JFrog Ltd. Q2 FY2025 earnings call

• Q2 saw software revenue up 23% y-o-y to $127.2M. Operating margin was 15.2%. Cloud revenue grew 45% y-o-y to $57.1M. • Greater than $1M customers grew to 61 (45% y-o-y) and >$100k customers to 1,076 (16% y-o-y). • Cloud growth driven by expanded annual commitments, and JFrog's hybrid approach aligns with AI adoption needs. • AI and ML initiatives: Partnership with NVIDIA as cornerstone software artifact repository and Secure Model Registry; mission to be world's leading AI model registry. • DevSecOps solutions: Continued customer wins driven by security, e.g., a large telecommunication company expanded use of JFrog Curation. • Annual User Conference swampUP in September to announce new products and partnerships.

In Q2, JFrog software revenue was $127.2 million, up 23% year-over-year. Cloud revenue for Q2 equaled $57.1 million, representing 45% year-over-year growth. Self-managed or on-prem revenues were $70.1 million, up 10% year-over-year. Greater than $1 million customers grew to 61 (45% growth year-over-year) and customers spending more than $100,000 annually grew to 1,076 (16% growth year-over-year). Cloud revenue was 45% of total revenues versus 38% in the prior year. 55% of total revenues came from Enterprise Plus subscriptions, up from 50% in the prior year.

• Q3 revenues expected to be in range of $127M to $129M. Non-GAAP operating profit anticipated between $16.5M and $18.5M. Non-GAAP diluted earnings per share $0.15 to $0.17. • Full year 2025 revenue range $507M to $510M (~18.7% y-o-y growth midpoint). Non-GAAP operating income $75M to $78M. Non-GAAP diluted earnings per share $0.68 to $0.70. • Full year 2025 baseline cloud growth estimated 34% to 36%. Net dollar retention rate expected in mid-teens. • Guidance derisks largest opportunities due to uncertainty in customer deployments.

• Macro uncertainties could impact actual results differing from expectations. • Threat of exploitation tied to MCP usage as MCP adoption accelerates. • Uncertainty regarding timing of customer deployments for large opportunities.

Q: Can you talk about the evolutions from cloud first to fit for purpose?

A: Customers migrating workloads to public cloud are rethinking due to AI cost predictability concerns, leading to consideration of hybrid setups.

Q: How has the sunsetting of JFrog Pipelines impacted go-to-market?

A: Sunsetting allowed better integration and partnership with CI/CD players like GitHub, focusing on core strengths like security and cloud migration.

Q: Any update on AI customer partnership?

A: A key AI technology leader upgraded subscription and doubled bet on JFrog in one quarter.

Q: Impact of AI coding tools on JFrog?

A: New code assistance tools create more binaries, increasing relevance of JFrog as system of record, though still early days.

Q: MCP opportunity and security?

A: MCP is important for AI agent integration, JFrog Research uncovered MCP vulnerabilities, and it's relevant for all Agentic AI interactions.