4. JFrog Ltd. (NASDAQ:FROG)
Number of Hedge Fund Holders: 32
3-Year Revenue Growth: ~25.9%
% Increase on a YTD Basis: ~27.04%
JFrog Ltd. (NASDAQ:FROG) offers a software supply chain platform. Analyst Mike Cikos from Needham maintained a “Buy” rating on the company’s stock, while keeping the price objective at $46.00. The analyst’s rating is backed by the company’s impressive financial performance, evidenced by its healthy revenue growth and strong increase in remaining performance obligations. In Q1 2025, JFrog Ltd. (NASDAQ:FROG)’s revenue came in at $122.4 million, reflecting a rise of 22% YoY, while its remaining performance obligations sat at $424.2 million as of March 31, 2025.
Furthermore, JFrog Ltd. (NASDAQ:FROG)’s net dollar retention rate remained stable at 116%, exhibiting its ability to retain and expand within the existing customer base, added the analyst. The continuation of multi-year deals cements its resilient business model, aiding the analyst’s rating. JFrog Ltd. (NASDAQ:FROG)’s customers with over $100K ARR rose to 1,051 as compared to 911 in the year-ago period. During Q1 2025, the company saw cloud momentum fueled by increased usage, it accelerated full-platform adoption, and continued to witness growth in its security core.
Baron Funds, an investment management company, released its Q4 2024 investor letter. Here is what the fund said:
“We initiated a position in JFrog Ltd. (NASDAQ:FROG), a leading provider of software tools that help developers manage, secure, and release modern software applications. JFrog’s flagship product, Artifactory, is a universal repository that stores and manages the “binaries” – the machine-readable files that applications rely on to run in production. As companies build increasingly complex applications with numerous dependencies and components from open-source libraries, managing these binaries has become mission-critical. JFrog simplifies this complexity by offering a centralized solution to store, track, and secure all software binaries, ensuring consistent deployments and faster development cycles. The company also provides adjacent security tools, such as JFrog Xray and Advanced Security, which continuously scan these binaries for vulnerabilities and policy violations, ensuring that only safe, compliant software reaches production.
JFrog has established itself as the industry standard in binary management, serving more than 7,000 customers, including 83% of the Fortune 100, the top 10 global technology corporations, the largest 10 financial institutions, and 9 of the top 10 health care organizations. The company is gaining market share from smaller competitors in the binary category due to its breadth and depth of coverage – Artifactory supports over 30 different package formats and programming languages (far more than competitors), while offering more efficient storage, deeper security context, and tighter integrations with other developer tools. Once adopted, JFrog delivers measurable ROI for customers by freeing up developer time, reducing complexity, and preventing costly security breaches. This has driven industry-leading customer gross retention rates of 97%, and solid 117% net expansion rates as customers expand their usage and adopt more product modules. 46 customers each spend more than $1 million annually on the platform. JFrog’s stickiness and strong developer brand awareness produce healthy unit economics, with trailing-twelve-month free cash flow margins more than doubling over the past two years to 22% as of the latest reported quarter.
Looking ahead, we believe JFrog can sustain healthy growth as generative AI adoption accelerates, driving the need to manage new binary types (e.g., large language model artifacts) and increasing overall application complexity. Additionally, we expect average deal sizes to grow as customers adopt higher-priced products like Advanced Security and migrate to JFrog’s cloud offering, which typically yields a 20% to 80% uplift in pricing. This combination of pricing power and operating leverage should drive strong free cash flow growth over time, which we believe will bode well for the stock.”
