JFrog (FROG) expects its cloud business to accelerate to 50% as the infrastructure software industry exhibits fundamental strength, Morgan Stanley said Friday in a note.
The brokerage expected Q1 to be seasonally softer, but segment results were overshadowed by the announcement of a 7-year, $1.8 billion cloud infrastructure commitment by Akamai Technologies (AKAM), the brokerage said.
For Q2, management guided for revenue of $1.08 billion to $1.10 billion, modestly below Street's 6.1% growth estimate, while EPS guidance of $1.45 to $1.65 also came in below the $1.68 consensus as co-location, GPU, depreciation, and GTM investments ramp up, according to the note.
For 2026, revenue guidance rose to $4.45 billion to $4.55 billion, while EPS was guided to $6.40 to $7.15. The key assumption change was CIS, where management expects at least 50% growth for the year, with momentum building in H2 as the $200 million contract contributes nearly $15 million and the new $1.8 billion contract adds about $20 million to 25 million in Q4, the brokerage said.
Morgan Stanley sees the growing CIS business as a clear positive for the multi-year acceleration thesis, with double-digit total revenue growth now expected in 2027.
Morgan Stanley kept an overweight rating on JFrog and raised the price target to $80 from $70.
Shares of JFrog rose more than 18% in Friday trading.
Price: $66.76, Change: $+9.74, Percent Change: +17.08%