FROG Q1 2025: cloud usage outpaces commitments, cautious guidance
- Broad-based cloud consumption growth: Analysts noted that consumption exceeded contractual commitments across a wide variety of customers and geographies, signaling strong engagement and stickiness with the platform.
- Robust multiyear contract growth (RPO): The team highlighted strong, broad-based multiyear agreements that have contributed to significant RPO growth, underscoring revenue predictability and customer commitment.
- Healthy pipeline of large enterprise deals: Executives described a promising pipeline of sizable, multi-year deals—especially from customers adopting the full platform (DevOps, security, and MLOps)—suggesting upside potential beyond conservative guidance.
- Delayed H2 revenue recognition: The company relies on large cloud migration deals—typically occurring in the second half—that are not factored into current guidance. This dependency could lead to revenue volatility if these deals are delayed or underperform, contributing to a slower growth trajectory.
- Conservative full-year guidance despite strong Q1 performance: The management intentionally excluded Q1’s outperformance from full-year guidance, indicating uncertainty about sustaining high growth levels. This cautious approach may signal potential underlying challenges in maintaining current momentum.
- Potential for non-linear deceleration: The expected deceleration—nearly 10 percentage points on an annual basis—suggests that revenue growth may not smooth out over the year, and a second-half weighting in slowdowns could further impact overall performance if key deals do not materialize as anticipated.
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Revenue | Q1 2025 | $116M to $118M (17% YoY growth) | no guidance provided | no current guidance |
Non-GAAP Operating Profit | Q1 2025 | $16.5M to $17.5M | no guidance provided | no current guidance |
Non-GAAP EPS | Q1 2025 | $0.15 to $0.17 | no guidance provided | no current guidance |
Revenue | FY 2025 | $499M to $503M (17% YoY growth) | no guidance provided | no current guidance |
Non-GAAP Operating Income | FY 2025 | $73M to $75M | no guidance provided | no current guidance |
Non-GAAP EPS | FY 2025 | $0.67 to $0.69 | no guidance provided | no current guidance |
Baseline Cloud Growth | FY 2025 | 30% to 32% | no guidance provided | no current guidance |
Net Dollar Retention Rate (NDRR) | FY 2025 | Expected to be in the mid-teens | no guidance provided | no current guidance |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Cloud Revenue Growth and Consumption | In Q4 2024 and Q3 2024, JFrog highlighted strong cloud revenue growth with increased consumption; however, they noted challenges such as delayed migrations, monthly subscriber limitations, and caution over sustaining above-minimum consumption (e.g. , , ). | In Q1 2025, cloud revenues hit $52.6M (42% YoY) with 43% of total revenues driven by consumption that exceeded contractual commitments, though there remains caution about sustainability amid macro uncertainties ( ). | Steady strong growth coupled with persistent caution over macro uncertainties and sustainability. |
Enterprise and Large Strategic Deals | Q4 2024 and Q3 2024 discussions stressed a transition toward enterprise customers via large, multiyear strategic deals—with an emphasis on cloud migration and integrated security, while Q2 2024 noted longer cycles and pushouts in big deals ( , , ). | Q1 2025 underscored winning a sizable Enterprise Plus deal with a renowned AI company, with Enterprise Plus subscriptions now comprising 55% of total revenues and a growing pipeline of strategic, multiyear engagements ( ). | Continued and deepening enterprise focus with increased high-value, multiyear engagements and active pipeline expansion. |
Multiyear Contract Growth (RPO) | Q3 2024 clearly detailed strong RPO growth driven by multiyear deals ( ), while Q4 2024 mentioned a conservative stance on RPO due to customer hesitancy over AI regulations, and Q2 2024 did not discuss this topic. | In Q1 2025, RPO growth was noted as strong and broad-based, with multiyear contracts locking in pricing and contributing significantly to higher-than-expected RPO compared to the prior year ( ). | Sustained upward RPO trajectory with expanding multiyear contracts and robust customer commitment. |
Integrated Platform Adoption and Strategic Partnerships | Across Q2, Q3, and Q4 2024, JFrog focused on the unified platform approach—integrating DevOps, security, and early MLOps elements—with partnerships involving GitHub, AWS, NVIDIA, and Hugging Face forming a core part of the narrative ( ). | In Q1 2025, this expanded to include the release of JFrog ML and a stronger emphasis on integrating DevOps, DevSecOps, and MLOps, with new strategic partnerships being highlighted with Hugging Face and deepened GitHub collaboration ( ). | Deepening integration and a broadening partnership ecosystem, particularly with enhanced AI/ML capabilities. |
Security Offerings and Growth | Q2, Q3, and Q4 2024 documented the gradual building of security solutions—Advanced Security, Curation, and Runtime—as integral to large deals, with partnerships supporting AI security and consolidation of point tools ( ). | In Q1 2025, security offerings continued to gain momentum: robust pipeline performance, integration into multiyear deals, and expansion into ML model threat detection, with renewals and upsell strategies in place ( ). | Continuous and expanding security integration that fuels deal growth, enhanced with new capabilities for AI model security. |
Delayed Revenue Recognition and Longer Sales Cycles | Q2 and Q3 2024 earnings calls described postponed migrations, pushed-out large deals, and extended sales cycles due to strict budgets and macro challenges, causing delayed revenue recognition ( ). | Q1 2025 echoed these themes, with executives noting longer sales cycles and delayed decisions due to persistent budget and purchasing constraints, despite higher customer usage ( ). | Persistent challenge—delayed revenue and longer sales cycles remain a constant concern amid macroeconomic pressures. |
Conservative Guidance and Revenue Deceleration Risks | Q2, Q3, and Q4 2024 earnings calls stressed a cautious, derisked guidance approach, revising expectations (e.g. cloud growth adjusted to around 40%), and excluding the largest deals to mitigate revenue deceleration risks ( ). | Q1 2025 maintained this conservative guidance: derisking the pipeline by excluding the largest, uncertain deals and planning to reassess after Q2, reflecting ongoing market caution ( ). | Steady cautious outlook with consistently conservative guidance and mindful adjustments to pipeline risks amid uncertain market conditions. |
Customer Metrics, Retention, and Expansion | Q2, Q3, and Q4 2024 showcased robust customer metrics—good net and gross retention rates, strong growth in customers above $100K/ $1M ARR, and a strategic shift toward higher-quality enterprise customers ( ). | Q1 2025 reported improved figures, with significant growth in customers above $1M ARR, Enterprise Plus subscriptions (55% of revenues), a 116% net dollar retention, and a notable opportunity for expansion from the current base ( ). | Consistent and strong customer growth with improved retention and expansion, reinforcing the enterprise-focused strategy. |
Emerging MLOps Adoption | Q2 2024 introduced the acquisition of Qwak AI and initial integration steps, while Q3 2024 and Q4 2024 highlighted experimental adoption and strategic positioning of MLOps (via Artifactory as a registry, partnerships) with cautious expectations ( ). | Q1 2025 described MLOps as still in its early stage with emerging adoption; it introduced a credit-based monetization model and new ML security capabilities, though full-scale impact remains to be seen ( ). | Emerging and cautiously optimistic—early-stage adoption with clear potential, but monetization and scale are still evolving. |
Profitability and Margin Pressure | Q2, Q3, and Q4 2024 showed a clear focus on improving operating margins and free cash flow, though with gradually increasing margin pressure from a higher mix of cloud revenues; cost efficiencies and operational improvements were noted ( ). | In Q1 2025, profitability improved with higher operating profit margins (17.4% vs. 14%), a record free cash flow margin (23%), while gross margin remains under pressure from the growing cloud revenue mix ( ). | Continued operational improvements with effective cost discipline, though margin pressures persist from strategic cloud revenue growth. |
-
Revenue Guidance
Q: How did macro uncertainties shape guidance?
A: Management explained that despite a strong Q1, they adopted a conservative outlook by excluding the largest, complex deals to account for market uncertainty, ensuring a derisked full‐year projection. -
Cloud Consumption
Q: Was consumption above contractual commitments?
A: They noted broad-based higher consumption across the customer base—usage exceeded minimum commitments—but cautioned that this overage won’t automatically translate into sustained trends. -
Free Cash Flow
Q: What drove the Q1 free cash flow margin?
A: Management highlighted that Q1 free cash flow benefited from annual payment timing and a conservative revenue approach, contributing to the 23% margin and positioning the company well for future performance. -
Enterprise Pipeline
Q: How strong is the pipeline for large deals?
A: They emphasized that big enterprise deals are already in the pipeline, with strong relationships in place, and expect many of these multiyear, cloud-driven opportunities to materialize in the latter half of the year. -
AI Deal
Q: What’s notable about the flagship AI deal?
A: Management described winning an impressive deal with a well-known AI leader, marking the start of using the platform as the system of record for all models, with future expansion into advanced security and ML solutions. -
Enterprise Plus Expansion
Q: How is the growth of Enterprise Plus progressing?
A: They reported that more than 55% of revenue now comes from Enterprise Plus subscriptions, and they anticipate further migration from lower subscriptions as additional platform value is unlocked.