JFrog Ltd Q1 FY2025 earnings call

• Cloud Growth: Q1 saw overachievement in cloud due to increased customer usage beyond contractual commitments, but macroeconomic constraints led to longer sales cycles and delayed decisions. JFrog is investing in multi-cloud and hybrid solutions and working with self-hosted customers to migrate to SaaS.
• AI and Machine Learning: All cloud enterprise customers have access to JFrog ML, and there's an upcoming release for hybrid customers. Secured a partnership with Hugging Face to protect 1.5 million open-source ML models. Released the annual software supply chain State of the Union report.
• Partnerships: Strong collaboration with GitHub, with joint efforts to unify DevOps, DevSecOps, and MLOps processes across platforms.
• Enterprise Wins: Secured a major AI technology leader deal, using JFrog platform for model management, security, and more.

In the first quarter of 2025, JFrog's total revenue was $122.4 million, up 22% year-over-year. Cloud revenue was $52.6 million, representing 42% year-over-year growth and 43% of total revenues. Self-managed or on-prem revenues were $69.8 million, up 10% year-over-year. Enterprise Plus subscriptions contributed 55% of total revenues, a 37% year-over-year growth. The net dollar retention for the four trailing quarters was 116%, and gross retention was 97% as of the first quarter 2025.

• Q2 revenue is expected to be in the range of $121.5 million to $123.5 million, with 19% year-over-year growth at the midpoint. Non-GAAP operating profit is anticipated to be between $17 million and $18 million, and non-GAAP earnings per diluted share $0.15 to $0.17.
• Full year 2025 revenue is anticipated to be $500 million to $505 million. Non-GAAP operating income is expected to be $74 million to $77 million, and non-GAAP diluted earnings per share $0.68 to $0.70.
• Full year 2025 baseline cloud growth is estimated to be in the range of 31% to 33%, with net dollar retention rate stabilizing in the mid-teens.

• Macroeconomic uncertainty causing longer sales cycles and delayed decisions to convert usage into commitments at higher tiers.
• Volatility in market conditions affecting customer purchasing and budget constraints, impacting the sustainability of cloud overage as a trend.

Q: Pinjalim Bora from JPMorgan asked about cloud consumption breadth, in-quarter consumption, and sales cycle duration.

A: Ed Grabscheid responded that cloud consumption was broad-based, in-quarter details not commented on, and sales cycles were consistent with 2025 environment.

Q: Sanjit Singh from Morgan Stanley inquired about ML opportunity emphasis and cloud customer behavioral response.

A: Shlomi Ben Haim discussed early stage of ML adoption and Ed Grabscheid addressed uncertainty in cloud customer behavioral response to excess consumption.

Q: Kingsley Crane from Canaccord asked about ML ecosystem maturity and RPO growth expectations.

A: Shlomi Ben Haim talked about early stage of ML adoption and Ed Grabscheid mentioned Q1 cloud usage exceeded expectations but RPO based on multi-year agreements.

Q: Eamon Coughlin from Barclays asked about GitHub partnership impact and core security pipeline.

A: Shlomi Ben Haim noted positive customer reaction to GitHub partnership and Shlomi Ben Haim expressed satisfaction with Q1 security performance and pipeline.

Q: Mark Cash from Raymond James inquired about RSA takeaways and base growth confidence.

A: Shlomi Ben Haim discussed tool consolidation and security around models, and Ed Grabscheid talked about growth from enterprise plus subscriptions and long runway for base growth.

Q: Koji Ikeda from Bank of America asked about 2027 revenue target confidence and free cash flow dynamics.

A: Ed Grabscheid mentioned ongoing evaluation of long-term model and free cash flow not capturing large customer opportunities.

Q: Andrew Sherman from TD Cowen asked about big deal pipeline and security sales cycles.

A: Shlomi Ben Haim talked about big deals in pipeline and consistent security sales cycles.

Q: Shrenik Kothari from Baird asked about MLOps adoption telemetry and Q1 enterprise account linearity.

A: Shlomi Ben Haim discussed early MLOps adoption and Ed Grabscheid noted Q1 linearity aligned with expectations.

Q: Jason Celino from Keybanc asked about Q1 cloud growth drivers and deceleration pace.

A: Shlomi Ben Haim emphasized broad-based growth and Ed Grabscheid explained de-risking of pipeline and conservatism in guidance.

Q: Jonathan Ruykhaver from Cantor Fitzgerald inquired about AI platform competition impact.

A: Shlomi Ben Haim stated more collaboration than competition with AI platforms.