What Happened?
Shares of software development tools maker JFrog (NASDAQ: FROG) jumped 10.2% in the afternoon session after the company reported a "beat and raise quarter." First quarter 2025 results included convincing beats on revenue and operating income. Sales rose 22%, led by cloud revenue, which grew 42%. Big clients continued to spend more, with $1 million+ customers up 35% from last year. In addition, full-year sales, adjusted operating income, and EPS guidance topped analysts' expectations and were slightly lifted from the previous outlook. Overall, this was an impressive quarter.
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What The Market Is Telling Us
JFrog’s shares are quite volatile and have had 17 moves greater than 5% over the last year. But moves this big are rare even for JFrog and indicate this news significantly impacted the market’s perception of the business.
The biggest move we wrote about over the last year was 9 months ago when the stock dropped 31.9% on the news that the company reported weak second quarter 2024 results. Its full-year revenue guidance was lowered by 1% and came in below expectations. Also, its revenue guidance for the next quarter missed Wall Street's estimates. Profitability was also expected to be pressured, with adjusted operating income for the next quarter and full year below consensus.
Management called out a challenging macro, which led to "projects being delayed, stricter budget environment, rigid procurement process." Cloud migrations were also slower during the quarter, and this delayed the anticipated spending uplift from on-prem to Cloud migrations. Overall, this was a weak quarter for JFrog, with the below-consensus outlook weighing heavily on the stock.
JFrog is up 27.5% since the beginning of the year, and at $39.14 per share, it is trading close to its 52-week high of $42.03 from February 2025. Investors who bought $1,000 worth of JFrog’s shares at the IPO in September 2020 would now be looking at an investment worth $604.13.
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