By the way (FROG -6.42%)leader in DevOps and software supply chain solutions, released its third quarter results on November 7. The company reported total revenue of $109.1 million, beating management’s guidance range of $105 million to $106 million. While revenue growth was robust at 23% year-on-year, the company faced continued challenges in profitability, posting a GAAP operating loss of $29.9 million, compared to a loss of $18.1 million in the prior year period. However, non-GAAP earnings per share came in at $0.15, above the guidance range of $0.09 to $0.11.

Source: Management guidance from the second quarter report published on August 7.

JFrog Business Overview

JFrog stands out in the technology sector with its Universal Software Supply Chain Platform, which provides end-to-end management of software release processes. This integrated platform supports diverse environments, providing flexibility and scalability that meet modern business needs for continuous software delivery.

In recent years, JFrog has focused on expanding its platform capabilities in areas such as security with JFrog Xray and JFrog Advanced Security. Integration with third-party technologies remains a key attribute, increasing its appeal in various IT environments. As JFrog expanded, challenges related to profitability and operational efficiency took center stage, influencing its strategic priorities.

Financial and product developments in Q3 2024

In Q3 2024, JFrog continued to expand its market presence through innovative solutions. Cloud revenue grew and provided 39% of total revenue. This growth underscores a strategic focus on migrating enterprises to cloud solutions. While it beat revenue expectations, from a profitability perspective, results worsened as the GAAP operating loss of $29.9 million widened from the $18.1 million loss in Q3 2023. Operating margins remained flat into negative territory, signaling continued cost pressures, possibly related to expansion and investment efforts.

JFrog’s non-GAAP gross margin fell slightly from 83.7% in 2023 to 82.8%. The company reported non-GAAP diluted earnings per share of $0.15, beating the guidance range of $0.09 to $0.11, showing that while challenges remain, cost control efforts positively impacted bottom line performance .

On the product side, JFrog announced platform enhancements during the quarter, such as the release of JFrog Runtime Security and MLOps capabilities. Additionally, it gained traction among enterprise customers as the number of customers delivering over $1 million in annual recurring revenue increased from 30 to 46 year-over-year. This reflects JFrog’s robust value proposition in the DevOps space.

Notably, the company’s net dollar retention rate was 117%, highlighting its ability to maintain and grow relationships with its existing customer base — a vital metric for subscription-based businesses. However, it reported a 0.9 percentage point decline in its non-GAAP gross margin year over year to 82.8%.

JFrog posted free cash flow of $26.7 million, supported by operating cash flow of $27.6 million. The company’s balance sheet remained strong, with cash, cash equivalents and investments totaling $467.8 million, positioning JFrog well to make strategic investments and weather potential market disruptions.

Strategic perspectives and considerations

For the fourth quarter, JFrog management anticipates flat revenue growth in the range of $113.5 million to $114.5 million and non-GAAP operating income of $14 million to $15 million. This outlook is based on its ongoing plans to expand the platform, even as macroeconomic pressures are expected to continue to affect customer purchasing dynamics.

Strategically, JFrog aims to foster partnerships with companies such as Nvidia (NVDA -0.95%) to strengthen their offerings in secure machine learning models — a key path to growth. It raised its full-year revenue guidance to a range of $425.9 million to $426.9 million (from $422 million to $424 million previously), along with non-GAAP net income per diluted share of $0.59 to $0.61 (from $0.54 to $0.56 previously). ). This reflects management’s confidence in JFrog’s strategic positioning in the dynamic software supply chain sector, maintaining a focus on platform evolution and enterprise engagement.