2023-12-07 20:37:08 ET
MongoDB, Inc. (MDB)
Barclays Global Technology Conference
December 7, 2023 12:50 PM ET
Company Participants
Michael Gordon - Chief Operating Officer and Chief Financial Officer
Dev Ittycheria - Director, President and Chief Executive Officer
Conference Call Participants
Raimo Lenschow - Barclays
Presentation
Raimo Lenschow
Yes. Okay, good. Oh, there we go. There we go.
Michael Gordon
Blooming.
Raimo Lenschow
Wow, MongoDB. Hey, great to have you here. And great to have the team from MongoDB here.
Question-and-Answer Session
Q - Raimo Lenschow
You just had given that it's topical, you just had earnings this week, so we should probably start with that one. What would it highlights from your perspective there? And then I'll just kind of take it from me?
Michael Gordon
Great to be here. Good to see you, thanks for having us. I always look forward to this. Yes, so we reported earnings earlier this week. I'll give a quick summary for those who didn’t see the details then we can kind of dive into it and run through everything. So it's another strong quarter. Overall growth was 30% year-over-year growth. Atlas growth was 36%. Atlas was in line with our expectations. It was another strong standout quarter from enterprise advance that surprised to the upside and we drove the beat. So we feel really good about that. I think at the core of that is really our run anywhere strategy. So this is the idea that not everyone, including Barclays is in 100% all in the cloud. People have different deployment choices and everything else. And so we want to just make it easy for them to get the advantage of MongoDB. So strong strength there.
The new business environment continues to be strong for us in terms of winning new workloads, both from existing customers as well as new logos. We continue to see the growth of existing customers and existing workloads grow healthfully, but at that sort of more moderated rate that we've seen since the macroeconomic slowdown, I would add that continues to be stable though. And so I feel good about that. I'm trying to think of other things to call out. I'd say on the bottom line, strong profitability.
Raimo Lenschow
No, very strong.
Michael Gordon
18% non-GAAP margins. So really reflecting the strength of the business. We could talk a little bit about that over time. And then continue to feel strong at the outlook. The Q4 guide we feel good about. We raised the guide by more than the beat. Some of that comes from really confidence in enterprise advances. As I said, Atlas is kind of tracking to our expectations, but we felt strong enough about what we're seeing on the Enterprise Advanced side to raise by more than the beat there. So overall, a really strong quarter.
Raimo Lenschow
Yes. And then I wanted to stay on enterprise advance because like does -- maybe it’s just me and like you going way back. It does feel like the messaging is slightly changing. It seems like a little bit more like this seems to be more positive like can you -- and mentioned already the run anywhere like strategy, like what's driving -- is it surprising you, first question? Like what are you seeing there? Because it's the second quarter in a row now and then what's you know, how sustainable is that benefit that you're kind of talking about?
Michael Gordon
Yes, it definitely surprised us and part of it really comes down to customers, right? And ultimately as in our conversations with customers when we think about it, we're here just kind of work with them and people are in different spots of the cloud journey. I think we've talked about this in different settings, but in conferences like this, it's easy to think that everyone is all-in in the cloud, because that's what everyone talked about, but the reality is there are a lot of workloads still on-prem. There are a lot of companies or industries that are more conservative, that are little bit lagered, that are daunted by the prospects of moving to maybe delay in some of that macro concerns. Maybe they have regulatory issues, sovereignty issues, the whole wealth of things. I don't think it's going away anytime soon.
And so what we've seen though is that while there may be this tendency to think about cloud and on-prem is sort of modern and legacy, what we're seeing is that there's been an increasing, I think appreciation among the customer base that moving to the cloud isn't the only aspect of modernizing or those are not synonymous. And the ways that I can modernize, that obviously include the cloud, but even ways that don't include the cloud. And increasingly what we're seeing is people appreciating MongoDB, and in this case particularly Enterprise Advanced, as sort of an on-ramp to the cloud, right?
My organization isn't ready, or our regulator won't let us, or whatever the dynamic is to move to the cloud, but we know we need to modernize our infrastructure, we need to modernize our capabilities, we need to innovate more quickly, and that's where EA comes in. So it's a lot of customer feedback. And frankly, it's been great to see, and it's given us a lot of confidence.
Raimo Lenschow
And have you, it's something that we observe is rather in our work that, like, given that budgets are tight, you kind of, yes, you probably, you might not go to the cloud straight away because it's like, you know, you have to double cost in a way initially, because you have to run it on premise, then you need to run it on cloud and it's double. So then maybe let's do on premise, kind of modernize it there? Did you change that change in thinking, like are you kind of changing your organizational behavior as well? Or like how does your sales force engage with the clients? Are they like -- was it more cloud pushing before and now you say like just get the deal done or get the modernization done or how…
Michael Gordon
No, I wouldn't say cloud pushing. I think it's pretty clear that if you're a sales rep, your goal is obviously to maximize your commission, right? And you're going to kind of go to whatever's easiest or whatever's fastest. So kind of having all the tools in the toolkit, if you will, is what's good for them. And so they'll go and they'll approach whatever is their fastest past the money, frankly, right? And so they -- I think the default motion sort of presumes that you will want Atlas, right, and that you will be in a modern environment. But pretty quickly, if I'm the rep and I'm covering Barclays, I'm going to know, you know…
Raimo Lenschow
They are not going to move, yes, yes.
Michael Gordon
Yes, that's not the thing I should be batting my head against the wall with, right? At the right time, obviously, sure, I don't want to be there. But people know their accounts and it's really hard. It's not like the rep can sort of say like, no, no, no, you know, Miss or Mr. CIO, you should deploy CTO, you should deploy this way, right? Companies have a strategy. And so our folks will just gravitate towards that and want to support the customer and work with them and help achieve their kind of technology objectives, so that they can drive technology as a source of competitive advantage for their business.
Raimo Lenschow
Yes, yes, yes. And on that, just to give us an idea about scale, not that you need to know the database market now, but like cloud optimizations, like I mean, how big is that market still? Like, you know, like look, I cover Oracle, there's still a lot of maintenance in the Oracle base, et cetera. Like, and it does feel like we haven't done that much, because you know historically you've been doing more like new workloads and you live really well there. There were some modernizations, but not that much. Like talk a little bit about what you're seeing in terms of the opportunity there?
Michael Gordon
Yes, so there's a significant opportunity, there's tens of billions of dollars spent on relational and we continue to chip away at it and kind of have more and more success on an absolute dollar basis every year. But there have been some historic barriers and the way that I think about it somewhat simplistically is if you're a CTO or you're running an engineering organization, that's probably a very expensive investment. Your engineers are scarce resources, and you're going to want to maximize the benefit of those, so that you could drive new feature capabilities, improved user experience, whatever it is it might be, right?
And so typically you wouldn't want to rebuild something just to rebuild it, right? Just because it could be better. So there has to be some sort of pain point. The analogy that I use often in financial settings is you'll build a model and you'll build a model of a company, IBM, whatever it is, right? And you build that model, and that model's just like an application built on relational.
Raimo Lenschow
Yes.
Michael Gordon
Those spreadsheet a relational database is basically a spreadsheet on steroids. And so you build your IBM model and you lay it all out and that's your predefined schema, right? You've said, okay, here's what it is. And then what happens is they change their segment reporting, they do an acquisition, there's a divestiture, and you're doing all these things on the side to kind of like slam in the numbers and make it work. But at some point that model becomes so non-performant that you need to rebuild it, right? And that's exactly the process that an application owner goes through with their application. If it's working or it's a little bit hard but working, like you'll keep with it because you want to do a new model of a new company to cover.
But at some point, it becomes so cumbersome, so brittle, so rigid, you say, screw it, I have to go rebuild this thing and like that's what happens. There has to be a pain point and when that pain point comes that's a well-positioned.
Raimo Lenschow
Yes, yes. Okay makes sense and then from you as a CFO now obviously like more for your own sanity, kind of, predicting a quarter, Atlas is better you like to you know because it seems more predictable.
Michael Gordon
Certainly 606 adds some complexity.
Raimo Lenschow
Yes, so 606 now comes in for EA. How do you get comfortable, and how does it work then in your guidance? Like, it just feel at the moment you kind of take a lot of those ADLs out and then they come and then we have all the nice surprise. Or how do we have to think about that?
Michael Gordon
Yes, so we, you know, while we don't guide by product, in part because of the 606 and [Indiscernible], we have to have a view.
Raimo Lenschow
Yes, yes.
Michael Gordon
And we have a view around, product mix, we'll have a view around multi-year, right, because that could be a factor that affects things from a 606 standpoint. And we try and do kind of closest to the pin, if you will. But because of the 606 variability and the lumpiness and the recognition of the upfront term license revenue, sometimes that's where you can have surprises. And so, you know, but that's kind of how we run it.
Raimo Lenschow
And indeed, remind us…
Michael Gordon
Actually, one other thing I just add on that, just go to the Atlas side, because I think there's probably a risk or a temptation that someone will assume that because Atlas is consumption oriented, that is virtually identical to ratable, right? The answer is not, right? It is actually driven by the underlying reads, writes, and activities in the database and the consumption that our customers have. And so there's some variability in there. And Atlas is, while large and quite successful, still actually pretty new. And if you think about the number of data points that we have of Atlas at scale, if you're trying to get like seasonal trends and things like that, we only have a few, right? So what we've talked about, for example, in Q3 was like that tends to be a seasonally stronger quarter, whereas Q4 tends to be a seasonally weaker quarter in terms of what the growth we see from existing applications.
Raimo Lenschow
Yes, yes. And then last question for me, I wanted to stay on [Indiscernible]. Maybe remind us on the 606, like how much license revenue do you recognize? I think it's 20%, 25%?
Michael Gordon
Yes, roughly 25%. Yes, so the simple way to think about it is if you have an annual contract, and most of our contracts are one-year contracts, but if you have an annual contract of $100, what you'd recognize is roughly $25 upfront, and then the remaining $75 would get recognized radically monthly over the next 12 months.
Raimo Lenschow
Yes.
Michael Gordon
Where the multi-year deals come in, and this is one of the reasons why we sort of call these out in terms of the results and the difficulty in the compare, is if you had a three-year deal, let's imagine for the moment that the three-year deal for simple math was just $100, $100, $100. What you'd do is at the start of the deal, you'd wind up recognizing $75 of term license revenue up front and then the remaining $225 would be spread over the subsequent 36 months of the contract.
Raimo Lenschow
Yes, yes.
Michael Gordon
Right? And so that's part of what creates this lumpiness in the impact from multi-year deals. And the reason why we call it out is because it does really affect the numbers, particularly when you look at things on a year-over-year growth rate. And I'm reasonably confident that all of you totally understand the, okay, next year I need to remember there's $75 in the denominator. But I think the key thing that sometimes people forget is that current year's numerator won't have the $25 that it normally would have had from, if it were just three successive annual deals.
Raimo Lenschow
Yes, yes, yes.
Michael Gordon
Right. And so thinking through that and what that means in terms of tough compares, and that's kind of why we try to call it out for people and belabor the point, but just make sure that people, when they're doing that…
Raimo Lenschow
And you kind of upsell in the year later?
Michael Gordon
You could, but if you upsell, it would only -- you will basically would only get the term license for all the new stuff. So if I sold you 50 licenses out of the gate and I sold you another 10, I could do it on the 10, but the 50 are kind of baked in the cake.
Raimo Lenschow
And then one question that's a bit like, you know, as times are tougher at the moment, like, who are those guys doing multi-year deals when you say, I want one year? Like, it seems a bit odd?
Michael Gordon
Yes, so it's interesting. It is a dynamic, it's not something that we're trying to force or push. I think, you know, when it comes down to it, you know, the multi-year deals, specifically the multi-year deals that have the 606 impact tend to be the EA deals. I think it's in the sort of Alibaba OEM licensing deals, it's sort of easy to understand why they would want a multi-year deal. They just want the certainty of getting access to the license. But for customers, I think it's a lot of -- the organizations that tend to buy EA tend to be older, more established organizations. They're perfectly comfortable paying annually upfront for the license, not a cash optimization thing.
And frankly, there's a lot of negative baggage and a lot of scar tissue, including by some of the legacy players around pricing. And so people like, they're clearly in that case, expecting to consume and keep consuming and probably consuming more MongoDB. They want to have price certainty. I think the fact that there was sort of an inflationary backdrop probably doesn't hurt because other vendors have been raising their prices. And so if I can just get some certainty, I know I'm going to use it, why don't I try and lock that in and lock in my kind of future ramp.
Raimo Lenschow
Oh, that's where it comes from, yes, yes, yes.
Michael Gordon
So, hypothesis, somewhat anecdotal, but.
Raimo Lenschow
Yes, fair. And I know Atlas is the exciting part, and I'll come to that next, but I wanted to kind of clarify one more thing before, and I apologize then for the question in that respect.
Michael Gordon
Funds make surges.
Raimo Lenschow
Yes, yes, that's a surges question. On the other revenue, obviously, like not this in Q3, but in Q2 we had like the large jump. Then we need, when we model next year, we need to be aware, like there was that kind of one-off kind of large jump like what else is in there and do you have any visibility for what could there be like more things that, but we don't know yet that kind of help next year or help or like impacts those numbers, because it does look like a steady, steady, steady large jump steady, steady, steady?
Dev Ittycheria
No you're right that's a tough compare for Q2 of next year. But more generally, to Michael's point, all the multi-year deals, which we've seen more this year compared to prior years in EA also set up a difficult EA compare next year.
Raimo Lenschow
Yes, yes. Okay. So you're not going to tell me there's another [Indiscernible]? Okay, I tried. So if you think about Atlas now, shifting gears a little bit, so really good solid numbers there, as you said, in line with your expectation to some degree, actually our expectation as well. What do you see in terms of linearity in the quarter? Like how did that come together for you?
Dev Ittycheria
Yes, so the key thing to keep in mind about the linearity, both for Q3 and for Q4 really has to do with seasonality. So we see the back half of Q3 being seasonally stronger than the beginning of the year. It's driven by the underlying usage of the applications, and that's exactly right. We basically see applications across our portfolio experience faster usage growth when the summer's over. People are back and interacting with the apps in their lives more, and that drives the seasonal improvement in the back half of Q3 versus Q2 and the first-half of Q3.
Now if you think about Q4, it begins like a regular quarter, if you will, but then comes the holiday slowdown, and it's the exact reverse image. During the holidays, we see meaningful slowdown in the underlying usage growth of the application, and as a result, we see slower growth in Atlas. People sit around the holiday table, don't sit on their phones as much apparently. And that actually quite nicely correlates with our revenue.
Raimo Lenschow
Yes. And it's not a critique on you guys, because you're struggling with that as well. Like, you know, remember last year we kind of learned about seasonality that you learned like Atlas Q2 is slightly less, Q3 is slightly more. And this year was slightly less, and looks like you're still learning about that? Like can you talk a little bit like the puts and takes there? Like, why was it maybe more last year and maybe less this year? Like, anyway, if you think about next year, then we try to model that like?
Dev Ittycheria
That's right. So first of all, I would repeat that Atlas is still a very young business. And then if you kind of divide the world into pre-COVID and post-COVID, we really only have for any given quarter two, and now in some cases three data points to try to understand quarterly seasonality. So we're -- you know, if you're -- for a trained statistician that is far from a significant sample to be able to fully call it, but we're trying to be as transparent as we can as we learn about the business.
So what we've seen is for the last three -- Q3s, including this one, we've seen the seasonal improvement in the back half. We see it driven by the underlying application usage growth. And we expected seasonal improvement to be less this Q3 than prior Q3, and the reason for that is that generally speaking we see less variability in consumption this year, compared to prior year. It just feels like macro felt a little bit more unsettled last year, customers were trying to adjust their strategies and so forth, whereas like we're in this slower growth macro affected world, but it just, as you look at literally standard deviation a week-over-week growth, it's smaller this year than last. And for that reason, we expect less of a seasonal recovery in Q3, and that's what happened.
Michael Gordon
I think the other thing that's maybe worth adding is our business is quite diversified when you think about the types of applications, industries, sectors, geographies, and everything else, and that has a portfolio effect and as you get a bigger base of applications and a more, and a still healthily diversified base, you would expect that variability to be dampened, right? If we only did e-commerce, right? You might expect things to go up. Or if we only did internal applications at banks, you'd expect the last two weeks of August to be quiet. Or like, you know, whatever. And so having that breadth of diversity of use cases, I think, also contributes to this, in addition to the increasing scale.
Raimo Lenschow
Yes, okay. And then the -- if you think about it, the number one debate I have, do you remember, like the beginning of the year was all about cloud optimizations and, oh my god, we're in the air. Maybe starting this point of discussion, maybe remind us how your Atlas consumption is maybe different than a snowflake or a data dog?
Dev Ittycheria
Yes, so we see a very tight correlation between the underlying app usage growth and the growth of our platform. And that shouldn't really be a surprise, because companies are building applications, they're deploying expensive developer resources, and they fundamentally want to see that app successful. And if that app happens to be successful, then it grows, and with it grows how much they pay us over time. And again, they're very, very tightly correlated.
And if the app is not successful, the fact that they're not paying us as much as they would have otherwise is actually, you know, a source of disappointment if anything. And so we don't experience optimizations the way, you know, we hear other people talk about it and when we talk about optimizations or how we define it at least is meaningful reduction is spend, you know, without affecting use. And that's not really possible to do on our platform because the two are very, very tightly aligned. So what we've seen is, when we've seen a very clear change in the macro environment in the second quarter of last year, we've seen the underlying usage growth of the applications on our platform slow down and with it the revenue growth is of Atlas revenue well ARR and revenues slow down.
And with the seasonal puts and takes we've been in that slower, but stable world really ever since. And that's sort of our dynamic and the principal driver of our business and I understand this different than some of the other people, who are seeing those big discontinuous moments when customers decide to spend less, but that's not our dynamic.
Raimo Lenschow
Yes, yes, yes. And then how do you think like the big question we all have is like you know are we like on the more consumption driven names are we stabilizing are we stable are we getting better et cetera like and there I would just want to find out like how do you measure your business and think about it? Because it’s like the one question I get a lot is people look at you year-over-year, and there, you know, it's like a bit about give or take mid-30s, and it looks like it's kind of the right number, but then I talk with other consumption guys, and they're like, dude, you can't look at you over a year, it doesn't make any sense, you need to look quarter-over-quarter, but then it just obviously for the scenario a little bit, like how do you think about, like, are we stable? Are we kind of, how do you feel about that?
Dev Ittycheria
So we agree that as a consumption business that is very closely driven by the growth of the underlying app, quarter-over-quarter, it makes more sense. And then of course, we will, as we always have, kind of, call out the dynamics when they're needed, sort of like the starting ARR in the prior quarters, consumption, impact, and revenue. You know, there are other factors, you know, in Q2 there's three more days, in this Q4 we called out the unused commitments from the prior year, just reminding people. So there are puts and takes and we try to kind of give you a map for the journey, but really sequentially is the better way to think about the business.
Raimo Lenschow
Yes, yes. Okay, perfect.
Michael Gordon
And then I would just add, you know, to that point and obviously we looked at it at a more granular basis than simply just quarterly, right? So we look at the base of the business on a week-over-week basis, right? And that's one of the reasons why we showed that chart at our investor day that showed the clear step down from the macro and then the consistent with the seasonal variation with the consistent stabilization that we've seen ever since.
Raimo Lenschow
Yes, and then the follow-on question, are we kind of, in the -- we like so would you agree with it's stable, or it has been stable on Atlas for what you've seen?
Dev Ittycheria
Yes, we've been really saying that for a while now.
Raimo Lenschow
Yes, yes, exactly, yes. And then how do we think about then, if we ever kind of hopefully, hopefully get to recovery, like how do you, like just to make sure that people don't go all crazy on model numbers, et cetera, like how do you think about that? Because it, you know, listening to you, it seems basically, look, if the underlying app and the underlying traffic increases, then you need to increase. We kind of need to read the Wall Street Journal in a way to kind of think about you.
Dev Ittycheria
So that is the first thing. So you're right, not the Wall Street Journal part, but just the underlying growth of application would be the primary governor of Atlas consumption. And your view of macro will be ultimately the driver of what we do there. We are obviously, that's not something we can control. So the part that we do control and we spend a tremendous amount of time focusing on is like, are we acquiring new workloads? Are we doing that at pace? And are they the same quality or better than what we've done in the past? But workloads tend to start very, very small. And so as you think about near to medium term at any point in time, the growth is primarily driven by what you already have in the base at the beginning of that period.
And then the other thing, we get this question sometimes, which is, well, is this the normal? Or, and we just had that kind of post-COVID bump is how some people refer to it, or was that normal, and the current environment is temporarily depressed? And at least as we look at our number, we have seen it be pretty consistent before the macro slowdown, so there wasn't any sort of macro bonanza in fiscal year ‘22, and this is the new normal, we've been at a consistent level, and then we've now been at the slower level.
As you think about recovery in the future, the other thing just to keep in mind is like, the business is bigger and more mature. So those two are the countervailing factors as we think about Atlas going forward.
Raimo Lenschow
Yes, okay. And then the one thing I stop on Atlas, you mentioned the 350 customers that kind of got moved. Because the other thing that, and I'm asking it because the other thing is like, then you look at customer additions and you're slowing down, because of whatever. Talk a little bit about the 350, what happened there and how that impacts numbers?
Dev Ittycheria
Yes, so we moved 350 customers out of our self-serve customer count. This is a de minimis impact. Well, there's actually no impact on ARR. But the reason why we called it out is specifically, because of the impact that it has on net addition. But what it was is two things. One is we reviewed our self-serve customer base, particularly as we set up for next year, and we concluded that a portion of the customers were actually subsidiary already existing customers. So we count them only once so we reduce the number.
And then the other thing is we've changed things in the margin in our free tier as we do and think over time. And for some set of very low paying customers, they no longer pay us 30 days in a row because of those changes. So they no longer qualify to be paying customers. So those were two one-time changes. It impacted the reported customer account by 350. It's irrelevant from the perspective of ARR. We're calling it up precisely so that you guys can better understand the true net additions trend.
Michael Gordon
Yes, I think if we didn't report customer accounts, we would literally not be talking about this.
Raimo Lenschow
Yes, yes, but like…
Michael Gordon
Yes, and I think the other thing on the customer account that sort of got some attention, which I think is interesting, was that it was a very strong quarter for additions of customers above 100,000. And again, that's more of an output than an input. Like now one's trying to engineer that number. Like no salesperson has an incentive for getting over some threshold, but I do think it's a clear indication of the strategic nature, the importance of the platform, and that had a really strong quarter, and so that was great to see.
Raimo Lenschow
Yes, okay. I've only had like four minutes left, so we need to kind of capture AI and the margins, so it's going to be tough.
Michael Gordon
It's going to be tough.
Raimo Lenschow
The -- if you think, like on the AI side, like they've talked a lot about like, AI will drive new apps, and there's going to be a lot more apps. Do you see that starting already or is that more like, now you're going to be more an output, so not an output, but you know what I mean, it's coming like step two, basically, and hence it's not now, and I shouldn't go crazy on my model.
Michael Gordon
Yes, you shouldn't go crazy on your model. The way that I might try and talk about it in a conceptual way, but we can kind of translate that to numbers, is it's not just theoretical, right? Like we have anecdotal, it's obviously clearly very early. But like we have customers actually using it. We talked about hugging face as a customer before Chat GBT launched. So obviously it's part of a longer trend, so we certainly have it, but I would put it, it's not in the theoretical or conceptual bucket. Like it is very, very early though, but there are anecdotes that you can point to that say, like, clearly this is happening. It will take a long time to play out, just like relational migrations will take a long time to play out, but if you, so no, you should not go crazy on your model.
But if you think about, like, a five or 10 year view of MongoDB, pre and post AI, clearly, five or 10 years from now, things will be in a much better position, or even better position first than they would have been had you not had any of those incremental tailwinds.
Raimo Lenschow
And then the other aspect of that is vector database. And I have to say, like you guys, so some of the industry events I stopped by with you and your technical guys, and they showed me the vector database and what it can do. Like for example, for catalog search, how you got so much better results. Is that like something that you can sell easily, like a upsell cross-sell into the base and make some easy quick money there? Or how do you think about it internally?
Dev Ittycheria
It will require a customer who's interested, it will require a customer who's ready to do this. Occasionally, back to Michael's point, it requires revisiting your data state as it is before you can actually become AI ready. So I wouldn't necessarily think it's a bunch of quick and easy wins. Where we are in the life cycle of vector searches, it went into public preview in June. We just GA'd it three days ago. And so first there will be some amount of pull from customers who are already, who are in the preview, who are working on it, and that will be incremental workloads in the platform, but we don't expect that to be like any material.
And then, you know, as you think about next year and the year after, is we'll be more proactively pushing through our go-to-market channels to acquire incremental workloads that require this capability.
Raimo Lenschow
Yes, okay.
Michael Gordon
I think one thing that is easier, and I think it's an important dynamic for people to think about, is there aren't deeply established alternative technologies. And so it's easier in the sense of like someone is building an application that's thinking about vector search, oh, I should add that, oh It's in MongoDB, it's in my existing platform. Great, which is different than saying, oh, here's tech search. Well, I already use another technology, you know, solar, whatever it is. And so there's like a displacement sale. And so that's like a harder -- that’s like a real sale. So then there's like a little bit of a nuance, but still super early.
Raimo Lenschow
It's interesting because I saw on our AI VAR checks and stuff like that, you guys show up actually higher on your vector database than some of the guys that you mentioned there. So that's interesting to see, actually.
Dev Ittycheria
It quite interesting. And we quoted it in a retail survey in our earnings call that actually shows us as the highest MPS product, which is very unusual for a product that was still in preview phase. And I think that speaks to the value of a platform, of everything being in one place, as opposed to trying to stitch together disparate solutions.
Raimo Lenschow
Yes. Okay. So we have 24 seconds. So if you think profitability here going forward, like it feels a little bit like you're over-earned. It sounds like a terrible phrase, but revenue upside was the main driver. And it feels like you probably want to start investing a little bit more again. Like how do you feel about that?
Michael Gordon
Yes, I know we have a little time, but I would just say, you know, it's been obviously very strong results. We -- if you look at sort of versus our IPO, and we said this in the investor day, we had kind of 20-% plus target margins. If I just look at this quarter, and obviously I don't want to over-rotate to this quarter, but 18%. So if you think about the 55 points of margin improvement we wanted to make, based on this quarter we made 53, but we're not even 2% market share. So that relationship doesn't quite seem right.
Raimo Lenschow
Yes, yes, yes.
Michael Gordon
And so I think it makes sense to invest more. We talked about how it's sort of like obviously great in the short-term, but probably from a long-term standpoint, higher margins than are desirable in the short-term and kind of too much progress. So I think that's.
Raimo Lenschow
That's a good summary, guys. Hey, thank you. Hey, it's good to have you back. Thank you.
Michael Gordon
Great to be here, always. Thank you. Great to see you.
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