A disappointing forecast for the coming quarter and full year sent database company MongoDB Inc. headlong into a tailspin today, as the value of its stock dropped like a lead balloon in after-hours trading today.

The company’s dismal guidance is the latest in a string of subpar financial forecasts from enterprise software vendors.

Investors had feared the worst, for MongoDB’s stock was already trading 7% lower in the regular session, but when those fears were confirmed, it prompted a rapid selloff that saw the stock decline by a further 25% in extended trading.

The company did OK in the first quarter, reporting earnings before certain costs such as stock compensation of 51 cents per share, easily beating Wall Street’s consensus estimate of 38 cents per share. Revenue for the period rose 22%, to $450.6 million, nicely ahead of the analyst’s $441 million target. That said, the company didn’t make much progress in terms of profitability, as its net loss for the quarter of $80.6 million grew from a year ago, when it posted a loss of $54.2 million.

In an unusually candid statement, MongoDB Chief Executive Dev Ittycheria (pictured) admitted that the company had a “slower-than-expected start” to the fiscal year in terms of both consumption growth and customer acquisition. He warned that this will likely “have a downstream impact for the remainder of fiscal 2025.”

Looking to the second quarter, MongoDB is projecting revenue of $462 million at the midpoint of its guidance range, far below the Street’s consensus estimate of $437 million. It called for earnings of 46 to 49 cents per share, trailing the analyst forecast of 58 cents.

The full-year picture looks just as grim. MongoDB said it’s looking for revenue of $1.89 billion at the midpoint, having previously forecast fiscal 2025 revenue of $1.915 billion. As for earnings, it’s looking at a range of $2.15 to $2.30 per share, down from its earlier range of $2.27 to $2.49 per share.

MongoDB is the creator of the document-oriented MongoDB database, which is used to power data-intensive applications. Its flagship product is the cloud-hosted MongoDB Atlas, which accounts for the bulk of its revenue, though it also sells on-premises and mobile versions. All three are popular with developers due to their support for multiple data formats and ease of use.

Over the last year, MongoDB has worked hard to boost its credentials as the foundation for generative artificial intelligence workloads. It believes that its database is the perfect data layer for generative AI apps, which need access to both structured and unstructured information such as images and audio files. To meet this demand, MongoDB has integrated vector search into its databases, enabling unstructured data to be stored as numerical representations that are easier to match to search queries.

More recently, MongoDB has been flexing its muscles on the AI development side, launching what it says is a “one-stop shop” for building and deploying modern applications using generative AI on an enterprise scale, in partnership with advisory, professional services and end-to-end technology stacks for hosting.

Ittycheria expressed confidence about the “large market opportunity” for generative AI applications and the potential for MongoDB to become the standard for developing them. “We also see a tremendous opportunity to win more legacy workloads, as AI has now become a catalyst to modernize these applications,” he said. “MongoDB’s document-based architecture is particularly well-suited for the variety and scale of data required by AI-powered applications.”

Although generative AI clearly presents a massive opportunity for MongoDB, the company has yet to translate that into business success, and its weak guidance appears to have had a knock-on effect on other companies looking to AI for growth. For instance, shares of Snowflake Inc. were down 3.5% today, while Datadog Inc.’s stock fell almost 4%.

“Investors will reset expectations for MongoDB’s growth rate and consequently its valuation,” said Dave Vellante, chief analyst at theCUBE Research, SiliconANGLE’s market research unit. “Its AI strategy of providing useful tools up the stack for application developers is sound but will take time to materialize. The spending AI today is much more focused around GPUs and connectivity, not software.”

Constellation Research Inc. analyst Holger Mueller said MongoDB appears to have miscalculated in terms of its profitability. With operating costs up by almost $90 million during the quarter, the management was probably banking on higher revenue growth than the 22% gain it did deliver. “Ittycheria alluded to this in his comments when he spoke of slower-than-expected growth, but the good news for investors is MongoDB is already planning to turn things around with a route back to profitability,” Mueller explained. “MongoDB will make it if it can keep its costs constant and deliver on its $462 million revenue target.”

MongoDB’s disappointing forecast follows poor outlooks from various other software companies, including Salesforce Inc., Workday Inc. and UiPath Inc.

Ittycheria appeared on theCUBE, SiliconANGLE Media’s mobile livestreaming studio, during its coverage of the MongoDB.local NYC event earlier this month, where he talked about the company’s ambitions to become a key player in enabling enterprises’ generative AI transformations:

Photo: SiliconANGLE