Summary
JFrog reported third-quarter revenue of $109.1 million, up 23% year over year. Gross profit was $81.8 million, but gross margin slipped to 75.0%, down 2.7 percentage points. The company's GAAP operating loss widened to $29.9 million, and operating margin fell to -27.4%, down 7.1 percentage points. Net loss widened to $22.9 million, and diluted EPS was -$0.21. The gap between GAAP and non-GAAP results remains wide, driven by share-based compensation and amortization of acquired intangibles. Non-GAAP operating income was $14.7 million, non-GAAP gross margin was 82.8%, and non-GAAP diluted EPS was $0.15.
Cash generation held up. Operating cash flow was $27.6 million, up 6.4% year over year. Capital expenditures were $0.9 million, up 58.4%. Free cash flow, a non-GAAP measure, was $26.7 million. Deferred revenue rose to $224.0 million, up 24.8%, and remaining performance obligations reached $346.1 million, up 47.2%. Those backlog metrics suggest customers are committing to longer or larger contracts. For the first nine months, revenue was $312.4 million, up 23.7%, and operating cash flow was $61.8 million, up 48.7%.
Operational metrics point to larger customers and more cloud adoption. Cloud revenue grew 38% year over year and made up 39% of total revenue, compared with 35% a year earlier. Net dollar retention for the trailing four quarters was 117%. Customers with more than $100,000 in ARR rose to 966 from 848 a year earlier, and customers with more than $1 million in ARR rose to 46 from 30. Enterprise Plus subscriptions represented 50% of revenue, up from 46%. The company announced JFrog Runtime Security, GitHub integrations, an NVIDIA collaboration, and JFrog ML, which builds on the Qwak AI acquisition. Management said the platform expansion with Artifactory at the core supports DevOps, DevSecOps, and MLOps.
Management issued guidance for the fourth quarter and the full fiscal year 2024. The fourth-quarter outlook includes non-GAAP operating income of $14.0 million to $15.0 million and non-GAAP diluted EPS of $0.13 to $0.15, assuming about 117 million weighted average diluted shares. For the full fiscal year 2024, the company guided non-GAAP operating income to $56.4 million to $57.4 million and non-GAAP diluted EPS to $0.59 to $0.61, assuming about 116 million weighted average diluted shares. Revenue guidance was also provided for both periods.
The quarter came with familiar risks. JFrog is domiciled in Israel and continues to monitor the Middle East conflict, noting that some employees and consultants have been called into military service but that there has been no major interruption or material adverse impact as of the filing date. The company also cites its history of losses, rapid growth, the need to integrate Qwak AI, security breach or product vulnerability risk, and competition in its forward-looking statements. The CEO said the quarter included some of the largest enterprise wins in JFrog's history, but also described a tight budgetary environment. That mix of large deals and cost discipline will be tested against the fourth-quarter outlook.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q3 FY2024 | Q2 FY2024 | QoQ | Q3 FY2023 | YoY |
|---|---|---|---|---|---|
| Revenue | $109.1M | $103.0M | +5.8% | $88.6M | +23.0% |
| Gross profit | $81.8M | $81.2M | +0.8% | $68.9M | +18.7% |
| Gross margin | 75.0% | 78.8% | -3.8 pp | 77.7% | -2.7 pp |
| Research & development | $43.0M | $37.1M | +15.8% | $33.4M | +28.9% |
| Sales & marketing | $51.0M | $45.9M | +11.0% | $37.9M | +34.4% |
| General & administrative | $17.7M | $17.3M | +2.7% | $15.7M | +13.2% |
| Total operating expenses | $111.7M | $100.3M | +11.4% | $86.9M | +28.5% |
| Operating income (loss) | -$29.9M | -$19.1M | -56.4% | -$18.1M | -65.8% |
| Operating margin | -27.4% | -18.6% | -8.9 pp | -20.4% | -7.1 pp |
| Net income (loss) | -$22.9M | -$14.3M | -60.4% | -$13.7M | -66.9% |
| Net margin | -21.0% | -13.9% | -7.2 pp | -15.5% | -5.5 pp |
| Diluted EPS | -$0.21 | -$0.13 | -$0.08 | -$0.13 | -$0.08 |
| Customers | 886 | 886 | ±0.0% | 736 | +20.4% |
| Net retention rate | 117.0% | 118.0% | -1.0 pp | 119.0% | -2.0 pp |
Risks
The company has deployed machine learning and AI in its offerings and expanded into MLOps, but competitors or third parties may incorporate AI technology into their products more quickly or successfully, impairing its ability to compete. The EU AI Act, in force since August 1, 2024, imposes new obligations with fines up to EUR 35 million or 7% of global income.
Adverse macroeconomic conditions and reduced information technology spending are pressuring demand, and the company states it has recently experienced longer sales cycles for certain products and enhanced budget scrutiny by customers, and expects these challenges to continue.
A material part of research and development and roughly half of employees and consultants are located in Israel, and the war between Israel, Hamas and Hezbollah, the regional conflict in the Middle East, and hostilities with Iran could disrupt operations, including employee military service absences and potential boycotts of Israeli companies.
Gross margin decreased to 75% for the three months ended September 30, 2024 from 78% in the prior-year quarter, driven by increased third-party hosting costs from higher SaaS revenue and intangible amortization from the Qwak acquisition. A shift in mix toward lower-margin SaaS offerings could further pressure margins.
The company acquired Qwak in July 2024 and has a history of acquisitions (Vdoo, Upswift). Integration may require significant management attention, disrupt the business, and the company may not achieve the anticipated benefits, with acquisition-related costs and intangible amortization already affecting results.
JFrog Artifactory is at the center of the platform and all subscriptions, so any decline in demand for Artifactory occasioned by malfunction, inferior performance, or increased competition would also reduce demand for the company's other products.
The company depends on highly skilled personnel, particularly DevSecOps engineers, security experts, and support staff, with intense competition and rising wages in Israel and the San Francisco Bay Area. Share-based compensation expense increased 42% for the three months ended September 30, 2024, and equity value changes could drive attrition.
A limited-functionality version of JFrog Artifactory is licensed under the AGPL, which allows commercial licensees to use it internally for free or to compete by providing it for free, potentially reducing demand and putting pricing pressure on subscriptions.
The length of the sales cycle, particularly for large customers, is unpredictable and can vary substantially based on deal complexity, and large individual sales have in some cases occurred in quarters subsequent to those anticipated or not at all, while a substantial proportion of expenses are relatively fixed in the short term.
SaaS KPIs
All quarters →Free Cash Flow
Non-GAAP Operating Margin
Cloud Revenue
Non-GAAP Gross Margin
Remaining Performance Obligations
Cloud Revenue as % of Total Revenue
Customers with >$100K ARR
Customers with >$1M ARR
Enterprise+ Subscription as % of Total Revenue
Summary, forecast, risks and KPIs are extracted from JFrog Ltd's SEC filings for Q3 FY2024 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 1, 2026.