to power their mobile application, mobile database, and synchronization, enabling consumers to receive data from their Cue Health devices on their smartphones and securely stored in the cloud. Telecom Italia Mobile or TIM, the communications industry leader in Italy and Brazil, develops fixed mobile and cloud infrastructure, data centers, service offerings, and products for communications and entertainment. The company at the forefront of digital technologies, TIM selected MongoDB Atlas to tie together its core digital service delivery platform to accelerate the transition to Google Cloud and enable flexible delivery of digital services through a microservices architecture.
MongoDB has been a partner in maximizing the customer experience across all of its digital channels. In summary, we had another excellent quarter. Our strong performance is a result of the seeds we planted years ago, such as launching Atlas, releasing multi-document ACID transactions, and expanding our go-to-market channels to complement our enterprise sales organization. Our continued success further fuels our aspirations. We not only expect to benefit from the seeds already planted, but we will continue to plant new seeds that drive long-term growth. Customers are embracing the vision of our application data platform that simplifies their data architecture while accelerating their pace of innovation. We believe the seeds we're planting today will yield strong growth results in the years to come. Before I turn it over to Michael, I would officially like to welcome our new CMO, Peder Ulander, to MongoDB.
A developer at his core, Peder joined us from AWS, where he led developer and enterprise marketing. He brings deep experience in the cloud, open source, engaging with developers, and has a track record of helping brands from startups to tech leaders take advantage of major market transitions. With that, here's Michael.
Thanks, Dev.
As mentioned, we delivered another strong performance in the third quarter, both financially and operationally. I'll begin with a detailed review of our third quarter results, and then finish with our outlook for the fourth quarter and full fiscal year 2022. First, I'll start with our third quarter results. Total revenue in the quarter was $226.9 million, up 50% year-over-year. Subscription revenue was $217.9 million, up 51% year-over-year. Professional services revenue was $9 million, up 35% year-over-year. It was a very strong quarter across the board, and we exceeded our expectations for both Atlas and Enterprise Advanced. Overall, Atlas's strong performance continues to be the largest contributor to our growth.
Atlas grew 84% in the quarter compared to the previous year, and now represents 58% of total revenue, compared to 47% in the third quarter of fiscal 2021 and 56% last quarter. In any given quarter, the sequential growth of Atlas is driven primarily by the expansion of the existing applications on our platform. As you can see in our strong Q3 results, that expansion was towards the higher end of the historical range this quarter. Enterprise Advanced also exceeded our expectations this quarter, driven by stronger than anticipated new business demand. During the third quarter, we again grew our customer base by over 2,000 customers sequentially, bringing our total customer count to over 31,000, which is up from over 22,600 in the year ago period.
Of our total customer count, over 3,900 are direct sales customers, which compares to over 2,800 in the year ago period. As a reminder, our direct customer count growth is driven by customers who are net new to our platform, as well as self-service customers with whom we have now established a direct sales relationship. The growth in our total customer count is being driven in large part by Atlas, which had over 29,500 customers at the end of the quarter, compared to over 21,100 customers in the year ago period. It is important to keep in mind that the growth in our Atlas customer count reflects new customers to MongoDB, in addition to existing Enterprise Advanced customers adding incremental Atlas workloads. We had another quarter with our net ARR expansion rate above 120%.
We ended the quarter with 1,201 customers with at least $100,000 in ARR and annualized MRR, which is up from 898 in the year ago period. The continued strong growth in customers with $100,000 or more in ARR is an indication of the success of our land and expand go-to-market strategy, and the fact that we are increasingly becoming a strategic partner for our customers. Moving down the income statement, I'll be discussing our results on a non-GAAP basis unless otherwise noted. Gross profit in the third quarter was $163.9 million, representing a gross margin of 72%, which is consistent with last quarter and consistent with 72% in the year ago period.
In the near- term, we continue to expect some modest reduction in the overall company gross margin as Atlas continues to grow as a percentage of our revenues. Our operating loss was $3.5 million or a -2% operating margin for the third quarter, compared to a -11% margin in the year ago period. Our outperformance versus our operating loss guidance was clearly driven by our revenue outperformance, but also by timing of certain expenses. Due to the ongoing COVID-19 pandemic, we are experiencing less of a rebound in travel, events, and workplace expenses than we'd previously assumed. At the beginning of fiscal 2022, we had shared with you our expectation that these categories would contribute an incremental $20 million-$25 million in expenses for the year compared to fiscal 2021, with most of it occurring in the second half.
Given the sustained impact from the pandemic, our revised expectation is that these incremental expenses will only amount to $9-$12 million for the current year. We see this as a one-time benefit as we do expect our activities to return much more closely to pre-COVID levels in fiscal year 2023. In addition, our marketing spend was lower than expected in Q3 as our new CMO, Peder Ulander, put certain programs on hold while he evaluated their effectiveness. This process is now complete, and we expect our marketing spend to revert to normal levels in Q4. Net loss in the third quarter was $7.2 million or 11 cents per share based on 66.4 million weighted average shares outstanding.
This compares to a loss of $18.2 million or $0.31 per share on 59.4 million weighted average shares outstanding in the year ago period. Turning to the balance sheet and cash flow, we ended the quarter with $1.8 billion in cash equivalents, short-term investments, and restricted cash. I would also like to point your attention to a meaningful sequential increase in our deferred revenue. As Dev mentioned in his remarks, we are increasingly becoming an enterprise standard and a strategic partner to our largest customers. Correspondingly, these customers have high confidence in continued growth of MongoDB. In order to optimize the best commercial terms, these customers typically make multi-year commitments to MongoDB. In Q3, we had a number of our largest Atlas customers renew their Q4 and Q1 contracts early.
Because these are Atlas customers and Atlas revenue is recognized upon consumption, the multi-year nature of these Atlas commitments did not affect revenue in the period. However, there was an impact on deferred revenue given these contracts were billed annually in advance. While early renewals occur regularly in our business, the dollar magnitude in Q3 was significantly above what we've experienced in the past. Operating cash flow in the third quarter was -$5.8 million. After taking into consideration approximately $3.4 million in capital expenditures and principal repayments of finance lease liabilities, free cash flow was -$9.2 million in the quarter. This compares to negative free cash flow of $14.9 million in the third quarter of fiscal 2021.
I'd now like to turn to our outlook for the fourth quarter and full-year fiscal 2022. For the fourth quarter, we expect revenue to be in the range of $239 million-$242 million. We expect non-GAAP loss from operations to be $13 million-$11 million and non-GAAP net loss per share to be in the range of $0.24-$0.21 based on 67 million weighted average shares outstanding. For the full-year fiscal 2022, we now expect revenues in the range of $846.3 million-$849.3 million.
For the full fiscal year 2022, we expect non-GAAP loss from operations to be $36.4 million-$34.4 million and non-GAAP net loss per share to be in the range of $0.74-$0.71 based on 64.6 million weighted average shares outstanding. To summarize, MongoDB delivered excellent third quarter results. We're seeing strong customer additions as well as excellent expansion within our existing customers. Customers have increased confidence in our application data platform and are in turn increasing their commitments to MongoDB. Our performance gives us increased confidence to continue investing, to capture the large market opportunity ahead of us, and we're seeing attractive returns on those investments. With that, we'd like to open it up to questions. Operator?
Our first question today comes from Sanjit Singh with Morgan Stanley.
Thank you for taking the question. Congratulations on a very strong quarter and great, good results across the board, including Atlas. If I take a step back, Dev, and I look at where we are with Atlas in terms of the mix, so the 58% of revenue, it's almost two-thirds of your subscription revenue. When we look at the motion around migration, so, you know, enterprise customers have been expanding for Atlas for quite some time now. Are you starting to see more of the outright migrations on Enterprise Advanced Atlas, or is that still on the come? When customers do that, is there a revenue uplift associated when customers move from Enterprise Advanced to Atlas?
Thanks, Sanjit. Yeah, to your question on migrations, still it's a very small set of customers who have actually migrated from Enterprise Advanced to Atlas. The bulk of our growth of Atlas is net new workloads. In terms of a price increase, in general, it tends to be flattish. Maybe there's a slight price premium, but there's not like some significant price delta. Again, you know, I would say the growth of Atlas is really driven by a massive cloud transformation happening in the enterprise and best-of-breed vendors are winning, and clearly customers are very comfortable moving mission-critical workloads not only to the cloud but also to MongoDB, and that's what I think you're seeing here.
Makes total sense. I, in your script, I thought the call-out on Coinbase being a customer was pretty interesting. That's. They're obviously, they're tied to this sort of new financial revolution that's going on. When you think of massive scale, but also financial transactional integrity, I was wondering, like, what the sort of specific set of use cases Atlas is playing with that customer. Is that more around sort of customer interactivity, or is that more on kind of on the transactional level?
Yeah. I think there's limits to what I can say, but it's definitely at the transactional level along with some adjacent applications. What I would tell you is, they have some pretty unique requirements when it comes to performance and scale. As you can imagine in their market, they have a lot of periods where they have some intense trading days and then so they need, you know, to scale up capacity very, very quickly to deal with those surges in trading volume and so on and so forth. So they basically realized the only platform out there that could really address their need was MongoDB.
Well, great feather in the cap when they're very impressive. I'll cede the floor. Thank you. Congrats on a great quarter.
Thanks, Sanjit.
Our next question comes from Raimo Lenschow with Barclays.
Hey. Congrats from me as well. Two quick ones. Dev, what we saw this quarter, in terms of what we haven't seen for quite a while is that on the EA side, you talked about, new customers starting to kind of come back and doing, more deals, et cetera, there. Can you talk a little bit about what you're seeing there in terms of what people are doing on that side? Is that kind of more regulated industries that can't go to Atlas yet? Or, is this like post-pandemic investments again? I had one follow-up for Michael, on the deferred side.
Yeah. We have a lot of EA customers who are just expanding their usage of MongoDB in the enterprise. Some of it's driven by cultural reasons, where basically they're you know, they're just comfortable running workloads in their own data center and wanna continue to do that. The benefit for them obviously is that when they do decide to move to the cloud, they don't have to rewrite one line of code. And then clearly there are some customers who are constrained by the industry they operate in, and they can't move to the cloud as quickly as they'd like to, and that's where EA comes in.
Yeah. Okay. You do see it's coming back now after the pandemic as well? Okay. Michael, on the deferred side, like, obviously, like there's no kind of P&L benefit on people renewing earlier. Like, what's driving those kind of big early renewals? Did you do anything in terms of terms, like payment terms or something to encourage this? Or, is that like your financial year was just different? Because it seems unusual without you kind of pushing for it.
Yeah, I think this is an example of really customer demand and responding to the customer, you know, needs. I think what we've tried to make clear over the last couple of years is that we're trying to make it increasingly easier to adopt and use MongoDB, and we've tried to strip away some of the incentives that our sales folks have for people to do things unnaturally, so it's much more customer-centric. This is really a result of them looking at their own demand profiles internally, aggregating demand and thinking and being confident that they'll be able to sort of expand more, and therefore looking for sort of best possible commercial terms, and sort of coming to us and saying, "Hey, we'd like to commit to even more based on what we see internally.
Perfect. Great. Congratulations. Really good news.
Thanks, Raimo.
Our next question comes from Brad Reback with Stifel.
Great. Thanks a lot. Dev, you'd mentioned the hiring of Peder as CMO and Michael, you talked about some delayed marketing spend as a result. Can you give us a high level sense of what maybe some of the changes the marketing go to market will be going forward?
Yeah, I think what Peder wanted to do and you know, he came from almost like he came out of central casting, given his background in open source, in the cloud, and also knowing how to engage with developers. He really wanna do a comprehensive review of all the marketing programs that were underway. What he's done, I wouldn't say there's some major swings in kind of strategy, but it's basically making some optimizations around doubling down some areas and pulling back in some other areas. I don't think you'll see any drastic changes.
He's also building tighter relationships with the sales organization, and so he and Cedric Pech, our CRO, are working very closely together, and making sure the marketing team is aligned with the sales efforts around going up market as well as going down market. That's essentially what's happening, and we're thrilled to have Peder on the team.
Great. Michael, maybe one quick follow-up for you. Last quarter, you had talked about some specific 2Q - 3Q seasonal trends within Atlas. Anything we should think about, as it relates to 3Q - 4Q seasonal trends as we head into the end of the year? Thanks.
Yeah. I think there are a couple different ways to think about that. I think within Atlas, as we mentioned, you know, Q1 is seasonally softer, and so we were trying to help put in context some of the strength that we saw in Q2. Certainly, the results in Q3, you know, were very strong and compare very favorably when you sort of adjust for that seasonality. I think the only other thing I'd call out that's probably important in terms of Q4 seasonality is two things. One, we had a very strong year-ago year in Q4, particularly in Atlas, and then on a more macro basis, Q4 tends to be disproportionately Enterprise Advanced-centric.
A lot of the renewal base, as it relates to, you know, workloads, tends to, like I said, disproportionately skewed towards Enterprise Advanced in Q4, and so that's I think another factor to keep in mind as well.
That's great. Thanks very much, guys.
Thanks, Brad.
Our next question comes from Brent Bracelin with Piper Sandler.
Good afternoon. Thanks for the questions here. It's incredible to see the return to 50%+ growth for the first time in two years. On the drivers of the growth here and acceleration, it looks like not only do you have strong Atlas new customer growth, but the Atlas usage in particular was very strong, even actually stronger than in last quarter. Walk me through kind of what are you seeing across the broader set of customers. What's driving higher Atlas usage on a per customer basis, and one quick follow-up on renewals.
Yeah, sure, Brent. Thank you. A few different things. I think you have to think about the mix overall, and just as a reminder for folks, you know, we don't run the business on a product basis. We run the business on a channel basis, just so people kind of remember that. If you think about the overall growth, I think about it in terms of new business and then expansions of existing behavior. It continued to be another strong new business quarter. Within Atlas workloads, that new business doesn't tend to have as big an impact immediately, whereas under Enterprise Advanced you've got the term license component recognized under ASC 606. Then as it relates to expansion, we've seen, you know, very consistent like good, strong cohort behavior across the expansion.
I mentioned in the prepared remarks specifically for Atlas, during this quarter that what we saw was sort of higher than, sort of at the higher end of what we typically see for the cohort behavior, and that drove, you know, some of the Atlas, you know, outperformance. You can also tell if you look at our numbers, and Brent, I don't know if this is what you're getting at, but you can tell if you look at the numbers where you can calculate from our disclosure the average revenue per direct sales customer, and that is, you know, up a little bit, you know, year-over-year and up sequentially.
I think that's, you know, generally pretty impressive, given the fact that there's a bit of a tailwind given that, you know, a lot of the customers that we've added overall are in the mid-market, who tend to spend below, you know, the average level. Then also some of those customers that are new to the direct sales channel are self-service customers who we've moved to be in the, you know, we've now established a direct sales relationship with them. They will grow more quickly as a result of that, but that's revenue is not all like net new, and obviously those folks start at a lower basis. I think sort of despite some, you know, mix, you know, headwinds, if you wanna think about it, those results have continued to impress us.
Absolutely. Just quickly on the renewals, short-term deferred up $49 million sequentially. You talked about some of that being tied to early renewals. Can you just maybe remind us why someone would be motivated to renew early? Would it be strictly tied to some of the reval you saw in EAs, and there was more EA-heavy renewals? Or-
Are there benefits for an Atlas customer if they're starting to consume more? Is there a financial advantage for them to kind of early renew just to onboard more use cases? Just trying to understand, because it's a little unusual why customers would be wanting to spend more now and early renew. Just trying to drill a little bit deeper into that. Thanks.
Sure. Yeah, no. That's part of the reason why we wanted to call it out because it was atypical. Obviously, we've said for some time now that, you know, deferred revenue and the calculated billing calculations that a number of folks do is not a particularly insightful or instructive measure for our business, and that certainly, you know, continues to be the case. Just given the behavior in Q2, we wanted to call that out. These were Atlas customers and therefore really, you know, as we discussed, doesn't affect the revenue. The revenue on Atlas is really all consumption based. What this is reflecting is the increasing strategic or mission-critical nature of Atlas in those accounts. Those folks are looking at their run rate.
They're seeing their run rate increase, and while they may get whatever benefits of the initial commercial deal that they struck, given that they're, you know, at meaningfully higher run rates, they wanna make sure that they're getting sort of the best commercial terms out of the relationship, and as a result, are entering into committed pay-in-advance contracts for, you know, larger amounts to try and make sure they're optimizing, you know, their spend levels with us. That's why we wanna call it out. Again, unlike kind of typical, you know, kind of the calculated billings number, you know, my sort of hypothesis or assumption is that part of the reason people like that is they view that as sort of an indicator of future revenue and/or where the business is going.
I think given that Atlas is consumption based and these folks that already were at run rates, you know, often that exceeded their commitments, it's not necessarily as helpful in that way that people are traditionally used to seeing it. Nevertheless, I think it's a great sign around the strategic nature of Atlas and their conviction to kinda continue to invest and expand usage of the platform.
Very clear. Helpful color. Thank you.
Our next question comes from DJ Hynes with Canaccord.
Hey, thanks, guys. I'll echo the congrats. Awesome set of numbers here. 2 questions. I'll start with you, Michael. Just kind of building off the thread that Brent started last question around expansion. I know you guys don't get granular with disclosure around net revenue retention metrics, and north of 120 is great, but is it fair to think that you're seeing that metric tick higher? I mean, I think it makes sense given, you know, net adds have been strong, but they've been pretty consistent for the last 5, 6 quarters, but growth has been accelerating. Is that one of the drivers?
Yeah. I would say that the net ARR expansion rate has been strong, you know, at that north of 120% level. I think when we look at the underlying cohort dynamics, they have generally, you know, been consistently strong. I think the success has really been a mix. I think it's, you know, adding new customers as well as expanding within existing customers. You have to remember, a lot of times, particularly with Atlas, which is where the bulk of the new customers are coming, those new customers aren't necessarily coming right away, and you know, spending, you know, at their full levels right away. So you get a little bit blurred.
It becomes a little bit sort of, you know, artificial, the distinction between, you know, what is a new customer land and what is a, you know, what part is the expansion, right? Because when you think about if you're starting off relatively small, and I only look at, you know, what are you spending on day one, everything else is expansion. Yes, of course, you could say that, but you wouldn't have that opportunity to expand if you hadn't added them. To us, I think it's two-pronged. I think it's both, you know, acquiring new customers, continuing to lay that foundation for that sort of, you know, expansion of the multilayer layer cake or however you wanna think about it. We've gotta keep, you know, adding those new customers but then expanding within them.
Hopefully that helps.
Yeah. Yeah. No, it makes sense. Then Dev, I wanna ask you a competitive question that's really not related at all to the quarter, but my sense is that Redis is out talking to public investors a bit more. Maybe you could just spend a minute touching on competitive differentiation there. I don't know if that's key value versus document or maybe use cases where they make more sense than you and vice versa. Any compare and contrast I think would be helpful at this point.
Yes. Sure. You know, Redis is predominantly used as a front-end cache. That was a use case that actually a lot of people also used MongoDB for in the early days. You know, we have a much broader set of capabilities as a document model. We support so many different types of workloads between key-value. We even support relational with joins. You know, have time series, graph traversals, et cetera. So we offer a broad set of capabilities. We also support multi-document ACID transactions. To the Coinbase example, you know, we have lots of financial services customers who are using us for mission-critical workloads. The breadth and capabilities of our platform are far wider and superior.
I think what I talked about a little bit in the prepared remarks was that we hear loudly from customers that they just can't continue to use a net new technology for every net new use case, that the challenges of learning, supporting, and managing all these different data technologies, having all these different data silos, how do you synchronize that data? How do you secure that data? How do you back up that data? How do you query that data? It becomes even more challenging. They're gravitating to more of a modern platform where they can run most of those workloads on one platform. It really simplifies the operational issues. It really makes the life of developer that much more easy. That's why we're winning. We don't really compete with Redis per se.
It's very rare that we go into a battle with Redis because it becomes quite easy to differentiate our capabilities against them. This is a big market, so there's no doubt that they're probably getting some traction somewhere. We really feel good about our competitive advantages.
Yep. Very helpful. Thank you, guys.
Our next question comes from Kash Rangan with Goldman Sachs.
Hey, Dev and team. Congratulations on a fantastic quarter. Dev, I'm curious to get your perspective. As you look at the Atlas, if you were to look at it three-four years from now, what kind of scale of applications do you see Atlas supporting, scope of applications, scale of applications Atlas supporting that it currently does not today? What are the other technological breakthroughs that you're looking for in the core system to be able to accomplish, clearly three-four years from now, what MongoDB is capable of achieving? Thank you so much. Congrats again.
Yes, thanks, Kash. What I would say is, you know, one of the advantages MongoDB's had from day one is that was built on a distributed system, right? By definition, we allow customers to really scale out their environment and deal with massive amounts of data and very, you know, high performance requirements. The reason they're coming to us is because the existing relational technologies just can't handle today's scale. To your point, as modern applications have even greater requirements to scale, the existing set of technologies will be even more handicapped.
We've done a lot of sophisticated things around replication for data resiliency, sharding for scale out, doing things like workload isolation so that when you're running sophisticated analytics, you don't impact user performance, building in materialized views so that you can predefine queries upfront and have that data ready versus trying to run those queries when you need it and then, you know, impacting CPU usage. All these things we're doing, and we're just chipping away and adding more and more capabilities. It's hard for me to sit here and say what we'll be doing five years from now, but we're just pushing the envelope on performance and scale. Because we've been built on a distributed architecture, we have a fundamental advantage over all the other technologies out there, and that allows us to really serve our customers well.
That's why the most sophisticated and demanding customers, like the Coinbases of the world and others, are using MongoDB because no other platform can address their needs.
Wonderful. Thank you very much. Happy holidays.
Thanks, Kash.
Our next question comes from Karl Keirstead with UBS.
Thank you. I wanted to ask you about the EA business, if we can go back to that. 20% growth was an acceleration from mid-teens over the last couple of quarters. If it was not the EA business that was the beneficiary of these early renewals, what would you attribute the growth rate acceleration to? Michael, I know you mentioned generally new business demand, but maybe you could elaborate. Thank you.
Yes, certainly. Thanks, Karl. I think this goes back to some things we've said for a while, which is that, you know, while, you know, clearly we're seeing a lot of adoption of Atlas, not every customer is ready to be in the cloud, and our goal is to give customers choice to meet them wherever they are on their cloud journey. Enterprise Advanced could be a great setup, as Dev alluded to earlier, to eventually moving into the cloud when they are ready for it. But I think more broadly, it just sort of speaks to the fact that the MongoDB value proposition resonates with customers. Here we have customers who are not as cloud forward continuing to, you know, add and expand to their MongoDB footprint.
you know, that drove, you know, the better expected quarter that we saw, you know, from sort of that product line.
Got it. Okay, that's helpful. Michael, just if you don't mind, back on DR, does it feel like this early renewal, larger multi-year commitment phenomenon is sort of one-off-ish, or does it feel like this is the start of a trend? Maybe to put it another way, would you encourage us to be somewhat tempered in our DR growth estimates for 4Q and 1Q if, in fact, some deals renewals were pulled forward? Thank you.
Yeah. I think I'm gonna say sort of yes to both, even that, though that might seem somewhat contradictory in the sense of like, yes, I think it's a one-off. I think it is a directional trend over time as Atlas becomes, you know, more strategic within accounts. But I would, at least in the near term, certainly think of this as more one-off, which is part of the reason why we wanted to explicitly call it out so people didn't sort of get unduly, you know, take the numbers and sort of extrapolate or do whatever, you know, you all wanna do with it.
Yeah. Hence my question. That's clear. Thanks, Michael.
Our next question comes from Patrick Walravens with JMP Securities.
Oh, great. Thank you. Let me add my congratulations. Dev, I've been listening carefully to some of the broader themes that you've been mentioning as we've been going through massive cloud transformation in the enterprise, the benefit of the distributed architecture. The reason is because I've been trying to figure out what it might be that MongoDB, Snowflake, Datadog, and Confluent might all have in common, because you guys are all already at super high growth rates and all accelerated in Q3. If you have one to two thoughts on that, I would love to hear it.
Well, thanks for the question. What I would say is a couple things. One, obviously, we are going through a massive transformation of the enterprise where people are moving workloads to the cloud. They had taken some time to get there, but now they're really moving aggressively to move not just tertiary second-tier apps, but mission-critical workloads to the cloud. By that move, they're also being very thoughtful about, you know, what technology they use. They're not just taking the, you know, the standard offerings from any of the cloud vendors or cloud providers, but really taking a best-of-breed approach. I think that's what you're seeing is the beneficiaries are basically choosing the best technologies available in the marketplace and running their workloads there. I think we are well positioned.
To your point about the themes or trends that I mentioned, you know, the, their desire to, you know, increase the speed of development. Are people just gonna wanna move faster? Of course, they are. Are they gonna wanna buy standalone, you know, single purpose databases? No. They need to have a general purpose platform. Are performance and scale requirements gonna grow over time? Of course, they are. Is security availability gonna be important? Of course, they are, right? Will customers want choice? Of course, they will. We feel all those trends are only gonna be, you know, playing to our strengths. That's why I think you're seeing customers increasingly choosing MongoDB to run their mission-critical applications in the cloud.
Great. Thank you.
Our next question comes from Fred Havemeyer with Macquarie.
Hey, thank you. You know, MongoDB, you recently announced pay-as-you-go for Atlas. Last quarter, you announced serverless for Atlas. You know, across the board at MongoDB, it's really looking like you're trying to align database consumption, deployment, and utilization, and make that a much tighter loop than I think it really has been historically. Also I gotta say, I'd like to shout out Unqork on MongoDB. I recall that earlier this year, you also announced, UiPath had adopted MongoDB, so you certainly have something going on with supporting low and no-code workloads. You know, back to the kinda question at hand here.
How should we be thinking about Atlas growth drivers between, say, traditional enterprises adopting Atlas for just more agile development cycles versus, say, innovative startups rapidly growing on your platform and perhaps adopting it because it much more tightly aligns with their need for scaling?
Yeah, thanks for your question. I just wanna make one clarification. The pay-as-you-go that we announced in AWS is only new to the AWS Marketplace. We've always had essentially an option where you could sign up via self-serve without any commitment, and we also actually offer that option now. Our salespeople can offer that for customers to basically sign up with a $0 contract just to get started. The pay-as-you-go is really just a feature available on the Amazon AWS Marketplace because obviously they transact a lot there, and we just wanna make it even easier for customers on marketplace to engage with Atlas. As part of the general theme, we just, as Michael mentioned, just making it more and more easy for customers to use Atlas.
In terms of signals that we're looking for, obviously, we really like the fact that large, well-known brands, and I mentioned a couple of them in the prepared remarks, are using MongoDB. I also pay attention to the signals of startups who are using MongoDB because to me, when startups are betting on MongoDB, that's a great sign for our future. The question I'd ask you is how many startups today are using Oracle? I can't think of many. To me, we spend a lot of time not only looking at, you know, the startups using MongoDB, but what are some of the, you know, the next generation developers? What tech stacks are they using? What modern application frameworks are they using?
That's where, you know, we feel really good because MongoDB is clearly the center of those ecosystems and that's a good sign of health for our future.
Yeah. Thank you, Dev. I think that, you know, your rankings on Stack Overflow have consistently reflected some of that too. Quick follow-up question for Michael. I think, you know, can we get an update on how many of your over $100,000 ARR customers would qualify for that level of spend on Atlas alone? Are you seeing any customers out there that are approaching on Atlas, say, like, north of $1 million in ARR?
Yeah. A couple things. We reported earlier this year that roughly over 60% of the 100K customers would've qualified just on their Atlas spend alone. There's been no material change to that number. I think it continues to be a very strong, you know, percentage of Atlas. You know, it's not surprising given the increased investment that we're seeing customers make.
Great. Thank you, and congrats on a strong quarter.
Thanks.
Thank you.
Our next question comes from Jason Ader with William Blair.
Yeah, thanks. Hey, guys. I know you've kinda covered this ground somewhat, but I wanna ask it in a slightly different way. This is the biggest beat you've had maybe ever, and I'm just wondering if, you know, something changed in the market here in the second half, whether it's the velocity of the enterprise transformation to cloud, or is it something more company specific where you've just been able to kind of separate yourself from the competition more?
I think the... Thanks, Jason. I think a couple things as we sort of tried to you know call out in the prepared remarks. I think it was just a really strong quarter across the board. We talked about Atlas and the success in Atlas and the stronger expansion than we typically see you know which is great. Then it was also a really strong Enterprise Advanced quarter as people commented on in some of the you know questions and the follow-ups. I think there you know continue to be sort of multiple legs of the growth. We continue to add you know customers. We continue to find you know that the customers that we're adding are behaving you know attractively you know and consistently with their kind cohorts from beforehand.
The changes that we've made in terms of making it easier to adopt MongoDB and easier to get on the platform, you know, are working and are having the desired effects. I think it's just sort of the culmination of, you know, all those things going, you know, really well, resulting in a really strong quarter that certainly beat our expectations.
It's kinda half, you know, maybe half macro, where things are moving faster to cloud and half just really good execution across your various product areas. Is that a fair way to think about it?
I think it's hard to sort of parse it that way. I guess I just look back and say, you know, we're going after an incredibly large market. We are being increasingly effective at capitalizing, you know, on that market opportunity. You see that sort of showing up in the numbers. Dev talked about in the prepared remarks, sort of the social proof, you know, impact and other things like that. I just think all that really added up to an exceptionally strong quarter.
Thanks, guys.
Thank you.
Our next question comes from Ittai Kidron with Oppenheimer.
Thanks. Great numbers. Dev, my question is to you on the competitive front. I saw you at re:Invent last week at AWS in Vegas, and I couldn't be more surprised by the number of serverless announcements that AWS made with regards to pretty much every database platform that they have. At the same time, they've also been pushing the DocumentDB and highlighting its compatibility to you, I think version four at this point. The mantra of their whole event was the right tool for the right job. It seems like they're taking a little bit of a different approach to you, and clearly they're being extremely successful. I guess my question is twofold.
Number one, what do you make of all the serverless announcements, and what way do they make your life a little bit more difficult to you in that they significantly simplify adoption of any platform? Then second, your platform comment, could it just be that the market overall for everybody is very strong, that the market isn't necessarily shifting to a platform? It's just all boats are getting lifted right here, right now.
Ittai, it's good to see you at re:Invent. It was good to actually have a face-to-face conference. Couple of things. One I would say is on the serverless part. We announced serverless over the summer, and we've been working on it for a while. DocumentDB still does not have a serverless offering, just to be clear. The reason we announced serverless was that we wanted to make it even easier to use MongoDB. People would not have to do upfront capacity planning and pick a particular instance size, that the database would just scale elastically as their demands grow.
The second thing I would say that is very different in terms of our strategy versus AWS's strategy is we don't believe that customers want to use 15 or 18 different databases. I don't know of any customer, and the team and I and our sales organization, we spend a lot of time with customers. No customer has said, "I want to use that many different databases." Because the challenge is, it's very simple. The challenges of learning, managing, supporting all those different technologies, having data sitting in all those different silos, knowing how to query that data, back up that data, synchronize that data is an operational nightmare.
That's why we believe our approach of offering a general purpose platform for our customers to consolidate workloads is really resonating you know with our customers, and obviously you see it in our numbers. I would say you know, Amazon obviously has a big brand. They have a lot of reach, and they can get. It's a big market, so clearly, you know, they're doing well. But we feel, you know, we've been you know partnering and competing with them and many others in the marketplace, and we're holding our own. In fact, we're you know doing extremely well and we feel really good about our competitive position.
Very good. Thank you.
Thank you.
Our next question comes from Phil Winslow with Credit Suisse.
Hey, guys. Congrats on a good quarter and thanks for taking my question. Just wanted to focus on the go-to-market channels. Obviously, you've been highlighting the success you're having in direct. Question there is how are things trending in terms of new hiring there? How do you feel about capacity and sort of plans for next year? Also one of the things that you highlighted was the self-service channel and some of the new non-direct channels that are seeing success. Wondering if you provide just more detail on those two. Thanks.
Yeah, sure. Yes, as we talked about in many of the quarterly calls, that we're trying to grow our sales capacity as fast as operationally possible. Q3 was another great quarter for hiring. It's basically, we're running the same playbook. We're getting, you know, we're increasingly segmenting the market. As you know, we have a field sales organization, we have inside sales organization, but we're now finding that there's this like mid-market segment comprised of really digital natives who are building their own applications and being very sophisticated in their use of technology, maybe have also, you know, raised a lot of capital. That's a big target market for us.
We're probably on the margins gonna start looking at some vertical areas where you know there's some commonality of use cases where we can really leverage that common learnings across say like financial services manufacturing retail healthcare et cetera. That's all things in terms of just refining and optimizing our go-to-market. On the self-serve side again it's really helping drive our business. The combined self-serve inside sales field sales organization and our partner organization is creating a really virtuous flywheel effect. Just to be clear yeah even today you know over half of the revenue in Atlas was sourced from self-serve. The self-serve channel is a great way to acquire customers and our sales organization then uses the customers we acquire and then grows them even faster.
The virtuous cycle is working really well.
Awesome. Thanks guys, and congrats again on an awesome quarter.
Thanks, Phil.
Our next question comes from Tyler Radke with Citi.
Hey, thanks for taking my question. I wanted to ask you just how are you seeing these large cloud platform partners help you get into these larger deals? I know you talked about that a bit in the script, but I'm curious if you're seeing those also help to accelerate the migration away from kind of a on-prem relational incumbent as well. Just talk to how those large, you know, cloud platform partnerships have kind of evolved from a relationship perspective. Thanks.
Yeah, sure, Tyler. Again, it was good to see you also at re:Invent last week. What I would say is that the cloud partners have kind of realized that, you know, when the workload and Atlas workloads move on the cloud, they're the beneficiary of multiples of that revenue that's spent with us on their platform between the consumption of the online storage and compute, as well as all the other ancillary services that customer may use. It's truly it sounds like a cliché, but it's truly a win-win relationship.
We've seen our partners and obviously last week we had some great relationships with senior level people at AWS because the relationship is really working and we're seeing a lot of, we're doing a lot of business together and we're becoming a very meaningful partner for them. I think it's that, you know, we've obviously been working with them closely now ever since the launch of Atlas over the last five years, and we've learned a lot of lessons. It's important not only to have product integrations, but it's also important to have the sales organizations aligned to work well with each other.
That took a little bit of time to work through because naturally there's some competitive offerings and salespeople are not the most trusting types when they have to work with someone who may have a competitive offering. When you incentivize them to work well together and it becomes clear that we have the far superior solution, you know, the cloud rep from the particular cloud provider is more than happy to work with us because they're gonna get so much of the business that comes to them. That's essentially what's happening. We're doing now deeper integrations and then as we talked about, we announced the pay-as-you-go announcement for the AWS Marketplace. We're just making it easier for customers to do business with us and the cloud provider together, which is goodness for everyone.
Great. Just on hiring, you mentioned it was a strong quarter. Do you anticipate that you're gonna grow your kinda direct sales force faster next year than you did this year?
Yeah, I don't think we're prepared to go into, you know, what we'll do next year just yet. That'll be in the March quarter. I would tell you this is generally, we've been trying to grow our sales capacity as fast as operationally possible. Now, we do have a high bar, so we're not just gonna hire salespeople willy-nilly. We also wanna make sure that we have the, you know, leadership capacity in place to, you know, develop and get the sales reps to execute in a consistent way quarter in, quarter out. We put a lot of thought in terms of how we think about capacity planning, where we add people, do we have the right leadership in place, et cetera.
We're trying to move as fast as possible.
Thanks, and good to see you last week.
Thanks, Tyler.
Our last question today comes from Jack Andrews with Needham.
Good afternoon. Thanks for fitting me into the call. Just wanted to ask if there's a quick update you can provide on time series and just how we should be thinking about that attach opportunity within Atlas and how that may drive maybe the rate and pace of consumption?
Yes. I think what we're seeing is that the time series is a use case that's growing quite rapidly. I think what it's driven by is that, you know, you have these small, inexpensive IoT sensors and fast and reliable wireless networks that have just made it so much easier for organizations to generate and collect time series data. For example, you know, Walmart will have 7 million unique data points in its stores. Electric cars now have over 1,000 sensors in the cars. Those sensors could be across the board, temperature sensors, smart watches, smart meters, blood glucose monitors, you know, et cetera, et cetera. That's a big opportunity that we see.
MongoDB is well-designed to service those workloads. We can ingest data very quickly. We can scale as the volume of data grows. That's something that we're very focused on. We've made some enhancements to now support time series. Before it was just on replica sets, now it's on sharded clusters. You'll see us going after that opportunity quite aggressively. Again, the benefit of the customers, again, they have one platform where they can run time series workloads, they can run key value workloads, they can run transaction-intensive workloads, et cetera, all in one platform with one developer experience. It just makes their life so much more easy.
Thank you, and congratulations.
Thank you.
This concludes our question- and- answer session. I'd like to turn the call back over to Dev Ittycheria for any closing comments.
Well, thank you for joining us today. As you know, we had an excellent quarter. I think just to reiterate, our strong performance is really due to, again, our consistent go-to-market execution, as well as the confluence of the fact that the secular trends are really reinforcing our technical advantages and our growing credibility with customers. Our Q3 results really give us increased confidence to continue investing and planting seeds for future growth. With that, I'd like to wish everyone a very happy and healthy and safe holiday season, and we look forward to talking to you soon. Take care.
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