JFrog Posts Blowout Earnings. AI Coding Was the Biggest Growth Driver.

The artificial-intelligence coding craze is fueling massive growth for JFrog, pushing its cloud revenue up 60% from a year ago. (Dreamstime)

Key Points

JFrog reports third-quarter revenue of $179.2 million, beating analyst estimates and prompting the company to raise its full-year guidance.
The software company’s cloud revenue grows 60% in the third quarter, driven by programmers storing AI-generated code in JFrog’s cloud.
JFrog expects full-year revenue of $680 million to $682 million, up from its previous forecast of $648 million to $652 million.

The artificial-intelligence trade might be putting off many investors, but software company JFrog‘s quarterly earnings report revealed the AI craze hasn’t been just some temporary boost—it has turned its AI-driven demands into reliable growth.

Shares of JFrog surged 31% to $97.67 Friday and were heading for their best single-day percentage gain on record, according to Dow Jones Market Data.

The sharp gain came after JFrog reported blowout third-quarter earnings Thursday that gave management the confidence to bump up its full-year guidance. The core driver? AI coding.

As programmers use AI coding assistants, those tools produce large amounts of code and software packages. Companies store that code in JFrog’s cloud, pushing the company’s cloud revenue up 60% in the third quarter from a year ago to account for roughly 57% of total revenue.

For StoneX analyst Yi Fu Lee, JFrog’s third-quarter earnings answered his “million-dollar question” on whether investor concerns that recent spikes in cloud usage were merely temporary and wouldn’t turn into long-term contracts.

JFrog answered the question.

In the third quarter, JFrog secured a $76 million deal with a major telecom provider, expanding the client’s baseline data commitment by 167%, Lee noted. He added that customers also have been adopting more of JFrog’s security and governance tools. StoneX kept its Buy rating and $120 price target.

Future contracted revenue was another high point, jumping 60% from a year ago in the third quarter. That was powered by a 58% increase in customers paying over $1 million annually, BTIG analysts noted. They have a Buy rating and $115 price target on JFrog.

Existing customers also have been spending more. Companies using JFrog bumped their spending by an average of 24% over the past year, lifting the net retention rate to 124% in the third quarter, Oppenheimer analyst Ittai Kidron said Friday. The firm maintained its Outperform rating and $125 target.

Still, the good times could come with caveats. Oppenheimer cautioned that profit margins might dip slightly next quarter as JFrog spends money to grow, big enterprise deals can take a long time to close, and the company could face tough competitors in AI security.

JFrog’s revenue grew 31% to $179.2 million in the third quarter, well above analysts’ consensus estimates of $165.9 million. Adjusted earnings of 32 cents a share topped Wall Street’s calls for 23 cents.

That gave JFrog runway to jack up its full-year outlook. It now expects revenue to range from $680 million to $682 million, up from prior guidance of $648 million to $652 million. It also expects adjusted earnings to range from $1.14 to $1.16, up from a previous outlook of 96 cents and $1 a share. Analysts polled by FactSet project adjusted earnings of $1.12 a share on revenue of $677.4 million.

To StoneX’s Lee, the debate around JFrog has fundamentally shifted: It’s no longer about whether the software company can hit 25% growth in 2026, but whether AI adoption and security upgrades can keep it growing at over 25% well into the future.

Write to Mariapaula Gonzalez at mariapaula.gonzalez@barrons.com

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