What happened

JFrog (NASDAQ:FROG) stock surged higher Friday morning, rising by 13% as of 11 a.m. EDT. After the bell on Thursday, the software development tool specialist announced surprisingly strong third-quarter sales and issued a more bullish outlook for the full year.

So what

Sales increased by 38% year over year in Q3, an acceleration over the prior quarter's 34% boost. JFrog noted strength across several key growth metrics, including average contract renewal size, recurring revenue, and the size of the customer base.

A man at work at an office.

Image source: Getty Images.

In a press release, management said it was especially pleased with the company's success at attracting larger enterprise clients. JFrog added 466 new customers with annual contract values over $100,000. "We successfully delivered on numerous fronts," CEO Shlomi Ben Haim said, "including technology innovation, revenue growth, cloud expansion, net dollar retention, and gross margin."

JFrog continued to post net losses on a GAAP basis, though, and cash flow remained in negative territory.

Now what

Nonetheless, investors were happy to hear that executives expect the sales momentum to continue through the close of the current year. Sales are on pace to land between $205 million and $206 million in 2021, management said, up from the prior forecast range of $202 million to $205 million.

The earnings picture brightened a bit, too. The company now expects to book an operating profit on a non-GAAP basis; previously it was predicting non-GAAP losses of as much as $5 million. Combined with the improved growth outlook, this update means JFrog shareholders can reasonably expect better operating trends at least through the start of 2022.

Considering that the stock has trailed the market so far this year, it's understandable that its good report was enough to push shares significantly higher on Friday.

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