OKTA Q2 Earnings Surpass Estimates, Revenues Increase Y/Y, Shares Up

Okta OKTA reported second-quarter fiscal 2025 earnings of 91 cents per share, beating the Zacks Consensus Estimate by 8.33% and jumping 26.4% year over year.

Total revenues increased 12.7% year over year to $728 million and surpassed the consensus mark by 2.37%. The year-over-year upside can be attributed to higher subscription revenues.

Subscription revenues (97.7% of total revenues) rose 12.5% year over year to $711 million. Professional services and other revenues (2.3% of total revenues) jumped 21.4% year over year to $17 million.

Location-wise, revenues from the United States contributed 79.5% to total revenues in the fiscal second quarter. The figure increased 13.8% year over year to $579 million. International revenues contributed 20.5% to total revenues. The figure increased 8.8% year over year to $149 million.
 

Okta, Inc. Price, Consensus and EPS Surprise

Okta, Inc. price-consensus-eps-surprise-chart | Okta, Inc. Quote

Shares were up 4.8% at the time of writing this article. OKTA shares have returned 16.2% year to date, outperforming the broader Zacks and Technology sector’s return of 12.6%.

Okta’s Q2 Top Line Details

Customers with more than $100K in Annual Contract Value (ACV) increased more than 7% year over year to 4,945. Workforce Identity ACV accounted for 59%, while the rest came from Customer Identity ACV.

The dollar-based retention rate in the trailing 12 months was 106%, down 4% from the figure reported in the year-ago quarter.

Remaining Performance Obligations (RPO) totaled $4.15 billion, up 18% year over year. The current RPO, expected to be recognized over the next 12 months, was $2.27 billion, up 13% year over year.

Okta’s Operating Details

Second-quarter 2025 non-GAAP gross margin was unchanged on a year-over-year basis at 81.6%.

As a percentage of revenues, research and development expenses decreased 170 basis points (bps) year over year to 15%. General and administrative expenses declined 110 bps to 10.7%. Sales and marketing expenses fell 220 bps year over year to 28.2%.

Non-GAAP operating margin expanded 480 bps year over year to 27.7% in the reported quarter.

Okta’s Balance Sheet

Okta had $2.86 billion in cash, cash equivalents and short-term investments as of July 31, 2025.

Net cash provided by operations was $167 million in the reported quarter, while free cash flow was $162 million.

Okta Offers Positive Guidance

For third-quarter fiscal 2026, Okta expects revenues in the range of $728-$730 million, indicating year-over-year growth between 9% and 10%. Current RPO is expected to be between $2.26 billion and $2.27 billion, suggesting year-over-year growth of 10%.

Non-GAAP operating income is expected in the range of $160-$162 million. Operating margin is expected to be 22%. Non-GAAP earnings are anticipated to be 74-75 cents per share.

Non-GAAP free cash flow margin is expected to be approximately 21%.

For fiscal 2026, revenues are expected to be $2.88-2.89 billion, indicating year-over-year growth between 10% and 11%. Non-GAAP operating income is expected in the range of $730-$740 million. Operating margin is expected between 25% and 26%. Non-GAAP earnings are anticipated to be between $3.33 and $3.38 per share.

Non-GAAP free cash flow margin is expected to be approximately 28%.

Zacks Rank & Other Stocks to Consider

Currently, Okta has a Zacks Rank #2 (Buy).

Astera Labs ALAB, Amphenol APH and Reddit RDDT are some other top-ranked stocks that investors can consider in the broader Zacks Computer and Technology sector. 

Astera Labs, Amphenol and Reddit each sport a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rate for Astera Labs, Amphenol and Reddit is currently pegged at 47.8%, 20.6% and 34.9%, respectively.

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This article originally published on Zacks Investment Research (zacks.com).

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