FROG Q3 Deep Dive: Cloud Momentum and Security Demand Propel Outlook

Software supply chain platform JFrog (NASDAQ:FROG) beat Wall Street’s revenue expectations in Q3 CY2025, with sales up 25.5% year on year to $136.9 million. On top of that, next quarter’s revenue guidance ($137.5 million at the midpoint) was surprisingly good and 4.8% above what analysts were expecting. Its non-GAAP profit of $0.22 per share was 34.4% above analysts’ consensus estimates.

Is now the time to buy FROG? Find out in our full research report (it’s free for active Edge members).

StockStory’s Take

JFrog’s third quarter delivered results that surpassed Wall Street expectations, with strong market reaction reflecting confidence in the company’s execution. Management credited broad-based cloud adoption and increased security product usage as central to the quarter’s growth. CEO Shlomi Ben Haim highlighted, “Our cloud revenue grew 50% year-over-year, driven by increased usage of AI-related artifacts and a clear go-to-market strategy that converts usage overages into higher annual commitments.” The company also pointed to notable customer expansion in large enterprise accounts and cited continued success in growing its security-focused offerings.

Looking forward, JFrog’s raised guidance is built on expectations of sustained growth in cloud adoption, deeper integration of security solutions, and emerging demand for AI-related offerings. Management emphasized that hybrid cloud deployments and increasing concerns over software supply chain security will continue to shape customer behavior. CFO Ed Grabscheid noted, “Our updated outlook is supported by a strong pipeline, increasing adoption of our holistic platform, and rising demand for governance and compliance features as AI workloads proliferate.” The company is positioning itself to meet evolving regulatory and security needs in the software development lifecycle.

Key Insights from Management’s Remarks

Management attributed the quarter’s outperformance to strong execution in cloud migration, security product adoption, and sustained enterprise sales momentum, while also pointing to ongoing customer demand for AI and hybrid solutions.

• Cloud adoption accelerates: JFrog’s rapid cloud revenue growth was fueled by increased usage of AI-related artifacts such as models from Hugging Face, Docker containers, and Python packages. Management noted customers are increasingly leveraging JFrog as a universal repository for both traditional and AI-driven software components, driving broader platform adoption.
• Security products drive expansion: The company saw significant uptake in its holistic security offerings, including JFrog Curation and Advanced Security, with several large multiyear contracts closed across government and enterprise sectors. Management highlighted that recent high-profile software supply chain attacks are leading customers to prioritize integrated security solutions.
• Enterprise customer growth: JFrog continued to expand its footprint among large enterprises, increasing the number of customers with annual spend over $1 million by 54% year-over-year. The company’s go-to-market teams focused on converting customers with high usage into higher annual commitments, leading to more predictable revenue streams.
• Hybrid and multi-cloud flexibility: Customers are adopting hybrid deployment strategies, balancing on-premises and cloud solutions due to unpredictable compute costs and regulatory requirements related to AI workloads. Management believes this flexibility differentiates JFrog and allows it to capture demand regardless of a customer’s cloud strategy.
• Product innovation in AI and governance: The launch of new products such as JFrog Fly (an AI-driven repository) and AppTrust (for automated governance) underscores the company’s focus on supporting both developer and agentic workflows. These innovations are designed to address emerging needs for compliance and governance in the software supply chain as AI adoption accelerates.

Drivers of Future Performance

JFrog’s management expects continued momentum from cloud growth, enterprise security adoption, and new product innovation to drive the company’s performance through year-end and beyond.

• Cloud and security integration: Management anticipates further growth from expanding cloud adoption and deeper integration of security features, as enterprises seek end-to-end solutions for software delivery and protection against evolving threats. These trends are expected to drive higher customer commitments and recurring revenue.
• AI and governance requirements: As AI models become more pervasive in software development, companies face new challenges in managing, securing, and governing these artifacts. JFrog believes ongoing innovation in AI-focused products and compliance tools will position it to capture incremental demand from both new and existing customers.
• Hybrid deployment and customer caution: While cloud momentum is strong, many customers remain cautious about fully migrating AI workloads to the cloud due to concerns over cost predictability and governance. JFrog’s hybrid approach is designed to serve customers at various stages of cloud adoption, providing resilience against shifts in deployment preferences.

Catalysts in Upcoming Quarters

In upcoming quarters, the StockStory team will watch (1) the pace at which enterprise customers increase cloud commitments and adopt new security features, (2) the adoption rate and customer feedback for recently launched products like JFrog Fly and AppTrust, and (3) the progression of hybrid deployment strategies amid continued uncertainty around AI workload migration. Execution on product integration, security expansion, and addressing compliance needs will be critical metrics for monitoring.

JFrog currently trades at $59.60, up from $47.27 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 for active Edge members).

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