Investing.com -- Wells Fargo (NYSE:WFC) on Thursday downgraded MongoDB (NASDAQ:MDB) stock from Overweight to Equal Weight and slashed its price target from $365 to $225 after the company delivered fiscal year 2026 (FY26) revenue and operating margin (OM) guidance well below expectations.
The database software maker’s shares plunged more than 18% in premarket trading Thursday on the disappointing outlook.
MongoDB reported solid fourth-quarter results but issued a FY26 revenue growth forecast of only 11.6-13.6% year-over-year, which is considerably lower than the consensus estimate of 17.5%.
The company attributed the lower guidance to a reduced pool of multi-year deals with Enterprise Advanced (EA), excluding Atlas (NYSE:ATCO), its cloud database service.
As a result, the non-Atlas EA segment is now expected to see a high single-digit decline in FY26, contrasting with a prior consensus estimate of a 5% year-over-year increase.
During the fourth quarter, Atlas, MongoDB's cloud database service, performed well, with revenue reaching $389 million, surpassing the consensus estimate of $373.5 million. The revenue grew by 24% year-over-year and now represents 71% of MongoDB's total revenue.
Management highlighted healthy new customer growth and strong consumption trends, which are expected to remain stable into FY26.
But the company faces a $50 million headwind due to the smaller pool of multi-year deals in the EA segment. This is partially offset by customers transitioning more workloads to Atlas, “which is a positive,” Wells Fargo noted.
Looking ahead, MongoDB plans to increase investments in research and development, particularly following the Voyage acquisition, as well as in sales and marketing to raise awareness of its offerings.
These investments, along with an anticipated increase in headcount, are aimed at driving future growth but also contribute to the lower OM guidance of 9.4-10.1%, down from the consensus of 13.1%.
“With a smaller pool of multi-year deals, we believe it will be difficult to significantly outperform expectations in FY26 and therefore expect shares to remain range-bound,” analysts concluded.
