Okta OKTA reported second-quarter fiscal 2027 earnings of $1.05 per share, which increased 15.4% year over year and beat the Zacks Consensus Estimate by 9.38%.
Revenues increased 10.6% year over year to $805 million, beating the consensus mark by 1.62%. Subscription momentum supported the quarter, with subscription revenues rising 12% to $793 million.
Location-wise, revenues from the United States contributed 87.6% to total revenues in the fiscal second quarter. The figure increased 10.19% year over year to $638 million. International revenues contributed 22.9% to total revenues. The figure increased 12.08% year over year to $167 million.
OKTA's Subscription Growth Supports the Top Line
Subscription revenues accounted for nearly all of the top line, while Professional services and other revenues were $12 million, down 29.4% year over year from $17 million. Management said growth benefited from steady momentum across its core Workforce and Customer Identity businesses and contributions from newer products, led by Okta Identity Governance.
Okta, Inc. Price, Consensus and EPS Surprise
Okta, Inc. price-consensus-eps-surprise-chart | Okta, Inc. Quote
Workforce Identity represented 59% of annual contract value, or ACV, at quarter-end and grew 11% year over year. Customer Identity accounted for the remaining 41% and increased 13%, underscoring balanced growth across Okta’s two core identity businesses.
Okta's Backlog and Large Customers Expand
In the second quarter of fiscal 2027, remaining performance obligations, which represent subscription backlog, increased 17% year over year to $4.858 billion. Current remaining performance obligations (cRPO), a key indicator of future subscription revenues, advanced 14% year over year to $2.585 billion.
Customers generating more than $100,000 in ACV increased 6% year over year to 5,255. The trailing-12-month dollar-based net retention rate was 107%, up one percentage point from the year-ago period, reflecting expansion within the existing customer base after accounting for contractions and churn.
OKTA's Profitability Shows Operating Leverage
Non-GAAP gross margin was 81.9%, up 40 basis points year over year, while non-GAAP subscription gross margin improved 20 basis points to 83.9%.
On a non-GAAP basis, operating expenses increased 10.7% year over year to $434 million. Research and development expenses rose 16.5% to $127 million, while sales and marketing expenses increased 17.6% to $241 million. General and administrative expenses declined 15.4% to $66 million.
Non-GAAP operating income increased 11.9% year over year to $226 million. Non-GAAP operating margin expanded 50 basis points to 28.2%, highlighting continued profitability despite growth investments.
Okta's Cash Generation Remains Strong
Okta ended July 31, 2026, with $2.299 billion in cash, cash equivalents and short-term investments compared with $2.589 billion as of April 30, 2026.
Net cash provided by operating activities was $234 million, representing 29% of revenues, compared with $167 million, or 23%, a year ago. Free cash flow increased to $227 million from $162 million, while the free cash flow margin expanded to 28% from 22%.
OKTA Raises Its Fiscal 2027 Outlook
For the third quarter of fiscal 2027, OKTA expects revenues of $813-$817 million, implying 10% year-over-year growth. cRPO is projected at $2.59-$2.60 billion, implying growth of 11-12%. Non-GAAP earnings are expected between 92 cents and 94 cents per share, with free cash flow of $175-$185 million.
For fiscal 2027, management raised its revenue outlook to $3.216-$3.226 billion, suggesting 10-11% growth, from the prior $3.185-$3.205 billion range. Non-GAAP earnings are now projected at $3.90-$3.94 per share compared with the previous $3.79-$3.87 range. Free cash flow guidance increased to $910-$930 million from $855-$885 million, with an expected margin of 28-29%.
OKTA’s Zacks Rank & Other Stocks to Consider
Okta currently carries a Zacks Rank #2 (Buy).
Some other top-ranked stocks in the broader Zacks Computer and Technology sector include Dell Technologies DELL, Docusign DOCU and Hewlett-Packard HPE. While Dell Technologies sports a Zacks Rank #1 (Strong Buy), Docusign and Hewlett-Packard carry a Zacks Rank of 2 each at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Dell Technologies shares have gained 268.4% in the year-to-date period. Dell Technologies is set to report second-quarter fiscal 2027 results on Sept. 1.
Shares of Docusign have plunged 13.3% year to date. Docusign is set to report second-quarter fiscal 2027 results on Sept. 3.
Shares of Hewlett-Packard have rallied 129.9% year to date. Hewlett-Packard is slated to report fiscal third-quarter 2026 results on Sept. 2.
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