Surge in AI security demand Okta (OKTA.US) exceeded expectations in Q2 earnings and raised full-year revenue guidance for the second time this year.

On August 26 local time, Okta (OKTA.US), a global leading independent identity verification service provider, announced its second-quarter financial report for the fiscal year 2027, ending July 31, 2026. Benefiting from the continued rise in corporate demand for AI security, Okta's performance this quarter significantly exceeded market expectations and led to the company raising its full-year revenue guidance for the second time this year, with the stock price surging over 19% in after-hours trading. The financial report indicated that Okta's total revenue for the second quarter reached $805 million, an 11% year-on-year increase, surpassing analyst expectations of $793 million. Subscription revenue was $793 million, reflecting a 12% year-on-year growth. During the quarter, GAAP net profit stood at $116 million, or $0.65 per share, marking a substantial 73% increase from last year's $67 million ($0.37 per share); adjusted earnings per share were $1.05, above the market expectation of $0.97. Record-high subscription backlog As a key indicator of future revenue, Okta's remaining performance obligations (RPO, or subscription backlog) reached $4.858 billion, a 17% year-on-year increase, exceeding the $4.7 billion anticipated by StreetAccount's analyst survey. Of this, the current remaining performance obligations (cRPO) anticipated to be recognized within the next 12 months amounted to $2.585 billion, a 14% year-on-year increase, also surpassing analysts' expectations of $2.51 billion. Okta's Chief Financial Officer Brett Tighe noted that both the core employee identity and customer identity businesses achieved acceleration in annual contract value (ACV) growth this quarter. AI agent identity security becomes a core growth engine This quarter, Okta officially opened the "Okta for AI Agents" tool to all customers to manage and protect the identity security of AI agents. Okta's CEO and co-founder Todd McKinnon stated in an interview, "If we are to achieve $10 billion, $20 billion, or even $30 billion in revenue, we must have such a catalyst." The financial report showed that the booking amount for the new products accounted for 30% of total orders in the quarter, with transactions involving these new products contributing approximately 40% in uplift to the annual contract value. McKinnon revealed that the company has signed dozens of AI-related deals, including a multi-million dollar contract from the healthcare industry. However, he also pointed out that new products like Okta for AI Agents have not yet made a substantial contribution to current remaining performance obligations. Raising full-year guidance breaks expectations of slowing growth Based on strong performance, Okta has once again raised its full-year revenue guidance for the fiscal year 2027. The company now expects revenue growth for the year to increase from the previously projected 9%-10% to 10%-11%, with a full-year revenue target range of $3.216 billion to $3.226 billion. For the third quarter, the company forecasts revenue of around $815 million, a year-on-year growth of about 10%, exceeding analysts expectations of $808 million. This outlook breaks the market's previous expectations that Okta's growth rate would slow to single digits starting from the second quarter. Continuous improvement in operational efficiency with strong cash flow Regarding profitability, Okta's GAAP operating profit for the quarter was $107 million, accounting for 13% of total revenue, significantly higher than last year's $41 million (6%); non-GAAP operating profit was $226 million, maintaining a profit margin of 28%. Cash flow from operating activities reached $234 million (29% of revenue), and free cash flow was $227 million (28% of revenue), both showing significant improvement compared to last year. As of the end of the quarter, the company had approximately $2.3 billion in cash, cash equivalents, and short-term investments. Additionally, Okta repaid the remaining $350 million in convertible debt principal and repurchased around 1.5 million shares during the quarter. Stimulated by the positive financial report, Okta's stock price soared over 19% in after-hours trading, reaching $160.50, surpassing a 52-week high. Year-to-date, Okta's stock price has increased by approximately 55%. As of the time of reporting, the company's market capitalization is approximately $23.4 billion.