JFrog NASDAQ: FROG said its latest quarterly results reflected continued growth in cloud usage, security adoption and enterprise spending, with management highlighting the company’s role in handling the growing volume of software artifacts generated by artificial intelligence-driven development.
At the Canaccord Genuity Growth Conference, Chief Financial Officer Ed Grabscheid said JFrog delivered 29% top-line growth during the quarter, while cloud revenue rose 53%. He attributed the performance to security demand, customers exceeding minimum cloud commitments and expansions into higher annual commitments.
“Security continues to be a significant growth driver for the company,” Grabscheid said, adding that the company also saw strong cloud-product usage across its portfolio. He said the company had expected the operational trends, though investors and analysts may have been more surprised by the strength of the results.
AI Development Drives More Artifacts
Management repeatedly pointed to the effect of AI coding tools and agents on software development volumes. Grabscheid said organizations are increasingly operating as “software factories” that move at the speed of machines, resulting in more code creation and, consequently, more binaries and other artifacts.
JFrog views its Artifactory product as a system of record not only for software binaries but also for large language models, model context protocol, or MCP, connections and agent skills registries, according to Vice President of Investor Relations Jeff Schreiner.
Schreiner said customers have begun looking to host agent skills and MCP connections in Artifactory. He also noted that AI models can create different storage dynamics because earlier model versions may need to be retained rather than deleted.
“The models are becoming first-class binaries because they’re, in fact, the largest form of a binary,” Schreiner said.
The company has introduced integrations with Claude Code and Cursor, which Schreiner said are intended to let customers integrate JFrog’s tools with their preferred coding agents. Through native integrations, customers can use JFrog Curation to scan packages that agents may pull during software builds, including packages from repositories such as PyPI, Go and npm.
Cloud Consumption and Commitments
Grabscheid said cloud usage trends have changed materially over the past three quarters, with customers consuming above their minimum commitments. He said the elevated usage level seen in the first quarter remained consistent in the second quarter and extended broadly across the product portfolio.
According to Grabscheid, reduced friction between developers and budget holders, along with shifting technology budgets to support AI spending, has helped support consumption. JFrog’s model allows customers to use more than their contracted minimums at an overage rate, which the company recognizes as revenue.
Management said its sales team is working to convert elevated usage into higher annual commitments, but does not intend to force customers to make such changes before their budgeting and renewal processes support them. Grabscheid said JFrog expects customers to recommit at higher levels as organizations plan for 2027, potentially improving revenue durability and predictability.
Security Adoption Gains Momentum
Security has shifted from an attached product to a leading component of JFrog’s customer discussions, executives said. Grabscheid said security was included in 80% of the company’s $1 million customer cohort wins during the quarter, while 40% of new customers landed with security.
He said buyer conversations increasingly begin with security rather than Artifactory, as customers focus on protecting software supply chains. JFrog’s security offerings include Curation, which manages what packages or models are permitted to enter an organization, and Advanced Security, which is integrated with Artifactory.
Grabscheid said Curation is particularly important because it operates outside an organization’s firewall and can apply centralized policies to open-source packages and models. Schreiner said JFrog believes its native integration and scalability differentiate it from point-solution competitors.
- Security contributed to 80% of the company’s $1 million cohort wins, management said.
- Forty percent of new customers adopted security products.
- Management said Curation is a primary asset in new security customer wins.
OpenAI Relationship and Profitability Approach
JFrog disclosed that OpenAI is a customer after previously being unable to identify the company publicly. Grabscheid said OpenAI used a self-hosted JFrog environment in connection with a reported sandbox incident involving Hugging Face and an Artifactory zero-day vulnerability. He said JFrog and OpenAI worked to remediate, patch and distribute an update.
Grabscheid said the episode highlighted a difference between self-hosted and cloud deployments: cloud customers receive updates immediately, while self-hosted customers may take days to apply remediation. He said the situation could help revive cloud-migration discussions as customers assess their AI deployment strategies.
Management also emphasized its effort to balance growth and profitability. The operator cited high-20% growth and a 33% free-cash-flow margin for the quarter. Grabscheid said JFrog’s philosophy has been to maintain a balance between growth and profitability, though the company would consider giving up a point of margin to accelerate growth.
On guidance, Grabscheid said JFrog has sought to account conservatively for variability from large enterprise deals and cloud usage above minimum commitments. He said the company’s cloud guidance represented a 34% to 42% range at the midpoint, while its net dollar retention rate floor was increased to 120%.
About JFrog (NASDAQ:FROG)
JFrog is a software company specializing in DevOps solutions designed to streamline the management, distribution and security of software binaries. Its core offering, JFrog Artifactory, serves as a universal artifact repository manager compatible with all major package formats, enabling development teams to store, version and share build artifacts across the software delivery pipeline. The company's platform also includes tools for continuous integration and delivery (CI/CD), security scanning and release automation.
Among JFrog's flagship products are JFrog Xray, a security and compliance scanning service that analyzes artifacts and dependencies for vulnerabilities; JFrog Pipelines, a CI/CD orchestration engine that automates build and release workflows; and JFrog Distribution, which accelerates the secure distribution of software releases to edge nodes and end users.
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