Freedom Broker: faster momentum boosts Okta’s appeal after a slowdown

Acceleration in key metrics is increasing Okta’s (OKTA) investment appeal after several years of business slowdown, Freedom Broker analysts believe. The company beat its own revenue guidance, expanded its remaining performance obligations, strengthened cash flow, and raised its full-year outlook. The analysts also cite Okta’s expansion into the AI-agent security segment as an additional driver. After the earnings release, the company’s shares were up about 20% in premarket trading.

Okta is a U.S. developer of digital identity and access management solutions. The platform helps companies control employee and customer logins to applications, manage permissions, and track potentially dangerous activity. The rise of AI is expanding this market: it is now necessary to identify and control not only people, but also autonomous software agents.

Growth after several years of slowdown

For a company that has faced a multi-year growth slowdown, an acceleration in key metrics means increased investment appeal, Freedom Broker analysts note.

One of the main signals was an acceleration in cRPO—contractual obligations the company expects to recognize as revenue over the next 12 months. The metric rose 14% year over year to $2.585 billion, following 13% growth a year earlier. Total remaining performance obligations (RPO) increased 17% to $4.858 billion.

This dynamic improves visibility into future revenue and indicates that demand for Okta’s products is holding up. In the analysts’ view, the results also ease concerns about the company’s ability to return to more sustainable growth after a prolonged slowdown.

Revenue beat the company’s guidance

In the second quarter of fiscal 2027 Okta’s revenue totaled $805 million, up 11% year over year. The result exceeded the company’s own guidance range of $790–794 million. Subscription revenue rose 12% to $793 million.

GAAP operating income increased to $107 million, or 13% of revenue, versus $41 million, or 6% of revenue, a year earlier. Adjusted operating income was $226 million versus $202 million in the same period last year. The adjusted operating margin held at 28%. GAAP net income reached $116 million versus $67 million a year earlier. Diluted earnings per share increased from $0.37 to $0.65. 

Cash flow strengthens the financial position

Okta’s operating cash flow increased from $167 million to $234 million and amounted to 29% of revenue versus 23% a year earlier. Free cash flow rose from $162 million to $227 million, and its margin—from 22% to 28%.

As of July 31, 2026, cash, cash equivalents, and short-term investments totaled $2.299 billion. During the quarter, the company repaid the remaining principal amount of its 2026 convertible notes, allocating $350 million for this purpose.

The growth in profit and cash flow shows that Okta is improving financial performance not only through higher sales. The company is simultaneously increasing operational efficiency, which is especially important after a period of restructuring and cost cutting.

Okta raised its fiscal 2027 outlook

For the third quarter, the company expects revenue in the range of $813–817 million, which corresponds to 10% year-over-year growth. cRPO is guided at $2.590–2.600 billion, or 11–12% higher than a year earlier.

Adjusted operating income is expected to be $196–200 million with a margin of 24–25%. Adjusted EPS is guided at $0.92–0.94, and free cash flow at $175–185 million.

Okta also raised its full fiscal 2027 revenue outlook to $3.216–3.226 billion, implying 10–11% growth. Adjusted operating income is expected in the range of $830–840 million with a 26% margin, and adjusted EPS at $3.90–3.94. The company forecasts free cash flow of $910–930 million and a margin of 28–29%.

A new growth phase

In February 2024, Okta announced the layoff of 400 employees, or about 7% of its workforce. Management said the decision was driven by the need to reduce excessively high expenses and choose investment priorities more carefully.

By August 2025, the company had already raised its revenue and profit forecasts amid growing demand for digital identity verification products and protection against AI-enabled attacks. In January 2026, the board of directors approved a share repurchase program of up to $1 billion.

This is not an individual investment recommendation.