Key Takeaways
- Okta reported a 13% year-over-year revenue increase for Q2 FY2026, reflecting resilience in the identity and access management sector.
- Adjusted earnings per share rose by 26%, highlighting improved operational efficiency and cost management.
- Remaining performance obligations grew by 18%, indicating a strong pipeline of committed future revenue.
- The net retention rate of 106% suggests steady client expansion and minimal churn despite macroeconomic caution.
- Market valuation metrics show the stock trading at a modest discount to moving averages, with analyst sentiment broadly positive.
Okta’s latest quarterly performance underscores a resilient trajectory in the identity and access management sector, with revenue expansion reflecting steady demand amid evolving cybersecurity needs. The company’s second-quarter results for fiscal year 2026 reveal a 13% year-over-year revenue increase, complemented by a 26% rise in adjusted earnings per share, pointing to enhanced operational efficiency and market penetration.
Breaking Down the Financial Metrics
In the quarter ended 31 July 2025, Okta reported revenue growth that outpaced some expectations in a competitive landscape. This 13% uplift aligns with broader trends in cloud-based security solutions, where enterprises continue to prioritise robust identity verification to counter rising cyber threats. Adjusted earnings per share surged 26%, a testament to disciplined cost management and scaling efficiencies. Such profitability gains are crucial for software-as-a-service providers like Okta, which have historically navigated high customer acquisition costs.
Remaining performance obligations (RPO), a forward-looking indicator of committed revenue, climbed 18% year-over-year. This metric suggests a healthy pipeline of future earnings, driven by multi-year contracts and expansions with existing clients. Meanwhile, the net retention rate stood at 106%, indicating that current customers are not only sticking around but also modestly increasing their spend. While not explosive, this figure reflects stability in a market where churn can erode gains quickly.
These results arrive against a backdrop of macroeconomic caution, yet Okta’s figures imply a degree of insulation through its focus on essential services. Identity management has become non-negotiable for organisations adopting hybrid work models and AI-driven tools, which amplify data risks. Analyst sentiment, as gauged from sources like Nasdaq, leans positive, with forward price-to-earnings ratios suggesting room for valuation upside if growth sustains.
Contextualising Growth Drivers
Okta’s performance builds on prior quarters. For instance, in its fourth quarter of fiscal 2025, ending 31 January 2025, the company achieved 13% revenue growth and a 15% increase in current RPO, as detailed in investor releases. The latest quarter’s 18% RPO expansion marks an acceleration, potentially fuelled by adoption of newer offerings like Auth0, which bolsters developer-focused identity solutions.
Public sector wins and international expansions have also contributed. With total RPO reaching approximately $4.15 billion based on recent disclosures, Okta demonstrates a fortified backlog. This is particularly noteworthy given industry headwinds, such as elongated sales cycles in enterprise software. The net retention rate of 106% compares favourably to historical benchmarks; for context, Okta’s fiscal 2025 fourth quarter saw a similar metric around 124% on a trailing twelve-month basis, though adjustments for organic growth highlight evolving dynamics.
- Revenue Composition: Subscription revenue, forming the bulk of Okta’s top line, likely drove the 13% overall growth, consistent with patterns observed in prior periods.
- Profitability Edge: The 26% adjusted EPS growth signals margin improvements, with operating margins reportedly hitting 28% in the quarter, per business wire reports.
- Cash Flow Strength: Free cash flow generation remains robust, supporting reinvestments and shareholder returns.
Market Reaction and Valuation Insights
Following the earnings release, Okta’s shares experienced a positive after-hours response, aligning with investor relief over sustained metrics. As of the latest session close on 26 August 2025, the stock traded at $91.56, reflecting a modest intraday gain amid broader market volatility. This positions Okta within a 52-week range of $70.56 to $127.57, with a market capitalisation exceeding $16 billion.
Valuation metrics offer a mixed but intriguing picture. The forward price-to-earnings ratio stands at 31.57, based on analyst estimates of $2.90 EPS for the upcoming year, while the current-year projection is 3.29. At a price-to-book of 2.44, the stock appears reasonably valued relative to its $37.51 book value per share. Compared to the 50-day moving average of $95.43 and 200-day average of $96.39, recent trading suggests a slight discount, potentially appealing to value-oriented investors.
Analyst ratings, aggregated from platforms like TipRanks, assign a ‘Buy’ consensus with a score of 2.0, underpinned by expectations of continued EPS beats. Forecasts from sources such as StockTitan project fiscal 2026 revenue guidance raised post-results, implying confidence in mid-teens growth.
Implications for the Identity Management Landscape
Okta’s results illuminate broader sector trends. The identity market, estimated at over $80 billion in total addressable opportunity as per historical company guidance, is expanding with AI integration and regulatory pressures. Competitors like Microsoft and Ping Identity face similar dynamics, but Okta’s independent stance allows neutrality in multi-cloud environments—a subtle edge in a vendor-agnostic world.
Challenges persist, including sales execution and macroeconomic slowdowns that could pressure net retention. Yet, the 106% rate indicates minimal contraction, a win in uncertain times. Looking ahead, analyst models from Nasdaq anticipate key metrics like billings and customer additions to drive sentiment. If Okta maintains RPO momentum, it could signal an inflection towards higher growth multiples.
| Metric | Q2 FY2026 | Year-over-Year Change |
|---|---|---|
| Revenue Growth | 13% | N/A |
| Adjusted EPS Growth | 26% | N/A |
| RPO Growth | 18% | N/A |
| Net Retention Rate | 106% | N/A |
| Forward P/E | 31.57 | Based on EPS est. $2.90 |
In summary, Okta’s Q2 outcomes reinforce its position as a steady performer in cybersecurity. With revenue and profitability on an upward swing, and forward indicators like RPO pointing to durability, the company merits attention from investors eyeing software resilience. While not without risks, the metrics suggest a path to compounding value, provided execution remains sharp.
References
- Okta Inc. (2025). Quarterly Results. Retrieved from https://investor.okta.com/financials/quarterly-results/default.aspx
- Okta Inc. (2025). Okta Announces Fourth Quarter and Fiscal Year 2025 Financial Results. Retrieved from https://investor.okta.com/news-and-events/news-releases/news-details/2025/Okta-Announces-Fourth-Quarter-And-Fiscal-Year-2025-Financial-Results/default.aspx
- Okta Inc. (2025). News Releases. Retrieved from https://investor.okta.com/news-and-events/news-releases/default.aspx
- Nasdaq. (2025). Okta Earnings. Retrieved from https://www.nasdaq.com/market-activity/stocks/okta/earnings
- Business Wire. (2025, August 26). Okta Announces Second Quarter Fiscal Year 2026 Financial Results. Retrieved from https://www.businesswire.com/news/home/20250826751986/en/Okta-Announces-Second-Quarter-Fiscal-Year-2026-Financial-Results
- StockTitan. (2025). Okta Q2 FY2026 Financial Results. Retrieved from https://stocktitan.net/news/OKTA/okta-announces-second-quarter-fiscal-year-2026-financial-5whdes7gbw6g.html
- 24/7 Wall Street. (2025, August 26). Will Okta Move Higher After Q2 Earnings? Retrieved from https://247wallst.com/investing/2025/08/26/live-will-okta-move-higher-after-q2-earnings/
- TipRanks. (2025). Okta Stock & Earnings Data. Retrieved from https://www.tipranks.com/stocks/okta/earnings
- AINVEST. (2025). Okta Q2 Earnings: Key Strategic Inflection. Retrieved from https://www.ainvest.com/news/okta-q2-earnings-strategic-rating-critical-inflection-point-identity-security-2508/
- StockStory. (2025, August 25). What to Expect From Okta Q2 Earnings. Retrieved from https://markets.financialcontent.com/stocks/article/stockstory-2025-8-25-okta-okta-q2-earnings-what-to-expect
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