Jfrog Ltd Q2 2025 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Sanjit Singh - Morgan Stanley - Analyst : Can you hear me? Shlomi Ben-Haim - Jfrog Ltd - Chairman of the Board, Chief Executive Officer, Co-Founder Yes, we can. Hi, Sanjit. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 07, 2025 / 9:00PM, FROG.OQ - Q2 2025 Jfrog Ltd Earnings Call

Question: Sanjit Singh - Morgan Stanley - Analyst : Understood. My follow-up question goes to a little bit about how some of the product portfolio decisions the team is making is translating to your -- both your growth and your partnerships within the ecosystem. And specifically, what I'm referring to is like the sunsetting of the JFrog Pipelines product, I was wondering to what extent has that improved your go-to-market collaboration and initiatives with some of the CI/CD players, including Microsoft GitHub. And is there any way where that's actually helping put more focus on the security part of the portfolio, which seems like it's also seeing some rising adoption. I'm trying to connect the dots there, but tell me if I'm over extrapolating. Shlomi Ben-Haim - Jfrog Ltd - Chairman of the Board, Chief Executive Officer, Co-Founder Yeah. So as you know, our growth is based on a very diverse portfolio, all sectors, all industries, all size of companies, cloud, on-prem, so different setups, but also different practices. JFrog is the only unified platform that provides DevOps practices, MLOps practices, and DevSecOps practices. This means that we are active in three different course to accelerate our growth. Specifically regarding JFrog Pipeline, the moment we found out that most of the world is betting on GitHub action and there are new CI practices coming with the trend of AI, we decided to be number one in what we know how to be number one. Pipeline was not one of them. Therefore, we were focused on the execution and the growth that we established with the new core, mainly security and mainly the migration to the cloud. And I think it was a very smart decision because now, as you can see by the numbers, we are even more focused on the execution. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 07, 2025 / 9:00PM, FROG.OQ - Q2 2025 Jfrog Ltd Earnings Call The other thing around it is that it opened door to better integration and better partnership with companies like GitHub, with companies that are doing CI/CD on top of the source code. And I think it's also accelerated the partnership and the go together to the market without confusing our customers.

Question: Andrew Sherman - Cowen and Company LLC - Analyst : Congrats. Shlomi, it would be great to hear more about the pipeline of large enterprise deals. It sounds like you had some in the quarter. It would be great to hear more about those, maybe about this Curation telco big deal. What do they find so compelling? And can that be a good indicator of deals to see in the second half? Shlomi Ben-Haim - Jfrog Ltd - Chairman of the Board, Chief Executive Officer, Co-Founder Yeah. Well, thank you, Andrew. Our pipeline is obviously being focused on executing big deals that are combining three factors. Factor number one, migrating to the cloud some workloads and making sure that we are working with our customers in full partnership to have the right commitment. As you know, our guidance are based on commitments and not usage. Second thing, the addition of security, holistic software solution for all the software supply chain in terms of security. One of the things that we noted is this big telecommunication company that added on top of JFrog Advanced Security added JFrog Curation as their firewall for binaries between the public hub and their internal software supply chain. And this new emerged solution coming from JFrog -- and based on the same practices of every Ops is the MLOps, managing your models, 360 all the way to deployment as part of one unified platform. This all goes to the differentiator, super strong differentiator that we bring, which is Artifactory as a centerpiece, the model registry, the system of record for the platform. And on top of that, we build capabilities. So in terms of the pipeline moving forward in the second half of the year, we are very positive. We keep the conservative way of looking at the pipeline and derisking the big deals that might move a week or a month here or there. And we are very positive and based our guidance based on what we've seen.

Question: Miller Jump - Truist Securities - Analyst : Thank you for taking the questions and congratulations on the strong results. I just want to stay with this idea of Artifactory getting used as the centerpiece and as a model registry for customers. Can you just talk about the consumption trends that you see when customers make this decision? Is there like a notable step-up or acceleration that's being driven there? Shlomi Ben-Haim - Jfrog Ltd - Chairman of the Board, Chief Executive Officer, Co-Founder Absolutely, Miller. Listen, you guys remember that JFrog started as a software package and artifact repository company. And then 2014 to 2016, Docker changed every developer's life with bringing containers in. And JFrog became the biggest container registry of the world, the biggest Docker registry of the world. What we are now facing is an amazing opportunity because AI models are yet another binary. So part of our strategy is to become the model registry of the world. And by that, we are not only supporting software packages, containers, and all type of artifacts, but also models as the infrastructure of the primary asset of AI. That means that most of our customers, when they are now looking at the need for model registry because everybody is implementing AI, when they are looking at the need for a model registry, they actually have two choices: A, to consolidate it around one system of record, one single source of tools, which is Artifactory, with all other 30 packages; or to have a standalone model registry, which will break the system of record rule to keep your company safe, secure, and efficient when you build software and release software. That we estimate -- AI is a big, big world today. But we estimate that, that will not only contribute to the stickiness of the platform and the expansion of the platform. With all the add-ons that we added on top of Artifactory, it will also position JFrog as a centerpiece of your software supply chain because there is no primary asset, no other primary asset, but models in the world of AI. And it doesn't matter if software is being created by human beings or by agents, it will still require a system of record. So to your question, we assume that the need for Artifactory and the fact that it's playing a centerpiece will only grow.

Question: Kingsley Crane - Canaccord Genuity Corp - Analyst : Congrats on the quarter. First question, so with AI enabling smaller teams to ship code faster, do you see a world where JFrog becomes even more critical to smaller orgs and teams? And are you already starting to see that with some new customer interest? Shlomi Ben-Haim - Jfrog Ltd - Chairman of the Board, Chief Executive Officer, Co-Founder What a great question, Kingsley. And I think that what we see today is that something fundamental has been changed. First of all, if you were a developer yesterday, you had your IDE, you had your CI/CD source code and JFrog, fine.Now there is a new piece. It's called code assistance. So it's not only you. There is a code assistance next to you. And the second piece is the architecture that was changed as well with MCP. This is how you build platform today. In both cases and with every environment that you will have, cloud, on-prem, this AI or another, this code assistance or another, you will still need a model registry, it's fundamental. And you will still need to manage your security around one flow, one pipeline. Therefore, we see JFrog stepping in in a very kind of strong infrastructure role, and we are betting on that and with the expertise that we built through our deals.

Question: Mark Cash - Raymond James - Analyst : Shlomi, if I could start with you. I wanted to ask on the overconsumption happening in the cloud. I think last quarter, you talked about how you didn't really see the budgets that may have been developers experimenting here and there. And you have another really strong performance this quarter and seeing success with converting to larger commits. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 07, 2025 / 9:00PM, FROG.OQ - Q2 2025 Jfrog Ltd Earnings Call So has there been a change in budgets? And are you seeing experimentation move to actual programs now? Shlomi Ben-Haim - Jfrog Ltd - Chairman of the Board, Chief Executive Officer, Co-Founder Yeah, Mark, so you remember very well. First of all, we see more usage, mainly around -- when you use JFrog infrastructure for your models, so there will be more data consumption, there will be more storage consumption. Same thing for containers and everything that has to do with AI, if you refer to this specifically. You have to remember that our strategy is that every time that we see an over usage on top of the commitment of the customer, our team is being sent to offer a better deal for the customer and to get an annual commitment. This is how we guide you. This is how we preserve our conservatism and keep ourselves in line with the plans. But overall, we see a healthy consumption, not yet in the days of 2022, but we see a healthy growing consumption.

Question: Zachary Schneider - Robert W. Baird & Co Inc - Analyst : This is Zach Schneider on for Shrenik. Thanks for taking our questions and congrats on the strong results. So following up on a previous question with cloud adoption continuing and DevSecOps needs shifting earlier in the life cycle, how are you leveraging your hyperscaler partnerships for co-sell marketplace attach? Maybe what percent of new security wins in the quarter were sourced via these marketplaces or just driven by this channel influence? Shlomi Ben-Haim - Jfrog Ltd - Chairman of the Board, Chief Executive Officer, Co-Founder Yeah, Shrenik (sic - "Zach"), this is Shlomi. I'll take the call, and Ed, feel free to chime in. The collaboration with the cloud providers is very important because of two reasons: A, it helps us to accelerate deals, especially mega deals that are coming in, that mainly through the marketplace and with a lot of collaboration from AWS, GCP, and Microsoft Azure. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 07, 2025 / 9:00PM, FROG.OQ - Q2 2025 Jfrog Ltd Earnings Call We have strong relationship with them. Some of the deals we are accelerating together. This is not just co-sell and partnership. This is also kind of co-services even when we are going with the customer, scaling with the customer. The second side of it is obviously optimizing the cost. As Ed mentioned on the call, we are optimizing the contracts with this hyperscaler. We are looking at the gross margin, being very responsible to how we grow in the cloud. So not just pushing the pedal all the way down, but also to do it in a responsible, smart way.

Question: Jonathan Ruykhaver - Cantor Fitzgerald LP - Analyst : Can you hear me? Shlomi Ben-Haim - Jfrog Ltd - Chairman of the Board, Chief Executive Officer, Co-Founder Oh, we can hear you now, Jonathan.

Question: Jonathan Ruykhaver - Cantor Fitzgerald LP - Analyst : Yeah. And Shlomi, as a quick follow-on, where do you see this opportunity? Will it be aimed more at the foundational model providers like OpenAI and Anthropic or large enterprise or both? Shlomi Ben-Haim - Jfrog Ltd - Chairman of the Board, Chief Executive Officer, Co-Founder No, it's not at all one company or another. Every agent, you can assume that in the future -- or not in the future, it's already in the present, but it will exceed in the future. Not only developers will write code, but also agents. So if I want this new persona to see JFrog as a system of record, I have to open the door for it. So every type of Agentic AI that will interact with JFrog will come through an MCP integration. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 07, 2025 / 9:00PM, FROG.OQ - Q2 2025 Jfrog Ltd Earnings Call

Question: Eamon Coughlin - Barclays Services Corp - Analyst : This is Eamon Coughlin on for Raimo, Thanks for taking the question and a great quarter. Can we dig a little deeper into linearity in the quarter? Should we view 2Q's performance broadly as a continuation of the customer usage from Q1? And did you see a continuation of these trends in July?

Question: Eamon Coughlin - Barclays Services Corp - Analyst : Got it. Thanks. That's super helpful. And then great to see continued cloud growth acceleration in the quarter. But can you help us understand the key drivers of your subscription self-managed portfolio? Shlomi Ben-Haim - Jfrog Ltd - Chairman of the Board, Chief Executive Officer, Co-Founder Yeah. Why don't I answer it here? Self-managed, we addressed that on the call as well. There is a new trend now that AI might need a hybrid solution. Now what can be better than an identical product, hybrid means that it's identical in the cloud and on-prem? So that's a new trend, mainly driven by the AI adoption and the seek for cost predictability and stability. The second thing that we see in the on-prem is just like what Ed mentioned in the cloud. Our on-prem customers are also looking for security. So the fact that we have our security available for you in the cloud, but also as a self-hosted or private cloud is also a benefit, and we see that this growth generated by these trends as well.

Question: George McGreehan - BofA Global Research - Analyst : This is George McGreehan on for Koji. I just wanted to ask with the strong momentum we're seeing in security deals and how that's contributing to forward-looking metrics like the acceleration in RPO, what would you say, is there any change in the competitive landscape for security? And any notable changes in win rates? And how really are the tone of conversations with customers now when you're talking about security deals versus maybe in the past year or two years ago? Shlomi Ben-Haim - Jfrog Ltd - Chairman of the Board, Chief Executive Officer, Co-Founder Yeah. Thank you, George, for this question. It comes in two different ways, as I mentioned, and as you know, on the JFrog go-to-market strategy with security. First of all, our customers, whether it's the CSO or the CIO or both, they are asking to look for consolidation, and they will push very hard on it, not only because of the cost benefit from it, but also from the enormous number of scanners that they used to have just two years ago, three years ago. Every developer bought another tool, every compliance group bought another tool. It became a zoo of scanners, and they are looking for consolidation and obviously also benefiting from the efficiency and the cost perspective. This is more business side and management side. What happened on the technology side is that there are a lot of new threats that cannot be identified by the previous software that covered software supply chain security. If you remember what we spoke about in the previous quarter, the fact that we scanned the entire Hugging Face 1.5 models and provided not only vulnerability findings, but also contextual analysis, telling you not only that we found this vulnerability that maybe every scanner can find, but also how exposed are you to this risk and if you should waste time on doing it. And the third thing is that modern security is a new thing. Nobody know really how to cover it. And since models are hosted at JFrog, and also the data, the metadata that you train models with, we have better access to this asset and better visibility to this asset. And I would welcome you to swampUP when we will speak about it even more and even share some great innovations with you to address this pain. There is no CSO in today's world that is not waking up at night several times because of model security. And I think that this is another driver that pushes JFrog to be a relevant player, not only in the world of DevSecOps, but in the world of MLSecOps as well.

Question: William Mandl - KeyBanc Capital Markets - Analyst : This is Billy on for Jason Celino. Shlomi, it sounds like there's strong demand for the security core, but curious what customer reception has been around runtime security, maybe how that is contributing to the strength you're seeing in your security business. Shlomi Ben-Haim - Jfrog Ltd - Chairman of the Board, Chief Executive Officer, Co-Founder Yeah. Hi, Billy. I think that cyber is important. Run time is important, and DevSecOps and software supply chain is important. This is a complementary solution. We were all very excited to see the acquisition of Palo Alto, which emphasized their advantage in the world of cyber and run time. And if you look at the growing demand for software supply chain security, it's coming from a different threat and a different need. And I think that they will co-exist together. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 07, 2025 / 9:00PM, FROG.OQ - Q2 2025 Jfrog Ltd Earnings Call

Question: Robbie Owens - Piper Sandler - Analyst : Obviously, very exciting about the security success that you guys are seeing here. Curious if you look at those deals. I know you're going to give us more information around attach rates at year's end, but any sense that you can give us in terms of what this is doing to pricing, especially as you're