Okta — Second Quarter Fiscal 2027 Earnings Summary

Financial Performance

• Total revenue was $805 million, an 11% increase year-over-year; subscription revenue was $793 million, a 12% increase year-over-year.
• GAAP operating income was $107 million (13% of revenue), compared to $41 million (6% of revenue) in the prior year quarter.
• Non-GAAP operating income was $226 million (28% of revenue), compared to $202 million (28% of revenue) in the prior year quarter.
• GAAP net income was $116 million, compared to $67 million in the prior year quarter; GAAP diluted net income per share was $0.65, up from $0.37.
• Non-GAAP net income was $194 million, compared to $169 million in the prior year quarter; non-GAAP diluted net income per share was $1.05, up from $0.91.
• Net cash provided by operating activities was $234 million (29% of revenue), compared to $167 million (23% of revenue) in the prior year quarter.
• Free cash flow was $227 million (28% of revenue), compared to $162 million (22% of revenue) in the prior year quarter.
• Remaining performance obligations (RPO) were $4.858 billion, a 17% increase year-over-year; current RPO (cRPO) was $2.585 billion, a 14% increase year-over-year.
• Cash, cash equivalents, and short-term investments totaled $2.299 billion at July 31, 2026.

Guidance and Future Outlook

• For Q3 Fiscal 2027, total revenue is expected to be $813 million to $817 million (10% growth year-over-year).
• Q3 Fiscal 2027 cRPO is expected to be $2.590 billion to $2.600 billion (11% to 12% growth year-over-year).
• Q3 Fiscal 2027 non-GAAP operating income is expected to be $196 million to $200 million (24% to 25% margin).
• Q3 Fiscal 2027 non-GAAP diluted net income per share is expected to be $0.92 to $0.94.
• Q3 Fiscal 2027 non-GAAP free cash flow is expected to be $175 million to $185 million (21% to 23% margin).
• For full-year Fiscal 2027, total revenue is expected to be $3.216 billion to $3.226 billion (10% to 11% growth year-over-year).
• Full-year Fiscal 2027 non-GAAP operating income is expected to be $830 million to $840 million (26% margin).
• Full-year Fiscal 2027 non-GAAP diluted net income per share is expected to be $3.90 to $3.94.
• Full-year Fiscal 2027 non-GAAP free cash flow is expected to be $910 million to $930 million (28% to 29% margin).
• Revenue guidance reflects an approximately one percentage point headwind from accelerating the shift of professional services business to partners.
• Free cash flow guidance reflects an approximately one percentage point impact from lower interest income due to the stock repurchase program and settlement of 2026 Notes.

Business Segments and Product Lines

• Steady momentum in core Okta workforce and customer identity drove ACV acceleration in both businesses.
• Top-line growth benefited from strong contributions from the portfolio of new products, led by Okta Identity Governance.
• The company highlighted success with its largest customers.

Market and Competitive Landscape

• Okta positions itself as the leading independent and neutral identity provider.
• Management views AI agents as a key driver, stating that every agent requires trusted identity and clear controls.
• The company helps organizations discover agents, secure connections, govern actions, and respond to issues to deploy agents safely at scale.

Risks and Challenges

• Adverse macroeconomic conditions could reduce demand for solutions.
• Cybersecurity incidents involving Okta or third-party service providers could occur.
• Risks include the inability to manage or sustain revenue growth and profitability, or failure to keep pace with technological change.
• Potential risks include insufficient financial resources to compete, inability to attract new customers or sell additional solutions to existing ones, and failure to maintain strategic partnerships.
• Challenges may arise from expanding marketing and sales capabilities, customer growth deceleration, technology interruptions, or non-compliance with privacy and security requirements.

Management Commentary and Tone

• CEO Todd McKinnon emphasized the necessity of trusted identity and controls for AI agents, highlighting Okta's role in enabling safe and scalable agent deployment.
• CFO Brett Tighe described Q2 performance as highlighted by accelerating cRPO, success with largest customers, and strong profitability and cash flow.
• Management stated a "prudent approach" to forward guidance for Q3 and FY27.

Other Key Points

• During the quarter, the Company settled the remaining principal amount of the 2026 Notes for $350 million in cash.
• The Company utilized a fixed long-term projected non-GAAP tax rate of 21% for Fiscal 2027, changing from the 26% rate used through Fiscal 2026.
• Okta has not reconciled forward-looking non-GAAP financial measures to GAAP measures as certain items are out of control or cannot be reasonably predicted.
• The company settled the remaining principal amount of the 2026 Notes for $350 million in cash.
• The company settled the remaining principal amount of the 2026 Notes for $350 million in cash.