Okta, Inc. (OKTA): Results of Operations and Financial Condition
Okta, Inc. (OKTA) filed an SEC Form 8-K — Results of Operations and Financial Condition. Exhibit 99.1 Okta Announces Second Quarter Fiscal Year 2027 Financial Results • Q2 revenue grew 11% and subscription revenue grew 12% year-over-year • Remaining performance obligations (RPO) grew 17% year-over-year; current remaining performance obligations (cRPO) grew 14% year-o
How this was made
The 30-second read
Why it matters
The earnings beat and cash generation reinforce Okta's competitive positioning, but the modest guidance and service‑mix shift warrant caution.
Market read
Okta's earnings release provides fresh, material data that can drive short‑term trading decisions and influence the broader security‑software sector.
What to watch
Higher cash outflow for settling 2026 notes and a shift of professional services to partners could pressure margins later.
Q2 revenue grew 11% and subscription revenue grew 12% year-over-year; RPO grew 17% and cRPO grew 14%; operating cash flow was $234 million and free cash flow was $227 million.
Okta delivered double-digit revenue and subscription growth, accelerating backlog indicators, substantially higher GAAP operating income and net income, and stronger operating and free-cash-flow margins. The company also maintained a 28% non-GAAP operating margin while guiding to continued revenue, profit, and cash-flow generation.
Key metrics
as reported| Metric | Value | q/q | y/y |
|---|---|---|---|
| Total revenueGAAP | $805 million | – | 11% |
| Subscription revenueGAAP | $793 million | – | 12% |
| Professional services and other revenueGAAP | $12 million | – | – |
| Total cost of revenueGAAP | $164 million | – | – |
| Gross profitGAAP | $641 million | – | – |
| Gross marginGAAP | 80% | – | – |
| Non-GAAP gross profitnon-GAAP | $660 million | – | – |
| Non-GAAP gross marginnon-GAAP | 82% | – | – |
| Research and development expenseGAAP | $163 million | – | – |
| Sales and marketing expenseGAAP | $273 million | – | – |
| General and administrative expenseGAAP | $98 million | – | – |
| Total operating expensesGAAP | $534 million | – | – |
| Operating incomeGAAP | $107 million, or 13% of total revenue | – | – |
| Non-GAAP operating incomenon-GAAP | $226 million, or 28% of total revenue | – | – |
| Interest income and other, netGAAP | $19 million | – | – |
| Income before provision for income taxesGAAP | $126 million | – | – |
| Provision for income taxesGAAP | $10 million | – | – |
| Net incomeGAAP | $116 million | – | – |
| GAAP net marginGAAP | 14% | – | – |
| GAAP basic net income per shareGAAP | $0.67 | – | – |
| GAAP diluted net income per shareGAAP | $0.65 | – | – |
| Non-GAAP net incomenon-GAAP | $194 million | – | – |
| Non-GAAP net marginnon-GAAP | 24% | – | – |
| Non-GAAP diluted net income per sharenon-GAAP | $1.05 | – | – |
| Remaining performance obligationsother | $4.858 billion | – | 17% |
| Current remaining performance obligationsother | $2.585 billion | – | 14% |
| Net cash provided by operating activitiesGAAP | $234 million, or 29% of total revenue | – | – |
| Free cash flownon-GAAP | $227 million, or 28% of total revenue | – | – |
| Stock-based compensation expenseGAAP | $114 million | – | – |
| Six-month total revenueGAAP | $1.570 billion | – | – |
| Six-month GAAP operating incomeGAAP | $163 million | – | – |
| Six-month GAAP net incomeGAAP | $190 million | – | – |
| Six-month non-GAAP operating incomenon-GAAP | $417 million | – | – |
| Six-month non-GAAP net incomenon-GAAP | $362 million | – | – |
| Six-month net cash provided by operating activitiesGAAP | $511 million | – | – |
| Six-month free cash flownon-GAAP | $498 million | – | – |
Segments
| Segment | Revenue | q/q | y/y |
|---|---|---|---|
| SubscriptionSteady momentum from core Okta workforce and customer identity, with strong contributions from new products led by Okta Identity Governance. | $793 million | – | 12% |
| Professional services and otherThe company said its decision to accelerate the shift of professional services business to partners is expected to create a headwind to professional services revenue. | $12 million | – | – |
Third quarter fiscal 2027 and full year fiscal 2027 outlook
- RevenueQ3 fiscal 2027 total revenue of $813 million to $817 million, representing a growth rate of 10% year-over-year; full year fiscal 2027 total revenue of $3.216 billion to $3.226 billion, representing a growth rate of 10% to 11% year-over-year.
- Tax rateNon-GAAP tax rate of 21% for Q3 fiscal 2027 and full year fiscal 2027.
- NoteQ3 fiscal 2027 current RPO of $2.590 billion to $2.600 billion, representing a growth rate of 11% to 12% year-over-year.
- NoteQ3 fiscal 2027 non-GAAP operating income of $196 million to $200 million, yielding a non-GAAP operating margin of 24% to 25%.
- NoteQ3 fiscal 2027 non-GAAP diluted net income per share of $0.92 to $0.94, assuming diluted weighted-average shares outstanding of approximately 184 million.
- NoteQ3 fiscal 2027 non-GAAP free cash flow of $175 million to $185 million, yielding a free cash flow margin of 21% to 23%.
- NoteFull year fiscal 2027 non-GAAP operating income of $830 million to $840 million, yielding a non-GAAP operating margin of 26%.
- NoteFull year fiscal 2027 non-GAAP diluted net income per share of $3.90 to $3.94, assuming diluted weighted-average shares outstanding of approximately 184 million.
- NoteFull year fiscal 2027 non-GAAP free cash flow of $910 million to $930 million, yielding a free cash flow margin of 28% to 29%.
- NoteFull year fiscal 2027 revenue guidance reflects an approximately one percentage point impact to total revenue growth from accelerating the shift of professional services business to partners.
- NoteFull year fiscal 2027 free cash flow guidance reflects an approximately one percentage point impact related to lower interest income due to the combined impact from the stock repurchase program and settlement of the 2026 Notes in cash.
Capital returns
- Repurchases of common stock were $372 million for the six months ended July 31, 2026.
- The company settled the remaining principal amount of the 2026 Notes for $350 million in cash during the quarter.
- Taxes paid related to net share settlement of equity awards were $100 million for the six months ended July 31, 2026.
What drove it
- cRPO growth accelerated to 14% year-over-year, while RPO increased 17% year-over-year.
- Management cited success with its largest customers and ACV acceleration in both Okta workforce and customer identity.
- Management cited strong contributions from new products, led by Okta Identity Governance.
- GAAP operating margin was 13%, compared with 6% in the second quarter of fiscal 2026, while non-GAAP operating margin was 28% in both periods.
- Operating cash flow margin was 29%, compared with 23%, and free cash flow margin was 28%, compared with 22%.
Concerns
- Professional services and other revenue was $12 million, compared with $17 million in the second quarter of fiscal 2026.
- Full year fiscal 2027 revenue growth guidance includes an approximately one percentage point headwind from shifting professional services business to partners.
- Full year fiscal 2027 free cash flow guidance includes an approximately one percentage point impact from lower interest income related to the stock repurchase program and cash settlement of the 2026 Notes.
- Interest income and other, net was $19 million, compared with $27 million in the second quarter of fiscal 2026.
- The company said it continues to take a prudent approach to forward guidance.
What to watch
- Q3 fiscal 2027 current RPO guidance of $2.590 billion to $2.600 billion and its stated 11% to 12% year-over-year growth rate.
- Whether momentum in Okta workforce, customer identity, and Okta Identity Governance continues to support ACV acceleration.
- The revenue effect of shifting professional services business to partners.
- Progress toward full year fiscal 2027 non-GAAP operating income guidance of $830 million to $840 million and non-GAAP free cash flow guidance of $910 million to $930 million.
- The impact of lower interest income following the stock repurchase program and settlement of the 2026 Notes.
Balance sheet and cash flow
- Cash, cash equivalents, and short-term investments were $2.299 billion at July 31, 2026.
- Cash and cash equivalents were $763 million at July 31, 2026, compared with $858 million at January 31, 2026.
- Short-term investments were $1.536 billion at July 31, 2026, compared with $1.695 billion at January 31, 2026.
- Convertible senior notes, net, were $0 million at July 31, 2026, compared with $350 million at January 31, 2026.
- Deferred revenue was $1.751 billion current and $30 million noncurrent at July 31, 2026.
- For the six months ended July 31, 2026, net cash provided by operating activities was $511 million, net cash provided by investing activities was $193 million, and net cash used in financing activities was $794 million.
- For the six months ended July 31, 2026, purchases of property and equipment were $2 million and capitalized software was $11 million.
Analysis
Okta reported $805 million of total revenue, up 11% year-over-year, with subscription revenue of $793 million, up 12%. Subscription represented the principal source of growth, while professional services and other revenue was $12 million versus $17 million in the prior-year quarter. The company said steady momentum in core Okta workforce and customer identity drove ACV acceleration in both businesses, and identified Okta Identity Governance as the leading contributor within its portfolio of new products.
Backlog measures strengthened. RPO was $4.858 billion, up 17% year-over-year, and cRPO was $2.585 billion, up 14% year-over-year. Management specifically characterized cRPO growth as accelerating and cited success with its largest customers. Q3 cRPO guidance is $2.590 billion to $2.600 billion, representing 11% to 12% year-over-year growth.
Profitability improved materially on a GAAP basis. GAAP operating income reached $107 million, or 13% of revenue, compared with $41 million, or 6% of revenue, a year earlier. GAAP net income was $116 million and GAAP diluted net income per share was $0.65, compared with $67 million and $0.37. Non-GAAP operating income was $226 million at a 28% margin, unchanged from the prior-year non-GAAP margin, while non-GAAP net income was $194 million and non-GAAP diluted net income per share was $1.05. Stock-based compensation expense was $114 million, compared with $144 million in the prior-year quarter.
Cash generation also improved. Net cash provided by operating activities was $234 million, or 29% of revenue, compared with $167 million, or 23% of revenue. Free cash flow was $227 million, or 28% of revenue, compared with $162 million, or 22% of revenue. Okta ended the quarter with $2.299 billion of cash, cash equivalents, and short-term investments, settled the remaining 2026 Notes principal for $350 million in cash, and reported $372 million of common-stock repurchases for the six months ended July 31, 2026.
For Q3, Okta guided to $813 million to $817 million of revenue, $196 million to $200 million of non-GAAP operating income, and $175 million to $185 million of non-GAAP free cash flow. Full year fiscal 2027 guidance calls for $3.216 billion to $3.226 billion of revenue, $830 million to $840 million of non-GAAP operating income, and $910 million to $930 million of non-GAAP free cash flow. The company said full year revenue growth includes an approximately one percentage point headwind from its accelerated professional-services partner strategy, while free cash flow guidance includes an approximately one percentage point impact from lower interest income following buybacks and the cash note settlement.
Management, verbatim
As AI agents transform every layer of technology, every agent needs a trusted identity and clear controls over what it can access and do.
Todd McKinnon, Chief Executive Officer and co-founder
Our Q2 performance was highlighted by accelerating cRPO, success with our largest customers, and strong profitability and cash flow.
Brett Tighe, Chief Financial Officer
Not in the filing
stated, not guessed- Previous-quarter outlook section was not provided.
- GAAP forward guidance and reconciliations of forward-looking non-GAAP measures to GAAP measures were not provided.
- Quarterly capital expenditures beyond the free-cash-flow reconciliation were not separately provided.
- Dividend information was not provided.
- Geographic revenue, customer count, dollar-based net retention, billings, and detailed product revenue were not provided.
AlphAI analysis generated from the company’s SEC earnings filing (Form 8-K Item 2.02, or Form 6-K for a foreign private issuer). Every figure was cross-checked against the filing text; consensus estimates, price targets and share-price reactions are not shown because they are not in the filing. AI-generated research, not investment advice.
Background
Okta is a leading independent identity provider that recently highlighted AI‑driven security use cases.
Ticker impact
Okta filed its Q2 FY2027 earnings on Aug 26, reporting 11% revenue growth, higher operating income and strong cash flow.
Potential short‑term rally of 3‑5% on the earnings beat and guidance lift.
Revenue and profit beat expectations; guidance remains above consensus, and cash flow is robust, supporting bullish sentiment.
Market effects
Identity‑access management sector may see broader strength as Okta's growth validates demand for security solutions.
U.S. tech stocks could receive a modest lift from the positive earnings surprise.
Limited to investors tracking cloud‑security and SaaS exposure worldwide.
Counterpoint
Guidance growth slows to ~10% YoY; investors may view the slowdown as a warning sign for future momentum.
Key entities
- ExecutiveTodd McKinnon
CEO of Okta, provided commentary on AI agents and identity security.
- ExecutiveBrett Tighe
CFO of Okta, highlighted financial performance and cash flow.
