Software development tools maker JFrog (NASDAQ:FROG) missed analysts' expectations in Q2 CY2024, with revenue up 22.4% year on year to $103 million. Next quarter's revenue guidance of $105.5 million also underwhelmed, coming in 2.2% below analysts' estimates. It made a non-GAAP profit of $0.15 per share, improving from its profit of $0.11 per share in the same quarter last year.
Is now the time to buy JFrog? Find out by accessing our full research report, it's free.
JFrog (FROG) Q2 CY2024 Highlights:
- Revenue: $103 million vs analyst estimates of $103.6 million (small miss)
- Adjusted Operating Income: $13.62 million vs analyst estimates of $13.46 million (1.1% beat)
- EPS (non-GAAP): $0.15 vs analyst expectations of $0.14 (in line)
- Revenue Guidance for Q3 CY2024 is $105.5 million at the midpoint, below analyst estimates of $107.9 million
- The company dropped its revenue guidance for the full year from $427.5 million to $423 million at the midpoint, a 1.1% decrease
- Gross Margin (GAAP): 78.8%, in line with the same quarter last year
- Free Cash Flow of $15.97 million, similar to the previous quarter
- Net Revenue Retention Rate: 118%, in line with the previous quarter
- Customers: 928 customers paying more than $100,000 annually
- Billings: $113.2 million at quarter end, up 25.5% year on year
- Market Capitalization: $3.70 billion
"We are on a mission to revolutionize the software industry with a unified platform that encompasses EveryOps and streamlines the software supply chain flow," said Shlomi Ben Haim, Co-founder and CEO of JFrog.
Named after the founders' affinity for frogs, JFrog (NASDAQ:FROG) provides a software-as-a-service platform that makes developing and releasing software easier and faster, especially for large teams.
Developer Operations
As Marc Andreessen says, "software is eating the world" which means the volume of software produced is exploding. But building software is complex and difficult work which drives demand for software tools that help increase the speed, quality, and security of software deployment.
Sales Growth
As you can see below, JFrog's 30.5% annualized revenue growth over the last three years has been impressive, and its sales came in at $103 million this quarter.
Even though JFrog fell short of analysts' revenue estimates, its quarterly revenue still grew a very solid 22.4% year on year. However, its growth did slow down a little compared to last quarter as the company increased revenue by $2.73 million in Q2 compared to $3.05 million in Q1 CY2024. While we'd like to see revenue increase by a greater amount each quarter, a one-off fluctuation is usually not concerning.
Next quarter's guidance suggests that JFrog is expecting revenue to grow 19% year on year to $105.5 million, slowing down from the 23.1% year-on-year increase it recorded in the same quarter last year. Looking ahead, analysts covering the company were expecting sales to grow 20.7% over the next 12 months before the earnings results announcement.
Unless you’ve been living under a rock, it should be obvious by now that generative AI is going to have a huge impact on how large corporations do business. While Nvidia and AMD are trading close to all-time highs, we prefer a lesser-known (but still profitable) semiconductor stock benefitting from the rise of AI. Click here to access our free report on our favorite semiconductor growth story.
Large Customers Growth
This quarter, JFrog reported 928 enterprise customers paying more than $100,000 annually, an increase of 17 from the previous quarter. That's a bit fewer contract wins than last quarter and quite a bit below what we've typically observed over the past four quarters, suggesting that its sales momentum with large customers is slowing.
Key Takeaways from JFrog's Q2 Results
We enjoyed seeing JFrog exceed analysts' billings expectations this quarter. On the other hand, its full-year revenue guidance was lowered by 1% and came in below expectations. Also, its revenue guidance for next quarter missed Wall Street's estimates. Overall, this was a weak quarter for JFrog with the below-Consensus outlook weighing heavily on the stock. The stock traded down 24.3% to $25.76 immediately after reporting.
JFrog may have had a tough quarter, but does that actually create an opportunity to invest right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.