JFrog(US:FROG)2025-11-06 23:02Financial Data and Key Metrics Changes - Total revenue for Q3 2025 was $136.9 million, representing a 26% year-over-year increase [7][23] - Operating margin improved to 18.7%, up from 13.5% in Q3 2024 [26] - Cloud revenue reached $63.4 million, a 50% increase year-over-year, accounting for 46% of total revenue compared to 39% in the prior year [24][26] - Gross profit was $114.9 million, with a gross margin of 83.9%, up from 82.8% in the year-ago period [25][26] - Net dollar retention was 118%, consistent with the prior quarter, indicating sustained growth among existing customers [9][25] Business Line Data and Key Metrics Changes - Enterprise Plus subscriptions contributed 56% of total revenues, up from 50% in the previous year, with a 39% year-over-year growth in revenue from these subscriptions [24][25] - Customers spending over $1 million annually grew to 71, a 54% increase year-over-year [8][26] - Customers spending more than $100,000 annually increased to 1,121, a 16% year-over-year growth [8] Market Data and Key Metrics Changes - The company noted strong cloud growth driven by increased usage of various software packages, including AI-related artifacts [8][10] - The demand for JFrog's security solutions has been a significant driver of cloud revenue growth [36] Company Strategy and Development Direction - JFrog aims to position itself as a foundational platform for software delivery, focusing on cloud and security solutions [7][10] - The company is embracing AI and machine learning, integrating these capabilities into its platform to enhance software supply chain management [16][22] - JFrog introduced the DevGovOps solution to address the growing need for governance and compliance in software delivery [18][19] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism regarding future growth, emphasizing the importance of security and governance in the current market landscape [15][29] - The company is prepared for ongoing macroeconomic volatility while maintaining a focus on profitable growth [28][30] Other Important Information - JFrog completed payments of $5.7 million related to the acquisition of Qwak, which was finalized in July 2024 [28] - The company ended Q3 2025 with $651.1 million in cash and short-term investments, up from $522 million at the end of 2024 [28] Q&A Session Summary Question: Was there anything one-time in the cloud revenue results? - Management confirmed that the strong cloud revenue was not due to one-time events but a combination of strong usage across multiple package types and security solutions [36] Question: What has changed in the go-to-market execution for cloud? - Management highlighted consistent execution and a strategy of converting customers with overusage to higher commitments, leading to stable cloud growth [38] Question: Can you elaborate on the types of artifacts managed by Artifactory? - Management noted an increase in the usage of AI-related artifacts alongside traditional software artifacts, indicating a growing trend [42] Question: How relevant is the UI/UX change due to AI for JFrog? - Management acknowledged the importance of adapting to AI-driven software creation and emphasized the need for agentic capabilities in their offerings [45] Question: What is the outlook for net dollar retention? - Management indicated that net dollar retention remains stable at 118%, with expectations for continued growth driven by security solutions and increased cloud usage [50] Question: How is the pipeline for security deals tracking? - Management reported a growing pipeline for security solutions, although sales cycles are longer due to the need to displace existing solutions [88]