Okta Inc. shares surged 19.4% in after-hours trading on Wednesday after the company reported better-than-expected quarterly results and highlighted accelerating demand for its AI security offerings. The stock closed the regular session up 2.92% at $134.42 before the release of Q2 fiscal 2027 results, which pushed shares above their prior 52-week high of $157 to $160.45.
Total revenue for the quarter reached $805 million, an 11% increase year-over-year and ahead of Wall Street forecasts. Subscription revenue, comprising 99% of total revenue, rose 12% to $793 million. Remaining Performance Obligations (RPO) climbed 17% to $4.858 billion, while current RPO (cRPO) grew 14% to $2.585 billion, marking the largest outperformance since fiscal Q4 2025. Non-GAAP operating margin expanded to 28.2%, and free cash flow margin increased 5.8 percentage points to 28.1%. The Rule of 40 metric reached 42%, combining revenue growth and free cash flow margin.
Chief Executive Todd McKinnon emphasized the company’s focus on AI security, noting that new products accounted for approximately 30% of bookings in the quarter, with an average ACV uplift of about 40% when included in deals. Okta shipped 24 significant enhancements to its Okta for AI Agents product over the past two months, targeting IT and security teams with features such as agent registry integration, identity security posture management, and privileged account credential vaulting. The company also expanded its Auth0 for AI Agents offering for developers, including authentication, token vault, and fine-grained authorization capabilities.
Okta’s competitive positioning in identity management was underscored by its performance in Gartner’s latest reports. The company outscored Microsoft in Gartner’s Voice of the Customer report on support experience, with a score of 4.5 compared to Microsoft’s 4.1. Okta also surpassed Microsoft across all five use cases in Gartner’s Critical Capabilities for Access Management and maintained its status as a Leader in Gartner’s Magic Quadrant for Access Management for the ninth consecutive year. Additionally, Okta reported that over 90% of its admins used multi-factor authentication (MFA) before it was mandated, compared to just 34% for Microsoft admin accounts.
The company’s total addressable market is estimated at $80 billion across workforce identity, privileged access management, and customer identity segments. The largest deal in the quarter came from the U.S. public sector, though this segment remains less than 10% of total business. Okta’s Enhanced Disaster Recovery capability reduces failover time from one hour to less than five minutes, further differentiating its platform.
For Q3 FY27, Okta guided total revenue to $813 million to $817 million, representing approximately 10% year-over-year growth at the midpoint. Current RPO is projected to grow 11% to 12% year-over-year, reaching $2.590 billion to $2.600 billion. Non-GAAP operating margin is expected to be 24% to 25%, while free cash flow margin is forecast at 21% to 23%. For the full fiscal year 2027, Okta projects total revenue of $3.216 billion to $3.226 billion, reflecting 10% to 11% growth and a 12% compound annual growth rate from fiscal 2024 to 2027. Non-GAAP operating margin is expected to remain at 26%, with free cash flow margin anticipated at 28% to 29%.
