JFrog Ltd. (FROG) Q3 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call summary and Q&A indicate strong cloud growth, successful go-to-market strategies, and a significant increase in RPO, all positive signs. Despite a decrease in margins, optimistic guidance and execution in cloud and security sectors suggest positive sentiment. The market cap indicates moderate sensitivity, but overall, the outlook is positive due to strong strategic positioning and growth drivers.
Key Financial Performance
Total Revenue $136.9 million, up 26% year-over-year. The increase was driven by strong go-to-market and operational execution, continued momentum in cloud revenues, growing adoption of JFrog security products, and expansion by customers within enterprise-level subscriptions.
Cloud Revenue $63.4 million, representing 50% year-over-year growth. Growth was driven by increased usage of conventional software packages, demand for JFrog Advanced Security and Curation, and conversion of customers with usage above minimum commitments into higher annual contracts.
Operating Margin 18.7%, compared to 13.5% in the year-ago period. The improvement reflects a balance between strategic investments and operational efficiency.
Customers Spending >$1 Million 71 customers, up 54% year-over-year from 46 customers. Growth attributed to enterprise sales motions and stronger partnerships.
Customers Spending >$100,000 1,121 customers, up 16% year-over-year from 966 customers. Growth attributed to enterprise sales motions and stronger partnerships.
Net Dollar Retention 118%, consistent with the prior quarter. Sustained growth driven by strong cloud usage and adoption of JFrog's holistic software supply chain security offering.
Gross Margin 83.9%, compared to 82.8% in the year-ago period. Improvement due to cost optimization with cloud service providers.
Operating Expenses $89.3 million, equaling 65% of revenues, compared to $75.5 million or 69% of revenues in the year-ago period. Reflects disciplined expense management.
Cash Flow from Operations $30.2 million, with free cash flow of $28.8 million or 21% margin, compared to $26.7 million or 24% margin in the year-ago period. Decrease in free cash flow margin due to payments related to the acquisition of Qwak AI.
Remaining Performance Obligations (RPO) $508 million, a 47% increase year-over-year. Growth highlights successful execution of go-to-market strategy and larger multiyear commitments from customers.
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Operating Highlights
JFrog AppTrust: Introduced as an innovative product for automated governance across platforms, launched in partnership with ServiceNow.
JFrog Fly: Launched as the world's first agentic repository, enabling AI-assisted software creation and delivery.
AI Catalog: New add-on to JFrog Curation for securing and governing AI models.
JFrog ML: Integrated into the JFrog platform to empower data scientists and developers for trusted AI model delivery.
Cloud Revenue Growth: Cloud revenue grew 50% YoY to $63.4 million, driven by increased usage of software packages and AI-related artifacts.
Enterprise Plus Subscriptions: Revenue from Enterprise Plus subscriptions grew 39% YoY, now representing 56% of total revenues.
Customer Expansion: Customers spending over $1 million annually grew 54% YoY to 71, and those spending over $100,000 grew 16% YoY to 1,121.
Operating Margin: Improved to 18.7% in Q3 2025 from 13.5% in Q3 2024, reflecting disciplined expense management.
Gross Margin: Increased to 83.9% in Q3 2025 from 82.8% in Q3 2024.
Free Cash Flow: Generated $28.8 million in Q3 2025, representing a 21% margin.
AI and Machine Learning: Positioned as a system of record for AI delivery, with integrations like NVIDIA AI Enterprise and new AI-focused products.
Security Solutions: Expanded offerings with JFrog Curation and Advanced Security, securing major contracts like a $9 million deal with the UK Customs and Revenue Agency.
Hybrid and Multi-Cloud Strategy: Focused on hybrid cloud solutions to address customer needs for flexibility in AI workloads.
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Risk or Challenges
Cloud adoption and AI-driven usage: Customers are hesitant to fully commit to public cloud due to unpredictable compute costs, which could limit significant cloud usage growth in the near term. This creates uncertainty in cloud revenue expansion.
Software supply chain security: Increasingly sophisticated software supply chain attacks, including recent NPM, PyPI, and MCP attacks, pose a significant threat to customers' operations. Without robust protection, customers remain exposed to vulnerabilities.
Economic and geopolitical uncertainties: Ongoing macroeconomic volatility and geopolitical uncertainty, including the recent war in Israel, could impact customer spending and deployment timing for large projects.
Regulatory and compliance pressures: The growing complexity of software development, combined with increasing regulatory requirements, puts pressure on development teams to ensure compliance, which could slow down software delivery and adoption.
Customer migration challenges: Efforts to migrate on-prem customers to cloud or hybrid solutions may face resistance or delays, potentially impacting revenue growth.
Dependence on large customer deals: The timing of large customer deployments remains uncertain, and excluding these opportunities from forecasts indicates potential risks to meeting revenue targets.
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Guidance & Outlook
Full Year 2025 Revenue Guidance: Anticipated revenue range of $523 million to $525 million, representing approximately 22.3% year-over-year growth at the midpoint.
Q4 2025 Revenue Guidance: Expected revenues to be in the range of $136.5 million to $138.5 million.
Cloud Revenue Growth: Baseline cloud growth for 2025 is estimated to be in the range of 40% to 42%, excluding contributions from usage above annual customers' minimum commitments.
Net Dollar Retention: Raising expectation for net dollar retention to above 116% for 2025.
Non-GAAP Operating Income for Full Year 2025: Expected to be between $87.3 million and $88.3 million.
Non-GAAP Earnings Per Share for Full Year 2025: Anticipated to be between $0.78 and $0.80, assuming a share count of approximately 122 million shares.
Non-GAAP Operating Profit for Q4 2025: Anticipated to be between $21 million and $22 million.
Non-GAAP Earnings Per Share for Q4 2025: Expected to be between $0.18 and $0.20, assuming a share count of approximately 125 million shares.
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Shareholder Return Plan
The selected topic was not discussed during the call.
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Key Q&A
Q:Was there anything one-time in the cloud revenues or was it a result of multiple factors?
A:There was nothing one-time in the cloud revenues. It was a convergence of strong usage across multiple package types, geographies, and verticals, along with strong security driving cloud growth.
Q:What has changed in the go-to-market execution for cloud growth?
A:The company has focused on consistent execution of technology and go-to-market strategies, converting customers with over-usage to higher commitments, aligning go-to-market philosophy with cloud business execution, and leveraging security solutions for growth.
Q:What is the mix of artifacts managed by Artifactory, and how is it evolving?
A:Artifactory is seeing growth in usage of AI-related artifacts such as open-source models, Python with PyPI, NPM, and Docker containers. However, it is too early to determine if this trend will lead to higher future consumption.
Q:How relevant is AI-driven UI/UX changes for JFrog?
A:JFrog Fly is designed to support agentic capabilities, enabling both developers and agents to create and deliver software efficiently. The company is reimagining the software supply chain with agentic experiences and plans to integrate these capabilities into the JFrog platform.
Q:What is the interpretation of NRR being flat at 118% despite strong cloud growth?
A:NRR is calculated on a trailing 12-month basis and reflects strong customer usage and security adoption. The company has expanded NRR and is satisfied with its stability at 118%.
Q:Does JFrog Fly open up new customers or buying centers?
A:JFrog Fly is primarily aimed at supporting both agents and developers in managing the software supply chain. While it may open new revenue avenues, the main goal is to integrate agentic experiences across the platform.
Q:What is the sustainability of cloud growth from new customers?
A:The company sees strong cloud growth driven by new customers and usage over minimum commitments. However, it remains cautious about seasonality and derisks large deals from guidance.
Q:What percentage of customers have converted to cloud, and what is the lift from these conversions?
A:The company did not disclose specific percentages but noted that cloud is a strong growth engine, with a significant portion of $1 million+ customers using the cloud.
Q:How are customers allocating budgets for securing AI models and software supply chains?
A:Customers are allocating new budgets for security and governance, driven by the need to address threats to software supply chains and ensure trust, control, and compliance in AI-driven software delivery.
Q:What is the impact of Federal wins and the Q4 guidance approach?
A:Federal wins were significant, but the Q4 guidance remains prudent, excluding usage over minimum commitments and derisking large deals due to timing uncertainties.
Q:What are the reasons some customers are not moving to the cloud?
A:Customers are cautious about cloud migration due to cost predictability, security, and governance concerns, especially with new AI workloads. JFrog supports both on-prem and cloud solutions to address these concerns.
Q:How does JFrog differentiate from competitors like OpenAI in security?
A:JFrog focuses on protecting binaries, which are not covered by OpenAI's LLM-driven source code security. This complements JFrog's approach to securing the entire software supply chain.
Q:What adjustments are being made to the sales and marketing strategy?
A:The company is investing responsibly in go-to-market efforts, focusing on enterprise sales, cloud migration, AI adoption, and security, with a consistent methodology driving results.
Q:What is the role of AppTrust in government opportunities?
A:AppTrust is a new product aimed at governance in DevOps. While not yet included in recent government wins, it is expected to drive future growth and adoption.
Q:What are the key drivers of enterprise customer growth?
A:Enterprise customer growth is driven by security adoption, cloud usage, and the efforts of a mature go-to-market team, reflecting years of investment.
Q:Review of Unclear Management Responses
A:Management avoided directly quantifying the lift from cloud conversions, the percentage of customers converted to cloud, and the upside from usage over minimum commitments. They also did not disclose operational metrics like the percentage of sales force running above quota or specific details about AppTrust's impact on government opportunities.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
AI agent
AI cloud
AI machine
AI software
Advanced Security
AppTrust
CEO Chairman
Co Founder
Curation
DevGovOps
Enterprise
Investor Relations
MCP
NPM PyPI
Security Solutions
ServiceNow
TCV
artifact
chain attack
chain security
cloud usage
developer AI
developer extension
development production
evidence quality
future software
governance
pace
remediation
repository software
software binary
swampUP
usage software
volume
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JFrog Ltd. (FROG) Q3 2025 Earnings Call Transcript
Positive11-7
The earnings call summary and Q&A indicate strong cloud growth, successful go-to-market strategies, and a significant increase in RPO, all positive signs. Despite a decrease in margins, optimistic guidance and execution in cloud and security sectors suggest positive sentiment. The market cap indicates moderate sensitivity, but overall, the outlook is positive due to strong strategic positioning and growth drivers.
JFrog Ltd. (FROG) Q2 2025 Earnings Call Transcript
Positive8-8
The earnings call presents a strong financial performance with 22% YoY revenue growth and a promising partnership with Hugging Face. The guidance aligns with expectations, and the Q&A highlights strategic AI and cloud investments, strong cash flow, and positive analyst sentiment. However, management's reluctance to provide specific future details slightly tempers enthusiasm. Given the market cap, a 2% to 8% positive reaction is likely.
FROG Slides
FROG Report
Frequently Asked Questions
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