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Okta: Okta's Q2 FY2026 Earnings: A Strong Performance

Okta reported a solid Q2 FY2026 with revenues growing in line with expectations. The company's EPS came in at $0.91, beating estimates of $0.84. The non-GAAP operating margin stood at 22%, and the free cash flow margin was approximately 21%. The strong financial performance was driven by continued strength in large customers, Auth0, new products, and the public sector. As Brett Tighe, Okta's CFO, noted, "We're encouraged by the signals we're seeing, including improved sales productivity and record pipeline generation."

OKTA

USD 88.19

-2.21%

A-Score: 5.0/10

Publication date: August 26, 2025

Full Report

Author: Analystock.ai

📋 Highlights
  • Financial Projections: Q2 FY2026 revenue growth guidance of 9-10% for Q3, 10-11% for FY2026; $2.9B in cash/cash equivalents.
  • Acquisition Strategy: Acquired Acxiom Security to accelerate privilege access management (PAM) growth and expand identity security capabilities.
  • Sales Productivity: Record pipeline generation driven by specialized sales teams, with Q2 sales productivity improving year-over-year.
  • Public Sector Momentum: Strong DOD and state agency deals, with RPO growth of 10% in Q2 and stable contract duration normalizing growth.
  • Identity Security Fabric: Focus on unifying identity platforms for human and AI agent workflows, with 22% non-GAAP operating margin guidance for FY2026.

Revenue Growth and Margin Expansion

Okta's total revenue growth is expected to be between 9% to 10% for Q3 and FY2026, with a non-GAAP operating margin of 22% and a free cash flow margin of approximately 21%. For the full year FY2026, the company expects total revenue growth of 10% to 11%, non-GAAP operating margin of 25% to 26%, and a free cash flow margin of approximately 28%. The company's revenue growth is driven by its comprehensive identity management platform, which includes privileged access workflows, identity governance, and core access management.

Valuation Metrics

Okta's valuation metrics indicate a high-growth profile, with a P/S Ratio of 7.62 and an EV/EBITDA of 129.19. The company's P/E Ratio stands at 161.06, reflecting its strong earnings growth. The ROE is relatively low at 2.1%, but the ROIC is high at 366.31%. The company's Free Cash Flow Yield is approximately 2.85%, indicating a reasonable return for investors.

Growth Prospects

Okta's growth prospects are driven by its expanding product portfolio, including its identity security fabric, which is designed to fully secure every identity. The company's acquisition of Acxiom Security is expected to further accelerate its privilege growth. Okta's go-to-market strategy is focused on serving security buyers in the enterprise, and the company is investing heavily in R&D to build a strong team in identity.

Public Sector and Identity Security

The company's public sector business performed well, with multiple new business and upsell deals with the Department of Defense and state agencies. Okta's identity security platform is gaining traction, driven by the need for modern, purpose-built identity security in the federal government. The company's focus on identity security is expected to drive growth in the coming quarters.

Okta's A-Score