I sent most of this week’s content during the week:

1. Monday’s short article included:

   1. A new transaction

   2. My overall portfolio & performance updates

2. Wednesday’s article included:

   1. Nvidia, CrowdStrike & SentinelOne Earnings Review

3. Thursday’s article included:

   1. Salesforce & Lululemon Earnings Reviews

   2. Ulta and Dell Earnings Coverage

   3. PayPal Fastlane News

   4. SoFi Sentiment

   5. Meta Llama Progress

   6. Progyny IVF Regulation

   7. A new transaction (which happened as telegraphed in the article)

4. Today’s article includes:

   1. MongoDB Earnings Review

   2. Okta & Marvel Earnings Coverage

   3. Apple News

   4. Market Headlines

   5. Macro

Next week, I will cover Zscaler, Gitlab, Samara and Broadcom earnings and more. I’m still organizing the SoFi investment case to organize all of the research I’ve done over the last 4 years. It will come in September.

1. MongoDB (MDB) – Earnings Review

a. MongoDB 101

MongoDB is a key player in data storage and analytics with a document-oriented setup. This differs from legacy relational style databases and next-gen versions like Snowflake’s. How so? Legacy relational databases store data in static rows and columns linked by implemented formulas. These databases look like giant Excel spreadsheets and use structured query language (SQL) to work. Legacy relational databases cannot seamlessly handle unstructured data like MongoDB’s data lake can. This is a large limitation considering how important unstructured data is for GenAI use cases. Legacy relational databases struggle to scale and unlock the most advanced querying. The datasets are fixed, with formatting and filtering more limited. The lack of ability to provide “not only SQL” (NOSQL) can slow performance and diminish value. MongoDB’s NOSQL database and document-style data storage fix these issues. That’s why the pace of migration continues to ramp up.

Importantly, NOSQL is not better when it comes to structured data querying and data consistency as well. Not superior, just better at certain things. For evidence of this, arguably one of the most disruptive players in the general database world is Snowflake. Snowflake’s data warehouse is a relational database… just a next-gen version. It offers NOSQL, better scalability via separation of data and compute, and unstructured querying. It went with a “make relational databases much better” approach, while MongoDB implemented a “move to NOSQL” approach. Snowflake is considered more advanced in structured data. Some would argue its security and governance offering is better too. MongoDB stands out when it comes to flexibility, ease of use and unstructured data prowess. In this light, they technically are complementary tools and can be used in tandem in some cases. Still, both continue to encroach on the other’s territory, like we see in other areas like cybersecurity, programmatic advertising and DevSecOps.

The firm’s most exciting product is called MongoDB Atlas. This is a cloud-native database service that implements a group of servers (or a cluster) to actually store data for app creation within its platform. The nature of MongoDB’s product allows clusters to be easily added to or subtracted for easier flexing up & down as needs fluctuate. It also offers MongoDB Realm as a mobile environment for app creation, MongoDB Stitch to build apps without servers or any needed infrastructure maintenance and MongoDB Search for data querying. Finally, it offers MongoDB Data Lake specifically for unstructured data, which directly competes with players like Snowflake.

Some more products to know:

• Vector Search allows clients to seamlessly scrape insights from data. It allows for theme-based querying rather than just word-based. It also provides retrieval-augmented generation (RAG). This pushes semantic search results into associated large language models to uplift querying precision. 

• MongoDB AI Applications Program (MAAP) offers a series of templates, guardrails and 3rd party integrations to diminish GenAI app creation friction.

• Enterprise Advanced refers to its on-premise (Atlas is cloud-based), database and app bundle. It allows companies to purchase licensing for subscription-based usage (rather than paying for consumption under Atlas).

• MongoDB 8.0 is its latest no standard query language (NoSQL) database. This offers 60% performance boosts and better time series (timeline-based) data services.

• Atlas Stream Processing allows for real-time data ingestion. That matters a lot for app developers who constantly toy with, split test and render every single little detail within their apps. Real-time access to data querying helps make that process more painless.

Reminder:

For the last two quarters before this strong report, the company had disappointed the street with sharp annual guidance misses. It pocketed $80 million in unused Atlas revenue commitments and multi-year licensing business last year. That $80 million will not recur. That chunk was essentially pure margin, which makes the profit hit larger than demand. Keep this in mind as we go through its financials and why they look underwhelming.

b. Demand

• Beat revenue estimates by 3.0% & beat guidance by 3.5%.

• Atlas revenue rose 27% Y/Y and represents 71% of total business vs. 63% Y/Y. Non-Atlas revenue (impacted by licensing & unused revenue notes above) fell by 13% Y/Y.

• Customer count rose by 12.7% Y/Y.

• Net revenue retention was 119% vs. “above 120%” Q/Q. A mix shift towards new business is impacting this metric like for many other software names.

c. Profits & Margins

• Beat EBIT estimates by 41.9% & beat guidance by 43.8%.

• Beat $0.48 EPS estimates by $0.22.

• Beat -$6 million FCF estimate by $2 million.

• Margin declines were driven by the licensing and unused revenue notes already discussed.

d. Balance Sheet

• $2.2B in cash & equivalents.

• No traditional debt; $1.1B in convertible senior notes.

• Diluted share count rose by 3.9%. That really does need to slow, considering we are 7 years beyond its IPO.

e. Guidance & Valuation

• Raised annual revenue guide by 1.8%, which beat by 1.3%.

• Raised annual EBIT guide by 8.8%, which beat by 9%.

• Raised annual $2.23 EPS guide by $0.17, which beat by $0.13.

Guidance assumes consumption growth remains at Q1 levels, despite Q/Q improvements this quarter. A decision to pay cloud providers upfront for capacity is allowing it to secure better terms. This means better gross margin, but worse FCF margin considering the larger initial outlay. That will hit cash flow by $22.5 million per quarter for Q3 and Q4.

f. Call & release

AI:

AI Monetization Today:

As we frequently write about, the software layer of GenAI monetization has barely begun. Companies are racing to lay the foundational infrastructure needed to support vast, complex databases and GenAI app creation in the decades to come. For now, budgets are being allocated to that layer, while inevitable app creation spend really hasn’t meaningfully begun yet. MongoDB continues to think GenAI will not contribute to 2025 results and is mainly seeing app experimentation from customers at this point, rather than prioritization.

AI Monetization Positioning:

Frequent dialogue with customers gives leadership confidence in GenAI monetization coming. It sees itself as the “ideal data layer for AI apps” for a few reasons. First, AI app quality is fully dependent on a database architecture allowing for “rich & complex” data querying with rapid speed. Its document-oriented approach can handle all different data types, including all unstructured data, which is especially relevant in the age of GenAI. Next, as LLM performance and latency improve, using operational data in GenAI apps becomes more feasible and desirable. That directly supports demand for its core products. Thirdly, it partners with all relevant app development frameworks and model builders to give developers ultimate choice on which tools to use, with security and compliance help that “meets or exceeds expectations.”

AI Biggest Opportunities:

MongoDB sees a massive opportunity in modernizing legacy apps to position them for accelerated compute and GenAI-laced value. It thinks it’s great at automating the preparation of data movement for migrations but not great at rewriting code as it enters their ecosystem. Its Relational Migrator Product is its full service response to this; it’s meant to make migration as painless as possible. It’s using GenAI in its own work to automate re-coding, database and query language conversion for these migrations. In turn, that lowers cost, complexity and friction associated with embracing these migrations. This year, it debuted a few projects with customers to test efficiency gains stemming from this work. The results were “very exciting,” with “significant reductions in time and cost to modernize” and “dramatic improvements in time and cost to rewrite code.” It’s also determined to be the “platform of choice” for customers building new AI apps. That’s why it created the MAAP program (already defined), with broad integrations for ultimate choice and professional service help too.

The Quarter:

This quarter was miles better than MongoDB’s previous two reports. New business trends brightened, retention rates remained strong, and Atlas consumption was modestly better than expected. Importantly, consumption didn’t recover back to levels assumed in its original guidance, but did grow sequentially. It expected flat Q/Q consumption trends. Beyond Atlas strength, demand for its Enterprise Advanced tier “exceeded expectations.” This offers MDB’s most broad swath of use cases, which points to this data specialist driving successful product expansion and coinciding retention benefits. All of this makes it “confident that the slow start to the year was operational.” This refers to last quarter’s blunder of focusing too little on existing client workload growth. That has since changed and sales productivity improved Q/Q, as these tweaks and the company’s go-to-market overhaul began to bear fruit. Other changes included tweaking incentives to prioritize workload growth and other variables more directly related to its financial success.

During the quarter, it won L’Oreal, Mckesson and Nationwide Building Society as new clients. For L’Oreal specifically, MDB delivered a 40x performance improvement vs. its old relational database vendor.

g. Take

I think bulls should be breathing a sigh of relief after this report. Revenue growth slowing and margin contraction is related to one-off comp items from last year (not structural). With that context, the outperformance lends credence to the idea that macro and go-to-market are the sources of weakness, rather than innovation or product-market fit. That makes sense, considering its revenue is mainly consumption-based and easier to flex down for customers as backdrops become more uncertain and negative. 

Go-to-market issues seem to be getting fixed as it strikes a better balance between pursuit of new customers and existing customer growth. And if macro is the remaining headwind, a brightening environment for this consumption-based model should also make it easier for customers to flex their spend back up (compared to a traditional SaaS model). To me, this quarter tells shareholders that this product suite is capable of thriving when the exogenous picture is more favorable. 

2. Earnings Round-Up – Okta & Marvel

A full review of the Okta quarter will be included with my Tuesday night Zscaler review. For now, here’s the 30,000 ft. view.

a. Okta

Results:

• Beat revenue estimate by 2.2% & beat guidance by 2.1%.

• Beat current remaining performance obligation (cRPO) guidance by 1.9%.

• Beat EBIT estimate by 18.4% & beat guidance by 19.3%.

• Beat $0.61 EPS estimate & identical guidance by $0.11 each.

• Beat $31 million FCF estimate by $47 million & beat guidance by about $46 million. FCF on a quarterly basis is highly influenced by timing of payments & receipts.

Guidance & Valuation:

• Raised annual revenue guidance by 1.0%, which beat by 0.8%.

• Raised annual EBIT guidance by 9.1%, which beat by 8.0%.

• Raised annual $2.38 EPS guidance by $0.23, which beat by $0.19.

• Raised annual FCF guidance by 7.1%, which beat by 5.7%.

• Next quarter guidance was comfortably ahead across the board.

Okta trades for 30x forward earnings. Earnings are expected to grow by 64% Y/Y this year and by 11% Y/Y next year.

Balance Sheet:

• $2.35B in cash & equivalents.

• No traditional debt; $1.11 billion in convertible senior notes.

• Diluted share count rose by 7.1% Y/Y (Auth0 M&A still) while basic share count rose by 4.2% Y/Y.

b. Marvel

Results:

• Beat revenue estimate & identical guidance by 1.6%.

• Missed 62.0% GPM estimate & identical guidance by 10 bps.

• Met GAAP GPM guidance.

• Beat EBIT estimate by 2.9% & slightly beat EBIT guidance.

• Beat $0.29 EPS estimate & identical guidance by $0.01.

Q3 Guidance & Valuation:

• Revenue guidance beat by 2.9%.

• 61.3% GPM guidance missed by 30 bps.

• EBIT guidance beat by 4.9%.

• $0.40 EPS guidance beat by $0.02.

MRVL trades for 36x forward earnings. Earnings are expected to fall by 5% this year and rise by 71% next year.

Balance Sheet:

• $809 million in cash & equivalents.

• $818 million in inventory vs. $865 million Q/Q.

• $4.1B in total debt ($129 million is current).

• Diluted share count rose by 0.7% Y/Y.

3. Apple (AAPL) – Various News

Apple is reportedly ordering 10% more iPhone 16 phones compared to the older model. The news is highly encouraging, considering iPhone growth has been somewhat of a hardware concern for Apple as of late. Great news for the firm and for overall market sentiment. It will hold an iPhone event on September 9th that I can’t wait to cover.

Apple is also considering participating in OpenAI’s latest round of funding – alongside Microsoft. This hints at Apple not being interested in joining the game of “build the best model.” It looks like its fortress ecosystem and customer data profiles will be the strengths it brings to the table, while OpenAI, Alphabet and others provide the models.

Finally, CFO Luca Maestri is stepping down from his role as of January 2025. Interestingly, at least for now, he will stay on as head of Corporate Services. Current VP of Financial Planning Kevan Parekh will become the firm’s new CFO. It’s never ideal to see a CFO leave. In this case, it helps that Maestri was onboard for a decade and will stay on in a lesser role. Apple’s talent bench is also second to none.

4. Market Headlines

According to Nielsen, Celsius volume growth rose week-over-week for the 4 weeks ending August 10th. Growth was 17.9% Y/Y, which favorably compares to 16.0% Y/Y growth for the 4 weeks ending July 31st. Good to see, but it’s just one week of new data. Comps will continue to get easier going forward.

Uber added Wayve as another autonomous vehicle (AV) partner. Wayve joins Waymo, Cruise, BYD, Arora, Toyota, Volvo and many more AV partners on the roster. The list will simply continue to grow. Uber’s leadership also shared with the media on Friday that they’ll be getting much more aggressive with Korean growth to challenge Kakao’s 90% market share position. It will look to rapidly add capacity via taxi fleets (it’s called Uber Taxi there) like it has done in several other markets, such as the UK. Uber pulled out of the market several years ago and re-entered during the pandemic in partnership with SK. It’s starting to see considerable share gains there already.

Coffee prices are setting all time highs to add to the list of challenges Starbucks currently faces. This may sound counterintuitive, but I think the timing is perfect. It simply adds another item holding back already ugly results, and gives new CEO Brian Niccol another lever to enjoy as he (I think) fixes this broken business model. 

Disney signed an extension with the US Open through 2037. It also got approval for its India businesses to merge with Reliance. DirecTV and Disney continue to negotiate contract renewals.

DraftKings will acquire Simplebet. Simplebet offers content & pricing algorithms for sports gambling.

Google Cloud and Accenture are extending an already tight partnership to span AI and cybersecurity.

Shopify named Mikhail Parakhin as its new CTO. Parakhin was previously the CTO of Yandex and also led Microsoft’s AI initiatives. Good hire.

Meta is working on another model of mixed reality glasses. The Rayban glasses continue to outperform all expectations. This new hardware will be positioned as a less powerful, but less clunky and lighter version of its Quest headsets.

5. Macro

Inflation Data:

• The Personal Consumption Expenditures (PCE) Index for July rose 2.5% Y/Y vs. 2.6% expected and 2.5% last month.

• The PCE Index for July rose 0.2% as expected and compared to 0.1% last month.

• The Core PCE for July rose by 0.2% M/M as expected and compared to 0.2% last month. This is the most important inflation reading.

• The Core PCE for July rose by 2.6% Y/Y vs. 2.7% expected and 2.6% last month.

• The latest GDP Price Index estimate for Q2 was 2.5% vs. 2.3% expected and 3.1% last quarter.

• Michigan 1-year Inflation Expectations for August were 2.8% vs. 2.9% expected and 2.9% last month. 5-year expectations were 3% (as expected & unchanged M/M).

Consumption & Output Data:

• Core Durable Goods Orders M/M for July grew by -0.2% vs. 0% expected and 0.1% last month.

• Durable Goods Orders M/M for July grew by 9.9% vs. 4.0% expected and -6.9% last month.

• The latest GDP estimate for Q2 was 3% vs. 2.8% expected and 1.4% last quarter.

• The Chicago Purchasing Managers Index (PMI) for August was 46.1 vs. 45 expected and 45.3 last month. 

Consumer & Employment Data:

• Conference Board Consumer Confidence for August was 103.3 vs. 100.9 expected and 101.9 last month.

• Continuing Jobless Claims were 1.868 million vs. 1.87 million expected and 1.855 million last report.

• Initial Jobless Claims were 231,000 vs. 232,000 expected and 233,000 last report.

• Personal Spending rose by 0.5% M/M for July as expected and compared to 0.3% growth last month.

• Michigan Consumer Expectations and Sentiment for August were in line and both materially improved M/M.

All of this data continues to point to a soft landing or a very mild recession being the two most likely outcomes of this economic cycle. That could always change. It did not change this week.