Okta Inc. shares jumped 19.4% in after-hours trading Wednesday after the company reported stronger-than-expected quarterly results and highlighted its expanding role in securing AI-driven enterprise workflows.
The San Francisco-based identity management provider closed 2.92% higher at $134.42 in regular trading on Aug. 26, ahead of the release of its second-quarter fiscal 2027 results. After the presentation materials were published, shares surged to $160.45, surpassing the 52-week high of $157.
Total revenue for the quarter ended July 31 reached $805 million, up 11% year-over-year and exceeding Wall Street expectations. Subscription revenue, which accounted for 99% of total revenue, rose 12% to $793 million. Remaining performance obligations (RPO) climbed 17% to $4.858 billion, while current RPO (cRPO) increased 14% to $2.585 billion.
Non-GAAP operating margin expanded to 28.2%, up 0.5 percentage points from the prior year, while free cash flow margin jumped to 28.1%, a 5.8 percentage point increase. The Rule of 40 metric stood at 42%, combining revenue growth and free cash flow margin. Net retention rate rose to 107%, up one percentage point year-over-year.
Okta serves over 20,000 customers, including 5,255 with annual contract values exceeding $100,000 and more than 600 with ACVs above $1 million. New products contributed approximately 30% of bookings in the quarter, with an average ACV uplift of about 40% when included in deals. The company estimates its total addressable market at $80 billion across workforce identity, privileged access management, and customer identity segments.
Chief Executive Todd McKinnon emphasized the company’s focus on securing AI agents, stating that "identity is the primary control plane for securing AI." He noted that 24 significant enhancements were shipped to Okta’s AI security offerings in the last two months, including agent registry capabilities, identity security posture management, and governance tools. The company also introduced Auth0 for AI Agents, targeting developers with authentication and authorization features for AI workflows.
Okta’s non-human identities framework addresses device identities, virtual machines, service accounts, and OAuth tokens through visibility, access control, and governance pillars. The company highlighted its competitive positioning against Microsoft, citing a 4.5 to 4.1 score advantage in Gartner’s Voice of the Customer report for support experience and a 90% adoption rate of multi-factor authentication among its admins prior to mandates, compared with 34% for Microsoft.
For the third quarter ending Oct. 31, Okta guided for revenue between $813 million and $817 million, representing 10% year-over-year growth at the midpoint. Current RPO is projected to grow 11% to 12% to a range of $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%.
Full-year fiscal 2027 guidance was updated to revenue of $3.216 billion to $3.226 billion, implying 10% to 11% growth. Non-GAAP operating margin remains targeted at 26%, with free cash flow margin expected at 28% to 29%.
Brett Tighe, chief financial officer, described the quarter as "a record bookings quarter for a non-Q4," driven by strong pipeline conversion and deal expansions.
