Inside a $31 Million Vote of Confidence in JFrog Amid a 119% Surge

On November 13, New York City-based Shannon River Fund Management disclosed a purchase of 647,140 shares of JFrog Ltd. (NASDAQ:FROG), boosting its position by approximately $31.38 million.

What Happened

According to a Securities and Exchange Commission (SEC) filing dated November 13, Shannon River Fund Management LLC increased its stake in JFrog Ltd. (NASDAQ:FROG) by 647,140 shares during the third quarter. The value of the fund’s position rose by $31.38 million, bringing its total holding to 863,924 shares worth $40.89 million as of September 30.

What Else to Know

This purchase raised JFrog Ltd. to 6.58% of the fund’s 13F AUM, but it remains outside the top five reported holdings.

Top holdings after the filing:

• NASDAQ:PEGA: $79.59 million (12.8% of AUM)
• NASDAQ:TSEM: $69.56 million (11.2% of AUM)
• NASDAQ:IDCC: $61.70 million (9.9% of AUM)
• NASDAQ:WIX: $58.63 million (9.4% of AUM)
• NASDAQ:FLEX: $49.24 million (7.9% of AUM)

As of Wednesday, JFrog Ltd. shares were priced at $66.81, up 119% over the past year and well outperforming the S&P 500, which is up 15% in the same period.

Company Overview

Company Snapshot

• JFrog Ltd. offers a comprehensive DevOps platform, including products such as Artifactory (package repository management), Pipelines (CI/CD automation), Xray (security scanning), and device management solutions for IoT fleets.
• JFrog serves technology, financial services, retail, healthcare, and telecommunications organizations seeking to streamline and secure their software supply chains.
• The company operates a subscription-based business model, generating revenue from software licenses, support services, and enterprise solutions for both cloud and on-premises deployments.

JFrog Ltd. is a technology company specializing in software development lifecycle solutions with a focus on automating, securing, and managing the delivery of software at scale. Its platform is widely adopted by enterprise clients requiring robust DevOps infrastructure to support continuous integration and delivery. The company's strategy centers on providing end-to-end tools that address critical needs in software package management, security, and distribution.

Foolish Take

JFrog’s performance in the third quarter shows why a fund might be leaning in amid some pretty staggering gains. In its latest results, the company delivered $136.9 million in revenue, up 26% year over year, with cloud revenue jumping 50% and now accounting for nearly half of total sales. Non-GAAP operating income came in at $25.6 million, translating to an 18.7% margin, while free cash flow reached $28.8 million for the quarter. Net dollar retention held at a strong 118%, and the number of customers spending more than $1 million annually climbed to 71. Those metrics are the markers of a platform becoming embedded.

So how does that compare to the fund? Its largest holdings include mature compounders like Pegasystems and Tower Semiconductor, and making JFrog a mid-single-digit percentage of assets suggests confidence in durability, not a short-term trade.

Nevertheless, valuation risk is real after a 119% run, but businesses that combine accelerating cloud adoption, expanding enterprise spend, and rising cash generation rarely get cheap again once the market fully catches on.

Glossary

13F: A quarterly report filed by institutional investment managers disclosing their equity holdings to the SEC.
Assets Under Management (AUM): The total market value of investments managed by a fund or investment firm.
Position: The amount of a particular security or asset held by an investor or fund.
Top Holdings: The largest investments in a fund's portfolio, typically ranked by value.
DevOps: A set of practices combining software development and IT operations to shorten development cycles and improve reliability.
CI/CD: Continuous Integration and Continuous Delivery/Deployment; automating software building, testing, and releasing processes.
Package Repository Management: Tools or systems for storing, organizing, and distributing software packages used in development.
Security Scanning: Automated analysis of software for vulnerabilities or security risks.
IoT Fleets: Groups of Internet of Things (IoT) devices managed collectively, often remotely.
Software Supply Chain: The sequence of processes involved in developing, securing, and delivering software products.
End-to-End Tools: Solutions covering all stages of a process, from start to finish, within a workflow.
TTM: The 12-month period ending with the most recent quarterly report.

Jonathan Ponciano has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Wix.com. The Motley Fool recommends Flex and JFrog. The Motley Fool has a disclosure policy.