Executive Summary / Key Takeaways

• System of Record for the AI Era: JFrog is solidifying its position as the universal system of record for all software artifacts, now extending this critical role to AI models and agents, which is foundational for modern software delivery.
• Robust Cloud and Enterprise Momentum: The company demonstrates strong growth in cloud revenue (50% YOY in Q3 2025) and significant expansion within its enterprise customer base, with $1M+ ARR customers growing 54% year-over-year.
• Holistic Security as a Differentiator: JFrog's integrated DevSecOps and MLSecOps solutions, including Curation and Advanced Security, are proving mission-critical, driving large enterprise deals by consolidating tools and protecting against sophisticated supply chain attacks.
• Strategic Innovation in AI: JFrog is actively innovating with new AI-centric offerings like JFrog ML, AI Catalog, MCP Server, and JFrog Fly, positioning itself at the forefront of AI-driven software development and governance.
• Disciplined Financial Execution: Despite macroeconomic uncertainties, JFrog maintains a prudent financial approach, consistently exceeding guidance while balancing strategic investments with a commitment to profitable growth and strong free cash flow generation.

The Liquid Software Vision: JFrog's Foundational Role in a Rapidly Evolving Landscape

In the dynamic world of software development, where speed, security, and scale are paramount, JFrog Ltd. ($FROG) has carved out a critical niche as the architect of the "Liquid Software" vision. Incorporated in 2008, JFrog set out to provide a hybrid, universal, end-to-end software supply chain platform, aiming to be the single source of truth for an organization's entire software footprint. This foundational role has become increasingly vital as the industry grapples with the accelerating pace of software creation, the proliferation of diverse artifacts, and the burgeoning demands of artificial intelligence (AI) and machine learning (ML) workloads.

JFrog's strategic journey has consistently focused on anticipating and addressing the evolving needs of developers, security teams, MLOps engineers, and IT operators. Early investments, including grants from the Israeli Innovation Authority, laid the groundwork for its core technology. A pivotal moment arrived between 2014 and 2016 when JFrog established itself as a leading container registry, particularly for Docker, demonstrating its adaptability to paradigm shifts in software delivery. This historical trajectory has culminated in JFrog's current strategic emphasis on unifying DevOps, DevSecOps, and MLOps within a single, cohesive platform, a response to the growing complexity and interconnectedness of modern software ecosystems.

The broader industry is experiencing a profound transformation driven by AI. The increasing pace of software creation by both humans and machines is leading to an exponential rise in artifact volume, demanding not just intelligent storage but robust binary delivery systems. This trend is evident in the growing usage of artifacts like PyPI, Docker containers, NPM, and models from platforms like Hugging Face for AI and machine learning. Furthermore, the rise of AI-driven data centers and the surging demand for infrastructure underscore the increasing need for efficient and secure software supply chains. JFrog's strategy directly addresses these broad industry trends, positioning its platform as an indispensable component of the modern digital economy.

Technological Moat: Artifactory's Universal Binary Powerhouse and AI Innovations

At the heart of JFrog's platform lies JFrog Artifactory, its core differentiated technology. Artifactory functions as a universal package repository, allowing teams to store, update, and manage all their software packages—from traditional binaries to the latest AI models. This universality provides a single source of truth, eliminating digital gaps and streamlining workflows across diverse development environments. The tangible benefits are significant: it ensures consistency, reduces complexity, and accelerates the software delivery lifecycle.

JFrog's commitment to innovation extends deeply into the emerging AI landscape, transforming its platform into a powerhouse for MLOps and AI-driven software. The company has integrated JFrog ML into its platform, empowering data scientists and developers to build, test, train, experiment, host, secure, and deploy machine learning models. This integration provides thousands of cloud enterprise customers with machine learning and model management technologies as part of their software supply chain solution. The strategic intent is to become the "model registry of the world," offering 360-degree coverage across the entire model lifecycle.

The company's security offerings are a critical differentiator, evolving to meet new threats in the AI era. JFrog Advanced Security and JFrog Curation provide a holistic approach to DevSecOps and MLSecOps. JFrog Curation acts as a "firewall for binaries," controlling the admission of packages from open-source or public repositories into an organization. This capability has demonstrated quantifiable benefits, with one Fortune 50 American company reporting that its JFrog Curation deployment allowed them to "shut down recent provider attacks minute once discovered, and the control has proven 100% successful since." This directly addresses the increasing sophistication of software supply chain attacks targeting build pipelines, AI/ML supply chains, and vulnerabilities in binaries.

Recent technological advancements further solidify JFrog's leadership:

• Model Context Protocol (MCP) Server: Launched in Q2 2025, this architecture enables Large Language Models (LLMs) and AI agents to securely interact with tools and data sources within the JFrog Platform, boosting developer productivity.
• AI Catalog: Introduced in Q3 2025 as an add-on to JFrog Curation, the AI Catalog is designed to secure and govern both third-party and internally developed AI models, ensuring compliance and responsible use.
• AppTrust: Unveiled at swampUP 2025 in partnership with ServiceNow (NOW), AppTrust is an "industry-first DevGovOps solution" that automates application delivery governance, creating a centralized, trusted audit trail across the software development lifecycle.
• Agentic Remediation: Showcased at swampUP 2025, these capabilities use AI agents to detect vulnerabilities in source code, identify remediation methods, prioritize fixes, and protect against future vulnerabilities, with initial integration with GitHub Copilot.
• JFrog Fly: Described as "the world's first agentic repository," JFrog Fly reimagines software supply chain management for the AI era, enabling AI agents to act as co-builders alongside developers.

These technological advancements collectively contribute to JFrog's competitive moat by increasing customer stickiness, enabling higher Average Selling Prices (ASPs) through bundled solutions, lowering customer costs by consolidating tools, and positioning the company to capture significant market share in the rapidly expanding AI and security segments.

Competitive Landscape: A Unified Platform Against Point Solutions

The market for DevOps, DevSecOps, and MLOps solutions is highly fragmented and intensely competitive. JFrog faces a diverse set of rivals, ranging from in-house solutions and specialized DevOps vendors to public cloud providers and diversified technology giants.

JFrog's primary competitive advantage lies in its unified, end-to-end platform approach, which contrasts sharply with the fragmented "point solution" landscape. While competitors like GitLab (GTLB) offer integrated DevOps platforms with strong community support, JFrog's JFrog Artifactory provides specialized binary repository management that offers greater efficiency in handling large-scale software packages. This specialization gives JFrog a qualitative edge in operational execution for global teams, particularly in complex, high-stakes environments.

Against broader collaboration and productivity tools like Atlassian (TEAM), JFrog's offerings, such as JFrog Pipelines, provide more specialized automation for software delivery. JFrog's strategic focus on enterprise software management positions it as a pure-play DevOps provider, whereas Atlassian's emphasis is on broader team collaboration. In security, JFrog directly competes with point solutions such as Snyk, Black Duck, Checkmarx, and Coverity. The successful adoption of JFrog Advanced Security and Curation by approximately 250 customers in 2024, many migrating from these point solutions, underscores JFrog's ability to displace fragmented offerings through consolidation and a holistic platform.

Even public cloud providers like Amazon Web Services (AMZN), Microsoft Azure , and Google Cloud (GOOGL), while partners, can also be indirect competitors by offering subsets of JFrog's functionality. However, JFrog's hybrid and multi-cloud offerings differentiate it, providing customers with true freedom of choice and flexibility, particularly for AI workloads where unpredictable compute costs are a concern. Microsoft (MSFT), with its vast resources and Azure DevOps, presents a formidable challenge, but JFrog's niche expertise in binary management and security offers a specialized, potentially more cost-effective solution for specific workflows. HashiCorp (HCP), focusing on infrastructure automation, overlaps with JFrog in deployment and security, but JFrog often leads in comprehensive supply chain visibility and software distribution integration.

JFrog's strategy to "part ways with a subset of low subscription customers" in 2024 reflects a deliberate focus on the enterprise segment, targeting opportunities with higher initial Annual Recurring Revenue (ARR) and greater expansion durability. This strategic positioning, coupled with its technological leadership in securing AI-driven software supply chains, allows JFrog to command a strong competitive standing in a market increasingly demanding unified, secure, and scalable solutions.

Financial Performance: Sustained Growth and Profitability Discipline

JFrog's financial performance in 2025 demonstrates a compelling narrative of sustained growth, particularly in its strategic cloud and enterprise segments, underpinned by a disciplined approach to profitability. For the three months ended September 30, 2025, JFrog reported total subscription revenue of $136.9 million, marking a robust 26% year-over-year growth. This momentum is further highlighted by the nine-month period ending September 30, 2025, with total subscription revenue reaching $386.5 million, a 24% increase over the prior year.

A significant driver of this growth is the accelerating shift to cloud deployments. SaaS subscriptions contributed $63.4 million in revenue for Q3 2025, representing a strong 50% year-over-year growth and accounting for 46% of total revenue, up from 39% in the comparable period of 2024. This trend reflects increased customer usage of various artifact types, including those related to AI and machine learning. The company's Enterprise Plus subscriptions, its premium tier, also saw substantial traction, comprising approximately 56% of total revenue in Q3 2025 (up from 50% in Q3 2024) and growing 39% year-over-year. This indicates a clear demand for JFrog's comprehensive, end-to-end solutions among larger organizations.

Customer expansion metrics further validate the investment thesis. As of September 30, 2025, customers with Annual Recurring Revenue (ARR) of $100,000 or more increased to 1,121 from 1,018 at the end of 2024. More impressively, customers with ARR of at least $1 million grew to 71, up from 52 at the end of 2024, representing a 54% year-over-year increase. The net dollar retention rate for the four trailing quarters stood at a healthy 118% as of September 30, 2025, demonstrating sustained growth within the existing customer base.

Despite continued investments in research and development and sales and marketing, JFrog maintains a focus on profitability. While the company reported a net loss of $16.4 million for Q3 2025 and $56.6 million for the nine months ended September 30, 2025, its gross margin for Q3 2025 increased to 77% from 75% in the prior year, driven by revenue growth and improved operating leverage. However, for the nine months ended September 30, 2025, the gross margin decreased to 76% from 78% in the prior year, primarily due to the continuous shift in revenue mix towards SaaS subscriptions, which incur higher hosting costs, and increased intangible amortization. Share-based compensation expenses also increased, reflecting grants to new and existing employees and acquisition-related equity awards.

Liquidity and Capital Allocation: Fueling Future Expansion

JFrog maintains a robust liquidity position, providing a strong foundation for future growth and strategic initiatives. As of September 30, 2025, the company's principal sources of liquidity included $651.1 million in cash, cash equivalents, and short-term investments. Management is confident that these resources, combined with cash generated from operations, will be sufficient to meet its liquidity needs for both the next 12 months and the long term.

The company's operational efficiency is evident in its cash flow generation. Net cash provided by operating activities for the nine months ended September 30, 2025, was $95 million. This was primarily driven by the net loss, adjusted for non-cash charges such as $115.7 million in share-based compensation and $18.9 million in depreciation and amortization, and favorable changes in operating assets and liabilities, including a $34.5 million increase in deferred revenue. This strong operating cash flow supports JFrog's ability to invest in its business without relying heavily on external financing.

Capital allocation is strategically focused on expanding the platform and market reach. While net cash used in investing activities for the nine months ended September 30, 2025, was $96.8 million, primarily due to net purchases of short-term investments, the company continues to evaluate opportunities for acquisitions of complementary businesses and technologies. Financing activities, including proceeds from employee share purchases and share option exercises, also contributed to capital, totaling $29.2 million for the nine months ended September 30, 2025. These activities underscore a balanced approach to funding growth, leveraging internal generation and equity-based compensation.

Outlook and Risks: Measured Caution Amidst Transformative Opportunities

JFrog's outlook for the remainder of 2025 reflects a blend of significant growth opportunities, particularly in cloud and security, tempered by a prudent and cautious approach to guidance. For the fourth quarter of 2025, JFrog anticipates revenues between $136.5 million and $138.5 million, with non-GAAP operating profit projected to be between $21 million and $22 million. Non-GAAP diluted earnings per share are expected to be in the range of $0.18 to $0.20.

For the full fiscal year 2025, the company projects revenues between $523 million and $525 million, representing approximately 22.3% year-over-year growth at the midpoint. Non-GAAP operating income is expected to be between $87.3 million and $88.3 million, with non-GAAP diluted EPS of $0.78 to $0.80. A key component of this outlook is the estimated full-year 2025 baseline cloud growth, expected to be in the range of 40% to 42%. The net dollar retention rate is anticipated to remain above 116%.

Management's guidance philosophy is notably conservative. It explicitly excludes contributions from "usage above annual customers' minimum commitments" and "derisks" the largest opportunities due to inherent uncertainties in deployment timing. This prudence stems from ongoing macroeconomic volatility and geopolitical uncertainty, which can lead to longer sales cycles and delayed purchasing decisions, particularly for large enterprise deals.

However, JFrog faces several pertinent risks that could impact its trajectory:

• Geopolitical Instability: A material portion of JFrog's research and development and over half of its employees are located in Israel. The regional conflict in the Middle East, despite a ceasefire in October 2025, remains volatile, posing potential risks to operations and the broader macroeconomic environment.
• Talent Acquisition Challenges: New H-1B visa restrictions, including a $100,000 fee for certain visas, could significantly increase recruitment costs for U.S. positions, potentially impacting JFrog's ability to attract and retain highly skilled talent.
• AI Regulatory Environment: The evolving regulatory landscape for AI, such as the EU AI Act (effective August 1, 2024, with incremental obligations through August 2, 2025) and the U.S. Executive Order 14117 (effective April 8, 2025, restricting sensitive data transfers to "countries of concern"), could impose significant compliance burdens and operational challenges.
• Customer Hesitation in Cloud for AI: Customers are exhibiting caution in fully migrating AI workloads to the public cloud due to unpredictable compute costs and security/governance concerns, opting for hybrid "fit for purpose" strategies. This could extend sales cycles for cloud migrations.
• Longer Security Sales Cycles: Security deals often involve displacing existing solutions, leading to longer sales cycles, typically 3-4 quarters on average.
• Open Source Software Risks: JFrog's use of open-source licenses, such as AGPL for a limited-functionality version of Artifactory, could allow competitors to use the software for free, potentially impacting monetization and intellectual property protection.
• Israeli Service Invention Law: Under Israeli law, employees may be entitled to remuneration for inventions created during employment, potentially leading to litigation and additional costs.

Conclusion

JFrog Ltd. stands at a pivotal juncture, transforming from a foundational DevOps provider into an indispensable system of record for the entire software supply chain, including the rapidly expanding domain of AI and machine learning. The company's unwavering commitment to its "Liquid Software" vision, coupled with its strategic investments in holistic security and AI-centric innovations, positions it for sustained enterprise growth. Recent financial performance, marked by robust cloud revenue acceleration and significant expansion within its high-value Enterprise Plus customer base, underscores the efficacy of its focused go-to-market strategy.

While JFrog operates with a prudent outlook, acknowledging macroeconomic uncertainties and geopolitical risks, its technological differentiators—from the universal Artifactory to cutting-edge AI Catalog and agentic remediation capabilities—provide a strong competitive moat. The ability to consolidate disparate point solutions into a unified platform, particularly in the critical area of DevSecOps and MLSecOps, is a compelling value proposition for enterprises seeking efficiency, security, and compliance. As the world increasingly relies on AI-driven software, JFrog's role as the trusted model registry and guardian of the software supply chain becomes ever more critical, suggesting a compelling long-term investment thesis for discerning investors.