Software development tools maker JFrog (NASDAQ:FROG) reported Q2 CY2025 results beating Wall Street’s revenue expectations, with sales up 23.5% year on year to $127.2 million. Guidance for next quarter’s revenue was better than expected at $128 million at the midpoint, 1.6% above analysts’ estimates. Its non-GAAP profit of $0.18 per share was 10.1% above analysts’ consensus estimates.
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JFrog (FROG) Q2 CY2025 Highlights:
- Revenue: $127.2 million vs analyst estimates of $122.9 million (23.5% year-on-year growth, 3.5% beat)
- Adjusted EPS: $0.18 vs analyst estimates of $0.16 (10.1% beat)
- Adjusted Operating Income: $19.36 million vs analyst estimates of $17.61 million (15.2% margin, 9.9% beat)
- The company lifted its revenue guidance for the full year to $508.5 million at the midpoint from $502.5 million, a 1.2% increase
- Management reiterated its full-year Adjusted EPS guidance of $0.69 at the midpoint
- Operating Margin: -20.4%, down from -18.6% in the same quarter last year
- Customers: 1,076 customers paying more than $100,000 annually
- Net Revenue Retention Rate: 118%, up from 116% in the previous quarter
- Annual Recurring Revenue: $509.2 million at quarter end, up 24% year on year
- Billings: $133.6 million at quarter end, up 18% year on year
- Market Capitalization: $5.09 billion
StockStory’s Take
JFrog’s second quarter results were welcomed positively by the market, reflecting strong execution in both cloud and security offerings. Management attributed the outperformance to expanding annual cloud commitments and robust enterprise adoption of its unified platform. CEO Shlomi Ben Haim highlighted, “Our cloud revenue grew 45% year-over-year, and we continue to see traction as organizations seek trusted, scalable software delivery in a rapidly evolving landscape.” The quarter also benefited from higher customer retention and increased momentum in security product adoption, particularly as large enterprises consolidated their DevSecOps tools around JFrog’s platform.
Looking ahead, management’s increased guidance is underpinned by rising demand for hybrid cloud solutions, AI model management, and expanded security use cases. Ben Haim emphasized that JFrog’s focus on hybrid deployment positions the company well as enterprises navigate AI-driven infrastructure choices, noting, “AI adoption is forcing companies to rethink where and how they run workloads, and JFrog’s hybrid capabilities offer the flexibility they need.” CFO Ed Grabscheid added that continued growth in cloud commitments and multi-year enterprise contracts should drive recurring revenue, while security remains a key driver for upselling existing customers.
Key Insights from Management’s Remarks
Management pointed to several company-specific trends fueling the quarter’s results and shaping its updated outlook, especially around cloud adoption, security, and product integration.
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Cloud commitment expansion: JFrog’s focus on converting customers with high usage into annual contracts drove recurring revenue growth, especially as enterprises sought more predictable budgeting amid AI infrastructure shifts. Management cited 45% year-over-year growth in cloud revenue as evidence of this trend.
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Hybrid demand acceleration: As large organizations reconsider cloud-only strategies due to AI’s cost unpredictability, JFrog’s longstanding hybrid architecture—supporting both cloud and on-premises deployments—proved advantageous. This flexibility has allowed the company to serve customers balancing compliance, security, and cost needs.
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Security product momentum: Rising adoption of JFrog’s unified security offerings, including its Curation and Advanced Security solutions, contributed to multiple large enterprise wins. Management highlighted a significant deal with a major telecommunications company where JFrog’s platform was chosen to enforce security policies across its software supply chain.
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AI registry leadership: JFrog’s Artifactory is increasingly being adopted as a model registry for AI, positioning the company at the center of the emerging MLSecOps (machine learning security operations) space. Partnerships with leading AI ecosystem players, such as NVIDIA and Hugging Face, further validate JFrog’s strategic direction.
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Product portfolio focus: The decision to sunset the JFrog Pipelines product and double down on integrations with leading CI/CD providers has clarified the company’s go-to-market strategy, allowing it to concentrate on its core strengths in DevOps, security, and AI infrastructure.
Drivers of Future Performance
JFrog’s guidance reflects expectations for continued growth in cloud and security, fueled by hybrid deployments and rising AI adoption, but management remains cautious given macroeconomic uncertainties.
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Hybrid and AI-driven demand: Management expects enterprise customers to increasingly require hybrid solutions that support both cloud and on-premises workloads as AI adoption grows. This trend is anticipated to drive further expansion in annual recurring revenue and support broader platform adoption, especially as organizations seek cost predictability and flexibility.
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Security upsell opportunities: JFrog’s security suite is positioned as a key upsell lever, with management pointing to consolidation of DevSecOps tools and growing CISO focus on unified, end-to-end security. The company plans to introduce new security packages and enhanced features at its upcoming user conference, which could further boost attach rates and elevate contract values.
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Macro and deal timing risks: Despite rising pipeline activity, management continues to “derisk” its outlook by excluding the largest deals due to uncertainty around timing. Additionally, while cloud and security momentum are strong, CFO Ed Grabscheid noted that multi-year contract timing and macro factors could create variability in short-term results.
Catalysts in Upcoming Quarters
In the coming quarters, StockStory analysts will be monitoring (1) progress in transitioning high-usage customers to annual cloud contracts, (2) the pace of security product adoption and the success of new package launches, and (3) how effectively JFrog capitalizes on hybrid and AI-driven deployment trends. Execution on these fronts, as well as updates from upcoming user conferences, will serve as important indicators of sustained momentum.
JFrog currently trades at $42.89, up from $38.84 just before the earnings. In the wake of this quarter, is it a buy or sell? The answer lies in our full research report (it’s free).
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