10-Q: JFrog Q3 2025 Revenue Jumps 26%, Net Loss Narrows

JFrog Ltd. reported strong subscription revenue growth of 26% for Q3 2025, reaching $136.9 million, while narrowing its net loss to $16.4 million.

Summary

• Total subscription revenue for the three months ended September 30, 2025, was $136.9 million, a 26% increase from $109.1 million in the same period of 2024.
• Total subscription revenue for the nine months ended September 30, 2025, reached $386.5 million, up 24% from $312.4 million in the prior year period.
• Net loss for Q3 2025 narrowed to $16.4 million, compared to a net loss of $22.9 million in Q3 2024.
• Net loss for the nine months ended September 30, 2025, was $56.6 million, an increase from $46.0 million in the nine months ended September 30, 2024.
• SaaS subscriptions contributed 46% of total revenue in Q3 2025, up from 39% in Q3 2024.
• Revenue from Enterprise Plus subscriptions represented approximately 56% of total revenue in Q3 2025, up from 50% in Q3 2024.
• The net dollar retention rate as of September 30, 2025, was 118%, an increase from 117% as of September 30, 2024.
• Customers with Annual Recurring Revenue (ARR) of $100,000 or more increased to 1,121 as of September 30, 2025, from 1,018 as of December 31, 2024.
• Customers with ARR of at least $1.0 million increased to 71 as of September 30, 2025, from 52 as of December 31, 2024.
• Free cash flow for the nine months ended September 30, 2025, was $92.4 million, significantly up from $59.3 million in the prior year period.
• Gross margin for Q3 2025 improved to 77% from 75% in Q3 2024, but the nine-month gross margin decreased to 76% from 78%.

Sentiment

Score: 7

Explanation: The company exhibits strong revenue growth, improved quarterly net loss, robust free cash flow, and significant expansion in its large customer base and net dollar retention. These are strong positive indicators. However, the company continues to incur overall net losses, and the nine-month gross margin declined. The extensive list of identified risks, including geopolitical instability, intense competition, and the complexities of managing rapid growth and international operations, tempers the overall positive financial performance, suggesting a moderately positive but cautious outlook.

Positives

• Strong revenue growth of 26% for Q3 2025 and 24% for the nine months ended September 30, 2025, driven by existing and new customers.
• Net loss narrowed in Q3 2025 to $16.4 million from $22.9 million in Q3 2024, indicating improved quarterly profitability.
• Net dollar retention rate increased to 118%, demonstrating strong customer expansion and retention.
• Significant growth in the number of large customers, with 1,121 customers having ARR over $100,000 and 71 customers with ARR over $1.0 million.
• Generated substantial free cash flow of $92.4 million for the nine months ended September 30, 2025, up from $59.3 million in the prior year.
• Increased contribution of SaaS revenue to 46% of total revenue in Q3 2025, reflecting successful cloud adoption.
• Growth in Enterprise Plus subscription revenue to 56% of total revenue in Q3 2025, indicating demand for end-to-end solutions.

Negatives

• Continued to incur net losses, with a net loss of $56.6 million for the nine months ended September 30, 2025.
• Gross margin for the nine months ended September 30, 2025, decreased to 76% from 78% in the prior year, primarily due to a shift towards higher-cost SaaS subscriptions and increased intangible amortization.
• Interest and other income, net, decreased for the nine months ended September 30, 2025, primarily due to lower interest rates on deposits and marketable securities.
• Income tax expense increased for both Q3 and 9M 2025, partly due to the absence of a discrete tax benefit recognized in Q3 2024 related to a business acquisition.

Risks

• Inability to effectively manage significant future growth or scale systems, processes, and controls, which could adversely affect business and financial condition.
• Revenue growth rate may decline in future periods due to factors such as greater market penetration, increased competition, market consolidation, slowing demand, or macroeconomic conditions.
• Quarterly results of operations are likely to fluctuate significantly due to various factors, many outside of control, making period-to-period comparisons difficult.
• History of annual losses and may not achieve profitability on a consistent basis, as operating expenses are expected to increase substantially.
• Markets for products are maturing and may evolve more slowly or differently than expected, impacting customer adoption and demand.
• Revenue mix variations over time, particularly the shift towards SaaS offerings, could harm gross margin and overall results of operations.
• Failure to keep pace with rapid technological and competitive developments or integrate products with third-party technologies could make products less marketable or obsolete.
• Inability to compete successfully against current and future competitors, many of whom have greater financial, technical, and other resources.
• Any decline in demand for JFrog Artifactory, which is central to the platform, would significantly impact the entire business.
• Downturns or upturns in sales may not be immediately reflected in results due to subscription revenue recognition over time.
• Existing customers may not renew subscriptions or may renew on less favorable terms, adversely affecting revenue.
• Inability to increase sales to new customers or expand existing customer subscriptions, particularly with free trial users not converting to paying customers.
• Dependence on executive officers and other key employees, and the inability to attract and retain highly skilled personnel, especially in engineering and sales.
• Reliance on strategic relationships with third parties, including public cloud providers and channel partners, who may also become competitors.
• The open source license (AGPL) for a limited-functionality version of JFrog Artifactory could negatively affect monetization and intellectual property protection.
• Failure to offer high-quality customer support could adversely affect business, reputation, and results of operations.
• Real or perceived defects, security vulnerabilities, errors, or performance failures in the platform could lead to revenue loss, liability, and reputational damage.
• Incorrect implementation or use of, or customers' failure to update, products could result in dissatisfaction and negative publicity.
• Interruptions or performance problems with technology and infrastructure, or reliance on third-party technologies, may adversely affect business operations.
• Failure to meet service-level commitments could lead to contractual liabilities, subscription terminations, and reduced future revenue.
• Inability to maintain and enhance the brand, especially among developers, security teams, data scientists, and IT operators, could adversely affect business.
• Difficulty in maintaining corporate culture as the company grows, potentially losing innovation and entrepreneurial spirit.
• The inbound sales model may not continue to be as successful, and direct sales functions may not fully compensate for a downturn.
• Sales prices of products may fluctuate or decline due to competitive pressures, discounts, or changes in pricing models.
• The length of the sales cycle can be unpredictable, particularly for large customers, leading to fluctuations in results of operations.
• Reliance on traditional web search engines and AI-powered synopses to direct traffic to the website, with potential for decline if rankings fall.
• Unfavorable economic conditions, such as inflation or recession, may adversely affect business due to impacts on enterprise spending and demand.
• Acquisitions of complementary businesses could require significant management attention, disrupt business, dilute shareholder value, and adversely affect results.
• Failure to generate significant capital or raise additional capital necessary to expand operations and invest in new products could reduce competitiveness.
• Sales to government entities are subject to specific challenges and risks, including complex procurement, changing certification requirements, and budgetary cycles.
• Issues in the development and use of AI, combined with an uncertain regulatory environment (e.g., EU AI Act, Executive Order 14117), may result in reputational harm, liability, or other adverse consequences.
• Expectations of performance relating to sustainability and governance factors may impose additional costs and expose the company to new risks.
• Failure to protect proprietary technology and intellectual property rights could substantially harm business and results of operations.
• Substantial costs could be incurred as a result of any claim of infringement, misappropriation, or violation of another party's intellectual property rights.
• Potential claims for remuneration or royalties for assigned service invention rights by employees under Israeli law, which could result in litigation.
• Indemnity provisions in various agreements potentially expose the company to substantial liability for intellectual property infringement and other losses.
• Use of open source software could negatively affect the ability to sell products and subject the company to possible litigation.
• A breach of security measures or unauthorized access to proprietary and confidential data, or a perception thereof, may result in the platform being perceived as not secure, lower customer use, and significant liabilities.
• Subject to stringent and changing laws, regulations, standards, and contractual obligations related to privacy, data protection, and data security, with non-compliance potentially harming the business.
• The regulatory environment applicable to handling European Economic Area (EEA) residents' personal data may cause additional liabilities or costs.
• Increasing restrictions in the United States on certain personal sensitive data transfers involving foreign countries (e.g., Executive Order 14117) may create operational challenges and legal risks.
• International operations and expansion expose the company to various risks, including management challenges, different labor regulations, trade restrictions, currency fluctuations, and limited intellectual property protection.
• Risks associated with economic, political, and social events in China could negatively affect business and results of operations.
• Subject to various governmental export controls, trade sanctions, and import laws and regulations that could impair the ability to compete internationally or subject to liability.
• Failure to comply with anti-bribery, anti-corruption, anti-money laundering laws, and similar laws could subject the company to penalties and other adverse consequences.
• Exposure to fluctuations in currency exchange rates, particularly NIS against the U.S. dollar, could negatively affect financial condition.
• Unanticipated changes in effective tax rates or adverse outcomes from examination of income or other tax returns could expose the company to greater than anticipated tax liabilities.
• Corporate structure and intercompany arrangements are subject to the tax laws of various jurisdictions, potentially leading to additional tax obligations.
• Tax benefits available under Israeli law require meeting various conditions and may be terminated or reduced in the future.
• Could be required to collect additional sales, use, value added, digital services, or other similar taxes, increasing costs for clients.
• Ability to use net operating loss carryforwards to offset future taxable income may be subject to certain limitations.
• The market price for ordinary shares may be volatile or decline regardless of operating performance due to various market and company-specific factors.
• Concentration of share ownership with insiders will likely limit shareholders' ability to influence corporate matters.
• If industry or financial analysts do not publish research or issue inaccurate/unfavorable reports, share price and trading volume could decline.
• Sales of substantial amounts of ordinary shares in the public markets, or the perception of such sales, could reduce the share price.
• The issuance of additional shares in connection with financings, acquisitions, or share incentive plans will dilute all other shareholders.
• Provisions of Israeli law and the amended and restated articles of association may delay, prevent, or make undesirable an acquisition.
• Difficulty enforcing a U.S. judgment against the company, its officers, and directors in Israel or the U.S., or asserting U.S. securities laws claims in Israel.
• Shareholder rights and responsibilities are governed by Israeli law, which may differ from those of U.S. corporations.
• Israeli government grants for R&D activities may require specified conditions for developing and transferring technologies outside of Israel, potentially incurring penalties.
• Requirements of being a public company may strain resources and divert management's attention.
• Failure to maintain an effective system of disclosure controls and internal control over financial reporting could impair the ability to produce timely and accurate financial statements.
• The impact of the regional conflict in the Middle East, the war between Russia and Ukraine, and other geopolitical tensions remains uncertain and could harm business.
• If estimates or judgments relating to critical accounting policies are based on assumptions that change or prove incorrect, results of operations could fall below expectations.
• Exposure to credit risk and fluctuations in the market values of the investment portfolio.
• Catastrophic events, such as natural disasters or terrorism, may disrupt business operations.

Future Outlook

The company anticipates that its revenue growth rate will decline in future periods due to factors such as greater market penetration, increased competition, market consolidation, slowing demand for its platform, and adverse macroeconomic conditions. Operating expenses are expected to increase substantially in the foreseeable future as the company continues to enhance products, broaden its customer base, expand sales and marketing activities, and invest in research and development. The net dollar retention rate is expected to remain relatively stable, with minor fluctuations around current levels. Management believes existing cash, cash equivalents, and short-term investments, combined with cash provided by operations, will be sufficient to meet liquidity needs for the next 12 months and in the long-term.

Management Comments

• "We have designed our subscription structure and go-to-market strategy to align our growth with the success of our customers."
• "We have an unwavering commitment to the software developer, security teams, MLOps teams, and IT operator communities, and show this commitment by offering varying forms of free access to our products in addition to the paid subscriptions."
• "We have continued to invest in our business and had a net loss of $16.4 million and $22.9 million for the three months ended September 30, 2025 and 2024, respectively, and $56.6 million and $46.0 million for the nine months ended September 30, 2025 and 2024, respectively."
• "We intend to continue to enhance our hybrid, universal, end-to-end software supply chain platform by developing new products and expanding the functionality of existing products to maintain our technology leadership."
• "We expect our net dollar retention rate to remain relatively stable, with minor fluctuations around current levels."
• "We believe our existing cash, cash equivalents, and short-term investments, together with cash provided by operations, will be sufficient to meet our needs for the next 12 months, as well as in the long-term."

Industry Context

JFrog operates in the dynamic and rapidly evolving markets of DevOps, DevSecOps, and MLOps, providing a hybrid, universal, end-to-end software supply chain platform. The company's strong growth in SaaS subscriptions and Enterprise Plus offerings aligns with broader industry trends of increasing cloud adoption and the demand for integrated security and machine learning capabilities within the software development lifecycle. The strategic acquisition of Qwak AI and continued investment in AI/MLOps functionality positions JFrog to capitalize on the growing importance of artificial intelligence in software development. The competitive landscape is fragmented, with various vendors addressing specific parts of the DevOps cycle, public cloud providers offering competing functionalities, and specialized security point solutions. JFrog's focus on a comprehensive platform aims to differentiate it in this competitive environment.

Comparison to Industry Standards

• The filing lists several competitors across different product categories, including Microsoft's GitHub, GitLab, Cloudsmith, Sonatype (DevOps/developer-focused), Amazon Web Services (AWS), Microsoft Azure, Alphabet Inc.'s Google Cloud (public cloud providers), Aqua Security, Snyk, Synopsys (security point solutions), and IBM, Pivotal Software, Broadcom's VMware (diversified vendors).
• The company states it believes it competes successfully on factors such as providing an end-to-end, unified platform, updated security products, breadth of technologies supported, technology integrations, total cost of ownership, extensibility across organizations, deployment flexibility, performance, security, scalability, reliability, customer experience, support quality, ease of implementation, and brand recognition.
• However, the filing does not provide specific comparable financial results or performance benchmarks from these named competitors to directly assess JFrog's performance against industry standards in terms of metrics like revenue growth, profitability, or customer acquisition costs relative to its peers.

Corporate Governance

Legal Proceedings

• The company is not currently aware of any legal proceedings, lawsuits, disputes, or claims that, if determined adversely, would individually or collectively have a material adverse effect on its business, financial position, results of operations, or cash flows.

Stakeholder Impact

• Shareholders: Face potential dilution from future equity or debt financings, share price volatility, and limited influence on corporate matters due to concentrated ownership. No dividends are expected in the foreseeable future.
• Employees: May be impacted by the Middle East conflict due to military service calls, face intense competition for skilled personnel, and the company's ability to attract and retain talent is crucial for growth. H-1B visa fee increases could affect talent acquisition.
• Customers: Benefit from strong product development and expansion, but face risks related to product defects, security vulnerabilities, and the need for effective customer support. Economic conditions may influence their spending on JFrog's products.
• Suppliers/Partners: The company relies heavily on public cloud providers and channel partners, facing risks if these relationships are not maintained or if partners become competitors. New lease commitments indicate ongoing facility needs.
• Creditors: The company's strong cash, cash equivalents, and short-term investments, along with positive operating cash flow, suggest sufficient liquidity to meet short-term and long-term needs.

Next Steps

• Continue to enhance the hybrid, universal, end-to-end software supply chain platform by developing new products and expanding the functionality of existing products.
• Expand the strategic team to identify new use cases and drive expansion and standardization on JFrog within the largest customers.
• Invest further in customer support, research and development, and sales and marketing to attract new customers and address market opportunities.
• Monitor the volatile situation in the Middle East and other geopolitical tensions, and maintain business continuity plans.
• Expand income tax disclosure as required by ASU 2023-09, effective for the annual period ending December 31, 2025.
• Evaluate the impact of ASU 2024-03 on financial statement disclosures, effective for annual periods beginning January 1, 2027, and interim periods beginning January 1, 2028.
• Evaluate the impact of ASU 2025-06 on financial statement disclosures, effective for the first quarter beginning January 1, 2028.
• Manage the additional commitment of $110.0 million for an operating lease related to a facility that will commence in 2026.
• Manage the lease agreement entered in October 2025 to extend occupancy of an existing facility for 5.4 years, with a total commitment of $8.1 million.

Key Dates

Recommendation

While JFrog demonstrates strong revenue growth (26% in Q3 2025), a narrowing quarterly net loss, robust free cash flow generation, and significant expansion in its large customer base, the company continues to operate at an overall net loss for the nine-month period. The nine-month gross margin also saw a slight decline. The extensive list of identified risks, including geopolitical instability, intense competition, the complexities of managing rapid growth, and evolving regulatory environments (especially for AI and data privacy), suggests a cautious approach. The positive momentum is notable, but the persistent unprofitability and significant operational and external challenges warrant a 'hold' recommendation rather than a 'buy' until a clear and consistent path to profitability is demonstrated and some of the macroeconomic and geopolitical uncertainties subside.

Keywords

DevOps, DevSecOps, MLOps, Software Supply Chain, SaaS, Cloud, Cybersecurity, JFrog, FROG, SEC Filing, 10-Q, Software Development, AI, Machine Learning, Enterprise Software, Israel