Okta Stock Soars 15% as AI Security Threat Drives Identity Protection Demand, Q2 Revenue Tops $805M

Okta pops 15% after topping estimates as AI threat spikes demand for identity security

* Okta topped Wall Street's fiscal second-quarter estimates. * The identity security company is benefiting from the growth of agentic AI. * CEO Todd McKinnon told CNBC that the agentic AI security opportunity is still "very early." In this article * OKTA Follow your favorite stocksCREATE FREE ACCOUNT Todd McKinnon, chief executive officer of Okta Inc., during a Bloomberg Television interview, in London, UK, on Friday, April 11, 2025. Chris J. Ratcliffe | Bloomberg | Getty Images Okta shares gained about 15% in extended trading after the identity software provider surpassed Wall Street's fiscal second-quarter estimates. Here's how the company did compared to LSEG estimates: * Earnings per share: $1.05 adjusted vs. 97 cents expected * Revenue: $805 million vs. $795 million expected Revenue rose 11% from $728 million a year ago, Okta said. Net income totalled $116 million, or 65 cents per share, up from $67 million, or 37 cents per share a year ago. During the quarter, Okta made its Okta for AI Agents tool for managing and securing agents widely available to all customers. New products accounted for 30% of total bookings, and Okta said it closed dozens of AI deals, including a multi-million-dollar deal with a healthcare company. The growth of agentic AI and the proliferation of cyber hacks orchestrated by agents are forcing companies to invest in more tools to manage swarms of new identities. CEO Todd McKinnon told CNBC that the agentic AI security opportunity is still "very early" and recent incidents, like the OpenAI Hugging Face hack, are only "catalyzing interest." Read more CNBC tech news "Network is the biggest cyber category now, but if you look out five or 10 years, with millions of agents running around, it's definitely going to be identity," he said. "Not trying to spread ourselves too thinly across all these other categories, I think it's really going to pay off." Against this backdrop, cyber companies have undertaken a massive acquisition spree to scale capabilities to meet new AI threats. That's driven up stock prices of peers like CrowdStrike and Palo Alto Networks to record highs. Okta shares have surged 55% this year. Okta on Wednesday closed its deal for threat detection startup Permiso Security, valued at roughly $200 million. McKinnon said Okta will continue leaning into smaller acquisitions that complement its current stack. "You'll see us do more of these tuck-in things," he said. "We're not going to buy some big legacy company just to have more revenue." Remaining performance obligations, or subscription backlog, jumped 17% year over year to $4.86 billion, surpassing a $4.70 billion estimate from analysts polled by StreetAccount. Current remaining performance obligations, or subscription backlog to be recognized in the next 12 months, rose 14% to $2.59 billion. The company bumped up its full-year guidance. Okta now expects revenue in the range of $3.22 billion and $3.23 billion. That's up slightly from the roughly $3.19 billion to $3.21 billion provided last quarter and a $3.2 billion estimate from LSEG. Adjusted earnings are expected to range between $3.90 and $3.94 per share, versus a $3.84 estimate from Wall Street. Stock Chart IconStock chart icon Okta stock chart Choose CNBC as your preferred source on Google and never miss a moment from the most trusted name in business news.

Okta Q2 FY27 slides: AI security focus drives 19% stock surge By Investing.com

Okta (NASDAQ:OKTA) presented its second quarter fiscal 2027 results on August 26, 2026, revealing stronger-than-expected performance that sent shares surging 19.4% in after-hours trading to $160.45. The identity security company's investor presentation highlighted accelerating demand across its core business and emerging AI-focused products, with total revenue of $805 million beating Wall Street forecasts. The stock's after-hours jump pushed shares above their 52-week high of $157, reflecting investor enthusiasm for the company's execution and growth trajectory. Regular session trading had already closed 2.92% higher at $134.42 before the presentation materials were released. Quarterly Performance Highlights As shown in the following comprehensive financial metrics table, Okta delivered solid growth across key performance indicators in Q2 FY27. The company reported total revenue of $805 million, representing 11% year-over-year growth, while subscription revenue climbed 12% to $793 million. Remaining performance obligations (RPO) reached $4.858 billion, up 17% year-over-year, with current RPO growing 14% to $2.585 billion. Profitability metrics showed continued improvement, with non-GAAP operating margin expanding to 28.2%, up 0.5 percentage points from the prior year. Free cash flow margin jumped 5.8 percentage points to 28.1%, demonstrating significant operational leverage. The following chart illustrates Okta's consistent quarterly revenue growth trajectory over the past three years, with subscription revenue comprising 99% of total revenue in Q2 FY27. Customer metrics reflected solid enterprise traction, with the company serving over 20,000 total customers. The number of customers with annual contract value exceeding $100,000 reached 5,255, growing 6% year-over-year. According to the earnings call, customers with over $1 million in ACV surpassed 600, representing growth of more than 20%. AI Security Strategy Takes Center Stage Okta's presentation emphasized artificial intelligence security as a critical growth driver, with management stating that "the future of technology is agentic." The company has developed a comprehensive portfolio of AI security offerings divided into two main categories. The following diagram details Okta's dual approach to securing AI systems for different customer segments. For IT and security teams, Okta for AI Agents provides an agent registry in Universal Directory, agent detection with Identity Security Posture Management, governance and access certification capabilities, and privileged account credential vaulting. For developers and builders, Auth0 for AI Agents offers authentication, token vault, fine-grained authorization for retrieval-augmented generation, and support for the Model Context Protocol. Chief Executive Todd McKinnon highlighted the business impact of these new products, noting that "in Q2, new products represented approximately 30% of bookings" with an average ACV uplift of about 40% when included in deals. He emphasized that "identity is the primary control plane for securing AI," positioning Okta as customers extend their existing identity platforms to cover AI agents. The company's broader approach to non-human identities is illustrated in the following security framework. This end-to-end security model addresses device identities, virtual machines, service accounts, and OAuth tokens through three pillars: visibility, access control, and governance and remediation. Competitive Positioning Against Microsoft A significant portion of Okta's presentation focused on competitive differentiation versus Microsoft, arguing across four key dimensions why Okta represents "the superior choice." The company emphasized ease of use and time to value, noting that Okta outscores Microsoft 4.5 to 4.1 on Support Experience in Gartner's Voice of the Customer report. Okta also highlighted that over 90% of its admins used MFA before it was mandated, compared to only 34% of Microsoft admin accounts. On execution capabilities, Okta cited its ninth consecutive year as a Leader in Gartner's Magic Quadrant for Access Management and higher rankings than Microsoft across all five use cases in Gartner's Critical Capabilities for Access Management. The presentation noted that Forrester explicitly recommends Okta for enterprises seeking an independent, full-scope workforce IAM platform. Integration depth emerged as another differentiator, with Okta providing "unique and deep integrations that customers want" beyond simple SSO and MFA, including provisioning, entitlements, automation, and Universal Logout. The company argued that Microsoft integrations favor its own platform first, while Okta maintains vendor neutrality. Risk mitigation formed the fourth pillar, with Okta positioning itself as helping customers avoid vendor lock-in. The company's Enhanced Disaster Recovery capability reduces failover time from one hour to less than five minutes. Detailed Financial Analysis Okta's financial performance demonstrated improving operational efficiency across multiple dimensions. The following chart shows the company's RPO growth trajectory, a leading indicator for future subscription revenue. RPO growth of 17% year-over-year to $4.858 billion, with current RPO up 14% to $2.585 billion, suggests healthy future revenue visibility. Management described this cRPO performance as the largest outperformance since fiscal fourth quarter 2025. Customer retention metrics remained solid, as illustrated in the following trailing twelve-month dollar-based net retention rate chart. The net retention rate of 107% in Q2 FY27, up one percentage point year-over-year, indicates that existing customers continue to expand their use of Okta's platform. While this metric has moderated from the 115% level in Q3 FY24, it remains above 100%, demonstrating positive customer expansion dynamics. Large customer growth showed particular strength, as depicted in the following chart tracking customers with over $100,000 in annual contract value. The 6% year-over-year growth to 5,255 customers in this segment, combined with the 20%+ growth in customers exceeding $1 million in ACV, reflects Okta's success in landing and expanding within large enterprises -- one of the company's stated FY27 priorities. Gross margins remained strong and stable, with non-GAAP subscription gross margin reaching 83.9% in Q2 FY27, up 0.2 percentage points year-over-year. Total non-GAAP gross margin of 81.9% reflected the company's pricing power in the identity security market. Operating leverage continued to improve, with non-GAAP operating margin reaching 28.2% in Q2 FY27. Chief Financial Officer Brett Tighe characterized Q2 as "a record bookings quarter for a non-Q4, driven by strong pipeline conversion and deal expansions." Free cash flow generation strengthened significantly, with the margin expanding 5.8 percentage points to 28.1%. The company's "Rule of 40" metric -- combining revenue growth and free cash flow margin -- reached 42%, demonstrating balanced growth and profitability. Market Opportunity and Growth Strategy Okta's presentation outlined a substantial market opportunity, with an estimated $80 billion total addressable market across workforce identity, privileged access management, and customer identity segments. The company's current penetration represents a small fraction of this opportunity, suggesting significant runway for expansion. The presentation identified multiple growth vectors including platform innovation, landing and expanding in large enterprises, leveraging the partner ecosystem, and international expansion. Management noted that channel partners were involved in all of the top 20 deals in Q2, highlighting the importance of the partner strategy. For fiscal 2027, Okta outlined three key priorities: securing AI, landing bigger and growing faster with large customers, and focusing on the US federal and highly regulated environments. The company noted that the largest deal in the quarter came from the U.S. public sector, though this segment remains less than 10% of total business. Forward-Looking Statements For the third quarter of fiscal 2027 ending October 31, 2026, Okta provided the following guidance as detailed in this outlook table. The company expects total revenue of $813 million to $817 million, representing 10% year-over-year growth at the midpoint. Current RPO is projected to grow 11% to 12% year-over-year to a range of $2.590 billion to $2.600 billion. Non-GAAP operating margin is expected at 24% to 25%, with free cash flow margin of 21% to 23%. For the full fiscal year 2027, management issued the following updated outlook. Full-year revenue guidance of $3.216 billion to $3.226 billion implies 10% to 11% growth, representing a compound annual growth rate of 12% from fiscal 2024 to fiscal 2027. The company expects to maintain a non-GAAP operating margin of 26% for the full year, with free cash flow margin of 28% to 29%. Management emphasized that the guidance reflects a cautious approach and does not assume the strong first-half performance will continue at the same pace. The full-year revenue outlook includes approximately a 1 percentage point impact from shifting more professional services work to global system integrator partners. Regarding AI security revenue, management indicated the opportunity remains early-stage and should not materially affect fiscal 2027 results, though it could become more significant in 2028 and beyond if current momentum continues. McKinnon noted that the company "has shipped 24 significant enhancements to that product in the last two months," referring to Okta for AI Agents, demonstrating rapid product development velocity. Risks and Challenges Despite the strong quarterly performance, Okta's presentation and earnings discussion highlighted several challenges. The AI security market remains crowded and confusing, with numerous rivals making similar claims about capabilities. McKinnon acknowledged that "the biggest challenge is not a single rival but market confusion," arguing that customers want clarity rather than additional marketing claims. The transition of professional services work to partners, while strategically sound for long-term margin expansion, creates near-term revenue headwinds. The company's cautious guidance approach also suggests management is not assuming recent strength will persist at the same rate, which could disappoint investors if growth moderates. Public sector exposure, while growing, still represents less than 10% of the business, meaning this opportunity has yet to become a major revenue driver. Additionally, competitive pressure from both large software vendors and smaller venture-backed AI security startups continues to intensify. The presentation's safe harbor statement acknowledged risks including macroeconomic conditions, cybersecurity incidents, challenges in managing revenue growth, difficulties attracting and retaining customers, and potential issues with strategic partnerships -- all factors that could impact future performance. Full presentation: This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

Okta soars on the stock market, buoyed by securing AI agents

Revenue rose 11% year over year to $805m, versus $795m expected, while adjusted earnings reached $1.05 per share, above the consensus of $0.97. New products accounted for 30% of bookings, and Okta signed several dozen AI-related contracts after rolling out its Okta for AI Agents offering more broadly. Its subscription backlog also climbed 17% to $4.86bn, above the $4.70bn anticipated. Okta also completed the acquisition of Permiso Security for about $200m and plans to pursue additional small, tuck-in deals. For the full fiscal year, the group now targets revenue of $3.22bn to $3.23bn, versus $3.19bn to $3.21bn previously, as well as adjusted earnings of $3.90 to $3.94 per share. According to CEO Todd McKinnon, securing AI agents remains a very early-stage market, but recent cybersecurity incidents are already accelerating corporate interest.