Core Insights - The discussion highlights the excitement surrounding the cybersecurity and identity security sectors, particularly with Okta's involvement in these areas [1]. Company Overview - Monty Gray has been with Okta for 7 years, overseeing corporate development, which encompasses company strategy, mergers and acquisitions (M&A), and technology partnerships [5]. M&A Philosophy - The conversation aims to delve into Okta's M&A philosophy and process, indicating a strategic focus on growth through acquisitions [6].

Summary of Okta (OKTA) 2025 Conference Call Company Overview - **Company**: Okta, a leader in identity security and management solutions - **Industry**: Cybersecurity, specifically focusing on identity security and access management Key Points and Arguments M&A Strategy and Market Activity - Okta's corporate development strategy is proactive, focusing on acquisitions that accelerate their roadmap, particularly in the privileged access space [7][9] - The current M&A environment is described as one of the busiest periods, with significant activity in the security sector [8] - Recent acquisition of a small company in the privileged access space aligns with Okta's strategy to enhance their offerings [9] Identity Security Fabric - Okta views identity as a broad platform termed "identity security fabric," which encompasses various user types, including employees, partners, and AI agents [13][14] - The company aims to provide secure access and governance for all types of users, including agentic AI, which presents new challenges in visibility and privilege management [16][21] AI Integration and Opportunities - Okta is focusing on integrating AI into their offerings, particularly in relation to agentic AI, which requires secure and compliant access management [12][50] - The company has launched offerings specifically for AI agents, indicating a strong belief in the growth potential of generative AI applications [43][45] Financial Performance and Growth Strategy - Okta has achieved operating margins in the mid to high twenties and is focused on reaccelerating top-line growth while maintaining a rule of 40 framework [56][57] - New product initiatives are contributing significantly to bookings, with expectations for continued growth in this area [58][66] - The company is bifurcating its sales team to better address the needs of different customer segments, enhancing productivity and effectiveness [59][63] Competitive Landscape - Okta positions itself as a best-of-breed provider, coexisting with larger competitors like Microsoft and CyberArk, rather than competing directly [30][87] - The company emphasizes the importance of partnerships and integrations within the ecosystem to enhance their market position [31][76] International and Public Sector Growth - Okta is focusing on key international markets to drive growth, concentrating resources on the top 10 countries [74][75] - The U.S. public sector business has shown strong performance due to strategic investments and certifications, allowing Okta to participate in significant modernization projects [84][85] Customer Retention and Acquisition - The company is experiencing pressure on net retention rates due to a "COVID cohort" of customers who overbought seats during the pandemic [67][72] - Despite this, gross retention remains stable, and Okta is focused on expanding its product offerings to mitigate seat-related issues [68][72] Additional Important Insights - Okta is actively learning how to adopt AI internally while maintaining a strong focus on security and governance [51][52] - The company is optimistic about its role in government efficiency and modernization efforts, particularly in the context of zero trust initiatives [86] This summary encapsulates the key themes and insights from the Okta conference call, highlighting the company's strategic direction, market positioning, and growth initiatives.

Core Insights - Okta (OKTA) is experiencing strong demand for its new identity solutions, which are contributing to market share gains and revenue growth [1][2] Financial Performance - In Q2 2025, Okta's total revenues increased by 12.7% year over year to $728 million, exceeding consensus estimates by 2.37% [2][9] - The number of customers with over $100K in Annual Contract Value (ACV) rose by more than 7% year over year to 4,945, indicating strong subscription momentum [2][9] - For fiscal 2026, Okta anticipates revenue growth of 10% to 11% compared to fiscal 2025, with the Zacks Consensus Estimate for fiscal 2026 revenues at $2.87 billion, reflecting a 10.1% increase from fiscal 2025 [4][9] Product and Market Position - Okta is providing a comprehensive secure identity fabric for non-human identities (NHIs), offering visibility, access control, governance, and monitoring similar to human identities [3] - The introduction of Cross App Access, a new open standard, is expected to further enhance subscription revenues in the long term [2] Competitive Landscape - Okta faces significant competition in the security domain from companies like SentinelOne and Palo Alto Networks, which are focusing on endpoint security and next-generation security solutions, respectively [5][6] - Palo Alto Networks reported a 32% year-over-year growth in its Next-Generation Security annual recurring revenue (ARR), reaching $5.58 billion, highlighting the competitive pressures in the market [6] Stock Performance - Okta's shares have appreciated by 17.7% year to date, outperforming the broader Zacks Computer and Technology sector's return of 12.9% and the Zacks Security industry's appreciation of 10.2% [7]

Core Insights - Okta, Inc. reported better-than-expected second-quarter financial results and raised its FY26 guidance above estimates [1][3] Financial Performance - Second-quarter revenue was $728 million, exceeding analyst estimates of $712.01 million [1] - Adjusted earnings for the second quarter were 91 cents per share, surpassing analyst expectations of 84 cents per share [1] - For the third quarter, Okta expects revenue between $728 million and $730 million, compared to estimates of $723.55 million [2] - Anticipated third-quarter adjusted earnings are projected to be between 74 to 75 cents per share, slightly below the estimate of 75 cents per share [2] Guidance Update - Okta raised its full-year fiscal 2026 revenue guidance to a range of $2.875 billion to $2.885 billion, up from the previous guidance of $2.85 billion to $2.86 billion [3] - Full-year adjusted earnings guidance was also increased to $3.33 to $3.38 per share, up from the prior range of $3.23 to $3.28 per share [3] - Analysts are forecasting full-year revenue of $2.864 billion and earnings of $3.28 per share [3] Market Reaction - Following the earnings announcement, Okta shares increased by 2.5% to $93.82 [3] Analyst Ratings and Price Targets - RBC Capital analyst maintained an Outperform rating and raised the price target from $113 to $115 [6] - Scotiabank analyst maintained a Sector Perform rating but lowered the price target from $115 to $105 [6] - Baird analyst kept an Outperform rating while reducing the price target from $148 to $142 [6] - BMO Capital analyst maintained a Market Perform rating and decreased the price target from $132 to $112 [6] - Jefferies analyst maintained a Hold rating and raised the price target from $100 to $105 [6]

Welcome back. Take a look at shares of Octa today. The identity security company higher after reporting a beat across the board in Q2, raising fullear guide says it's removing some macro concerns from its outlook after headwinds kind of failed to materialize over the course of the quarter.Joining us now in a first on CNBC interview is Octa's co-founder and CEO Todd McKinnon. Todd, welcome back. Good to have you.>> Great to be here, Carl. uh looking at some of the responses to the call, I I wonder were you a ...

Group 1 - Michael Wiggins De Oliveira is an inflection investor, focusing on buying undervalued companies at pivotal moments when their profitability is expected to improve significantly over the next year [1] - The investment strategy emphasizes technology and the Great Energy Transition, including uranium, with a concentrated portfolio of approximately 15 to 20 stocks and an average holding period of 18 months [1] - Michael has over 10 years of experience analyzing companies in tech and energy sectors, and has built a following of over 40,000 on Seeking Alpha [2] Group 2 - The Investing Group Deep Value Returns, led by Michael, offers insights through its concentrated portfolio of value stocks, timely updates on stock picks, and a weekly webinar for live advice [3] - The group provides "hand-holding" support for both new and experienced investors, fostering an active and kind community accessible via chat [3]

Group 1 - Jefferies raised the target price for Okta from $100 to $105 while maintaining a "Hold" rating [1]

Core Viewpoint - Okta reported strong Q2 FY2026 earnings, exceeding analyst expectations in both revenue and adjusted earnings per share, leading to a significant stock price increase [1] Financial Performance - Revenue for Q2 FY2026 was $728 million, a 13% year-over-year increase, surpassing analyst expectations of $711.8 million [1] - Subscription revenue grew by 12% to $711 million [1] - Adjusted earnings per share were $0.91, exceeding the expected $0.84 [1] - Remaining performance obligations or subscription backlog increased by 18% to $4.15 billion [1] Future Guidance - For Q3 FY2026, Okta expects revenue between $728 million and $730 million, with adjusted earnings per share between $0.74 and $0.75, compared to analyst expectations of $721.3 million and $0.75 [1] - The company raised its FY2026 revenue guidance to a range of $2.88 billion to $2.89 billion, with adjusted earnings per share projected between $3.33 and $3.38, against analyst expectations of $2.86 billion and $3.27 [1]

Core Points - A federal court has authorized a settlement regarding a derivative lawsuit involving Okta, Inc., which will include the adoption of corporate governance reforms [1][2] - The settlement is deemed fair and reasonable by the Settling Parties, and it is expected to benefit both the company and its stockholders [2] - A fee of $2,250,000 for attorneys' fees and expenses has been agreed upon, which the Settling Defendants will not oppose [3] Settlement Hearing - A Settlement Hearing is scheduled for October 24, 2025, where the court will evaluate the fairness and adequacy of the settlement [4] - Current Okta stockholders have the option to appear at the hearing and voice objections, but must follow specific procedures to do so [5][6] - Written objections must be filed with the court at least 14 days prior to the hearing to be considered [7][8] Additional Information - The Stipulation and its details can be accessed on Okta's Investor Relations page [9] - Inquiries regarding the settlement should be directed to Settling Stockholders' Counsel, not the court [10]

[PART I. FINANCIAL INFORMATION](index=4&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This part provides Okta, Inc.'s unaudited financial statements, management's discussion and analysis, market risk disclosures, and controls and procedures for the reported periods [Item 1. Financial Statements (unaudited)](index=4&type=section&id=Item%201.%20Financial%20Statements%20(unaudited)) This section presents Okta, Inc.'s unaudited condensed consolidated financial statements and notes for the reported periods [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) | Metric | July 31, 2025 (millions) | January 31, 2025 (millions) | | :-------------------------------- | :----------------------- | :-------------------------- | | **Assets** | | | | Cash and cash equivalents | $876 | $409 | | Short-term investments | $1,982 | $2,114 | | Accounts receivable, net | $417 | $621 | | Total current assets | $3,566 | $3,416 | | Total assets | $9,550 | $9,437 | | **Liabilities & Equity** | | | | Convertible senior notes, net (current) | $859 | $509 | | Deferred revenue (current) | $1,550 | $1,691 | | Total current liabilities | $2,647 | $2,523 | | Total liabilities | $2,796 | $3,032 | | Total stockholders' equity | $6,754 | $6,405 | - Total assets increased to **$9,550 million** as of July 31, 2025, from **$9,437 million** as of January 31, 2025, primarily driven by an increase in cash and cash equivalents[10](index=10&type=chunk) - Current convertible senior notes increased significantly to **$859 million** from **$509 million**, reflecting upcoming maturities[10](index=10&type=chunk) [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) | Metric | Three Months Ended July 31, 2025 (millions) | Three Months Ended July 31, 2024 (millions) | Six Months Ended July 31, 2025 (millions) | Six Months Ended July 31, 2024 (millions) | | :------------------------------------ | :---------------------------------------- | :---------------------------------------- | :--------------------------------------- | :--------------------------------------- | | Total revenue | $728 | $646 | $1,416 | $1,263 | | Gross profit | $560 | $491 | $1,093 | $960 | | Operating income (loss) | $41 | $(19) | $80 | $(66) | | Net income (loss) | $67 | $29 | $129 | $(11) | | Net income (loss) per share, basic | $0.38 | $0.18 | $0.74 | $(0.06) | | Net income (loss) per share, diluted | $0.37 | $0.15 | $0.72 | $(0.06) | - Total revenue increased by **12.7% YoY** for the three months ended July 31, 2025, and by **12.1% YoY** for the six months ended July 31, 2025[13](index=13&type=chunk) - The company achieved net income of **$67 million** for the three months ended July 31, 2025, a significant improvement from **$29 million** in the prior year, and **$129 million** for the six months, reversing a net loss of **$11 million**[13](index=13&type=chunk) [Condensed Consolidated Statements of Comprehensive Income (Loss)](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income%20(Loss)) | Metric | Three Months Ended July 31, 2025 (millions) | Three Months Ended July 31, 2024 (millions) | Six Months Ended July 31, 2025 (millions) | Six Months Ended July 31, 2024 (millions) | | :------------------------------------ | :---------------------------------------- | :---------------------------------------- | :--------------------------------------- | :--------------------------------------- | | Net income (loss) | $67 | $29 | $129 | $(11) | | Other comprehensive income (loss) | $(4) | $10 | $13 | $(1) | | Comprehensive income (loss) | $63 | $39 | $142 | $(12) | - Comprehensive income for the three months ended July 31, 2025, was **$63 million**, up from **$39 million** in the prior year, and **$142 million** for the six months, a significant improvement from a **$12 million loss**[16](index=16&type=chunk) [Condensed Consolidated Statements of Stockholders' Equity](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) | Metric | As of July 31, 2025 (millions) | As of January 31, 2025 (millions) | | :-------------------------------- | :----------------------------- | :------------------------------ | | Total stockholders' equity | $6,754 | $6,405 | | Additional paid-in capital | $9,426 | $9,219 | | Accumulated deficit | $(2,673) | $(2,802) | - Total stockholders' equity increased to **$6,754 million** as of July 31, 2025, from **$6,405 million** as of January 31, 2025, driven by net income and stock-based compensation[20](index=20&type=chunk) - Stock-based compensation contributed **$128 million** and **$147 million** to additional paid-in capital for the periods ended April 30, 2025, and July 31, 2025, respectively[20](index=20&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) | Metric | Six Months Ended July 31, 2025 (millions) | Six Months Ended July 31, 2024 (millions) | | :------------------------------------ | :---------------------------------------- | :---------------------------------------- | | Net cash provided by operating activities | $408 | $305 | | Net cash provided by (used in) investing activities | $118 | $(38) | | Net cash used in financing activities | $(67) | $(87) | | Net increase in cash, cash equivalents and restricted cash | $469 | $180 | | Cash, cash equivalents and restricted cash at end of period | $884 | $522 | - Net cash provided by operating activities increased by **$103 million** to **$408 million** for the six months ended July 31, 2025, compared to the prior year[24](index=24&type=chunk) - Investing activities shifted from a net cash outflow of **$38 million** in 2024 to a net cash inflow of **$118 million** in 2025, primarily due to higher proceeds from maturities and sales of available-for-sale securities[24](index=24&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) [1. Overview and Basis of Presentation](index=10&type=section&id=1.%20Overview%20and%20Basis%20of%20Presentation) - Okta, Inc. operates as a leading independent identity partner, providing cloud-based identity solutions through its Okta Platform and Auth0 Platform[28](index=28&type=chunk) - The company operates as one reportable segment, utilizing a SaaS business model with revenue primarily from multi-year subscriptions[33](index=33&type=chunk) [2. Accounting Standards and Significant Accounting Policies](index=11&type=section&id=2.%20Accounting%20Standards%20and%20Significant%20Accounting%20Policies) - The company will adopt new FASB guidance on disaggregated income tax disclosures in its Annual Report on Form 10-K for the year ended January 31, 2026[41](index=41&type=chunk) - New FASB guidance requiring disaggregated income statement expense information disclosure is effective for annual periods beginning after December 15, 2026, and is currently being evaluated for impact[42](index=42&type=chunk) [3. Restructuring and Other Charges](index=11&type=section&id=3.%20Restructuring%20and%20Other%20Charges) - The 2025 Restructuring Plan, involving a reduction of approximately **180 full-time employees**, was substantially complete by Q1 fiscal 2026, with **$11 million** in restructuring costs recognized in Q4 fiscal 2025[43](index=43&type=chunk) | Metric | (dollars in millions) | | :-------------------------------- | :-------------------- | | Balance as of January 31, 2025 | $11 | | Restructuring charges | $0 | | Cash payments | $(11) | | Balance as of July 31, 2025 | $0 | [4. Cash Equivalents and Investments](index=11&type=section&id=4.%20Cash%20Equivalents%20and%20Investments) | Category | As of July 31, 2025 (millions) | As of January 31, 2025 (millions) | | :-------------------------------- | :----------------------------- | :------------------------------ | | Money market funds (Level 1) | $654 | $225 | | Certificates of deposit (Level 2) | $34 | $23 | | U.S. treasury securities (Level 2) | $6 | $0 | | Total cash equivalents | $694 | $248 | | Short-term investments (Available-for-sale) | $1,982 | $2,114 | | Total | $2,676 | $2,362 | - Strategic investments in privately-held companies, classified as Level 3, increased to **$33 million** as of July 31, 2025, from **$30 million** as of January 31, 2025[49](index=49&type=chunk) [5. Deferred Commissions](index=12&type=section&id=5.%20Deferred%20Commissions) | Metric | Three Months Ended July 31, 2025 (millions) | Three Months Ended July 31, 2024 (millions) | Six Months Ended July 31, 2025 (millions) | Six Months Ended July 31, 2024 (millions) | | :------------------------------------ | :---------------------------------------- | :---------------------------------------- | :--------------------------------------- | :--------------------------------------- | | Sales commissions capitalized | $48 | $33 | $80 | $59 | | Amortization of contract costs | $40 | $32 | $76 | $62 | - Capitalized sales commissions increased by **45%** for the three months and **35.6%** for the six months ended July 31, 2025, compared to the prior year[50](index=50&type=chunk) [6. Deferred Revenue and Performance Obligations](index=13&type=section&id=6.%20Deferred%20Revenue%20and%20Performance%20Obligations) - Subscription revenue recognized from beginning deferred revenue balances was **$651 million** for the three months ended July 31, 2025, and **$1,144 million** for the six months, indicating consistent revenue recognition from prior periods[54](index=54&type=chunk) | Metric | As of July 31, 2025 (millions) | | :------------------------------------ | :----------------------------- | | Total remaining performance obligations (RPO) | $4,152 | | RPO expected to be recognized in next 12 months | $2,265 (55%) | [7. Convertible Senior Notes, Net](index=13&type=section&id=7.%20Convertible%20Senior%20Notes,%20Net) - The 2025 Notes (**$510 million** principal) and 2026 Notes (**$350 million** principal) are classified as current liabilities due to upcoming maturities on September 1, 2025, and June 15, 2026, respectively[57](index=57&type=chunk) | Note Type | Principal Amount (millions) | Net Carrying Amount as of July 31, 2025 (millions) | Net Carrying Amount as of January 31, 2025 (millions) | | :---------- | :-------------------------- | :--------------------------------------- | :--------------------------------------- | | 2025 Notes | $510 | $510 | $509 | | 2026 Notes | $350 | $349 | $349 | [8. Commitments and Contingencies](index=14&type=section&id=8.%20Commitments%20and%20Contingencies) - A class action lawsuit, In re Okta, Inc. Securities Litigation, was settled for **$60 million**, covered by D&O insurance and the company's **$10 million** retention, with final approval granted on November 19, 2024[63](index=63&type=chunk) - Derivative lawsuits related to cybersecurity controls and Auth0 integration were globally resolved with a non-monetary settlement and a **$2.25 million** fee award to plaintiffs' counsel, subject to final approval on October 24, 2025[72](index=72&type=chunk) [9. Employee Incentive Plans](index=15&type=section&id=9.%20Employee%20Incentive%20Plans) | Expense Category | Three Months Ended July 31, 2025 (millions) | Three Months Ended July 31, 2024 (millions) | Six Months Ended July 31, 2025 (millions) | Six Months Ended July 31, 2024 (millions) | | :------------------------------------ | :---------------------------------------- | :---------------------------------------- | :--------------------------------------- | :--------------------------------------- | | Cost of subscription revenue | $21 | $22 | $38 | $41 | | Research and development | $51 | $56 | $98 | $119 | | Sales and marketing | $35 | $36 | $67 | $66 | | General and administrative | $35 | $31 | $64 | $67 | | Total stock-based compensation expense | $144 | $148 | $272 | $299 | - Total unrecognized stock-based compensation expense was **$800 million** as of July 31, 2025, with a weighted-average remaining period of **1.9 years** for unvested RSUs[77](index=77&type=chunk) [10. Income Taxes](index=16&type=section&id=10.%20Income%20Taxes) | Period | Pretax Income (Loss) (millions) | Provision for (Benefit from) Income Taxes (millions) | Effective Tax Rate | | :------------------------------------ | :------------------------------ | :--------------------------------------------------- | :----------------- | | Three Months Ended July 31, 2025 | $67 | $0 | 0.5% | | Six Months Ended July 31, 2025 | $135 | $6 | 4.6% | | Three Months Ended July 31, 2024 | $12 | $(17) | (158.8)% | | Six Months Ended July 31, 2024 | $(10) | $1 | (2.5)% | - The 'One Big Beautiful Bill Act,' enacted July 4, 2025, resulted in a **$5 million** decrease to income tax expense for the three months ended July 31, 2025, primarily due to immediate expensing of domestic R&D expenditures[80](index=80&type=chunk)[84](index=84&type=chunk) - The company maintains a full valuation allowance on its U.S. deferred tax assets, but may release a significant portion in the foreseeable future if sufficient positive evidence of profitability emerges[163](index=163&type=chunk) [11. Net Income (Loss) Per Share](index=17&type=section&id=11.%20Net%20Income%20(Loss)%20Per%20Share) | Metric | Three Months Ended July 31, 2025 | Three Months Ended July 31, 2024 | Six Months Ended July 31, 2025 | Six Months Ended July 31, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income (loss) per share, basic | $0.38 | $0.18 | $0.74 | $(0.06) | | Net income (loss) per share, diluted | $0.37 | $0.15 | $0.72 | $(0.06) | | Weighted-average shares, basic (thousands) | 175,460 | 168,612 | 174,827 | 168,045 | | Weighted-average shares, diluted (thousands) | 180,966 | 174,443 | 181,356 | 168,045 | - Potentially dilutive securities, including employee share-based awards and convertible senior notes, were excluded from diluted EPS calculations in certain periods if anti-dilutive[90](index=90&type=chunk) [12. Subsequent Events](index=18&type=section&id=12.%20Subsequent%20Events) - On August 25, 2025, Okta entered a definitive agreement to acquire Axiom Security Ltd, a privileged access management solutions company, expected to close in Q3 fiscal 2026 and financed with cash on hand, with no material impact on fiscal 2026 financial results[91](index=91&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=18&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Okta, Inc.'s financial condition, operational results, business model, key metrics, liquidity, and accounting estimates [Overview](index=19&type=section&id=Overview) - Okta, Inc. is a leading independent identity partner, offering Okta Platform and Auth0 Platform to securely connect users to technologies, supporting cloud adoption, remote work, and Zero Trust security models[96](index=96&type=chunk)[97](index=97&type=chunk) - The company's SaaS business model generates approximately **98%** of total revenue from multi-year subscriptions, with future growth potentially impacted by longer sales cycles[99](index=99&type=chunk)[100](index=100&type=chunk) - Cybersecurity incidents and global economic uncertainties (e.g., inflation, interest rates) have adversely affected, and could continue to affect, the company's reputation, customer relations, and financial results[102](index=102&type=chunk)[103](index=103&type=chunk) [Components of Results of Operations](index=20&type=section&id=Components%20of%20Results%20of%20Operations) - Subscription revenue is primarily driven by customer count, users per customer, and solutions used, typically invoiced annually in advance[105](index=105&type=chunk) - Professional services revenue comes from implementation and optimization assistance, recognized as services are performed[106](index=106&type=chunk) - Cost of subscription revenue includes hosting fees, employee-related costs for infrastructure and support, and amortization of capitalized software, with ongoing investments expected to improve gross margin over time[108](index=108&type=chunk)[109](index=109&type=chunk)[112](index=112&type=chunk) [Results of Operations](index=22&type=section&id=Results%20of%20Operations) | Metric | Three Months Ended July 31, 2025 (%) | Three Months Ended July 31, 2024 (%) | Six Months Ended July 31, 2025 (%) | Six Months Ended July 31, 2024 (%) | | :------------------------------------ | :----------------------------------- | :----------------------------------- | :--------------------------------- | :--------------------------------- | | Subscription Revenue | 98% | 98% | 98% | 98% | | Professional Services and Other Revenue | 2% | 2% | 2% | 2% | | Total Revenue | 100% | 100% | 100% | 100% | | Gross Profit | 77% | 76% | 77% | 76% | | Operating Income (Loss) | 6% | (3)% | 6% | (5)% | | Net Income (Loss) | 9% | 5% | 9% | (1)% | - Net income as a percentage of total revenue improved significantly, reaching **9%** for both the three and six months ended July 31, 2025, compared to **5%** and **(1)%** in the prior year periods, respectively[125](index=125&type=chunk) [Comparison of the Three and Six Months Ended July 31, 2025 and 2024](index=24&type=section&id=Comparison%20of%20the%20Three%20and%20Six%20Months%20Ended%20July%2031,%202025%20and%202024) [Revenue](index=24&type=section&id=Revenue) | Revenue Type | Three Months Ended July 31, 2025 (millions) | Three Months Ended July 31, 2024 (millions) | $ Change | % Change | | :-------------------------- | :---------------------------------------- | :---------------------------------------- | :------- | :------- | | Subscription | $711 | $632 | $79 | 12% | | Professional services & other | $17 | $14 | $3 | 24% | | Total Revenue | $728 | $646 | $82 | 13% | | Revenue Type | Six Months Ended July 31, 2025 (millions) | Six Months Ended July 31, 2024 (millions) | $ Change | % Change | | :-------------------------- | :---------------------------------------- | :---------------------------------------- | :------- | :------- | | Subscription | $1,384 | $1,235 | $149 | 12% | | Professional services & other | $32 | $28 | $4 | 16% | | Total Revenue | $1,416 | $1,263 | $153 | 12% | - Subscription revenue growth was primarily driven by new business, including new customers and additional solutions sold to existing customers, reflected in a **106%** dollar-based net retention rate and a **7%** increase in customers with ACV above **$100,000**[128](index=128&type=chunk) [Cost of Revenue, Gross Profit and Gross Margin](index=25&type=section&id=Cost%20of%20Revenue,%20Gross%20Profit%20and%20Gross%20Margin) | Metric | Three Months Ended July 31, 2025 | Three Months Ended July 31, 2024 | Six Months Ended July 31, 2025 | Six Months Ended July 31, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total cost of revenue (millions) | $168 | $155 | $323 | $303 | | Gross profit (millions) | $560 | $491 | $1,093 | $960 | | Subscription gross margin | 80% | 78% | 80% | 78% | | Professional services & other gross margin | (24)% | (31)% | (25)% | (28)% | | Total gross margin | 77% | 76% | 77% | 76% | - Subscription gross margin improved to **80%** for both the three and six months ended July 31, 2025, from **78%** in the prior year periods, primarily due to improved spend efficiency[133](index=133&type=chunk)[138](index=138&type=chunk) - Professional services and other gross margin improved from negative **31%** to negative **24%** for the three months, and from negative **28%** to negative **25%** for the six months, driven by increased revenue in this segment[134](index=134&type=chunk)[139](index=139&type=chunk) [Operating Expenses](index=26&type=section&id=Operating%20Expenses) | Expense Category | Three Months Ended July 31, 2025 (millions) | Three Months Ended July 31, 2024 (millions) | % of Revenue 2025 | % of Revenue 2024 | | :-------------------------- | :---------------------------------------- | :---------------------------------------- | :---------------- | :---------------- | | Research and development | $160 | $164 | 22% | 25% | | Sales and marketing | $246 | $238 | 34% | 37% | | General and administrative | $113 | $108 | 15% | 17% | | Expense Category | Six Months Ended July 31, 2025 (millions) | Six Months Ended July 31, 2024 (millions) | % of Revenue 2025 | % of Revenue 2024 | | :-------------------------- | :---------------------------------------- | :---------------------------------------- | :---------------- | :---------------- | | Research and development | $314 | $327 | 22% | 25% | | Sales and marketing | $483 | $474 | 34% | 38% | | General and administrative | $216 | $225 | 15% | 18% | - Research and development expenses decreased by **$4 million** (3 months) and **$13 million** (6 months) YoY, primarily due to reduced stock-based compensation expense, leading to improved spend efficiency as a percentage of revenue[141](index=141&type=chunk)[142](index=142&type=chunk) - Sales and marketing expenses increased by **$8 million** (3 months) and **$9 million** (6 months) YoY, mainly due to higher labor and travel costs, but decreased as a percentage of total revenue due to improved spend efficiency[146](index=146&type=chunk)[147](index=147&type=chunk) - General and administrative expenses increased by **$5 million** (3 months) due to stock-based compensation but decreased by **$9 million** (6 months) due to reductions in consulting costs and stock-based compensation, also showing improved efficiency as a percentage of revenue[150](index=150&type=chunk)[151](index=151&type=chunk) [Interest and Other, Net](index=28&type=section&id=Interest%20and%20Other,%20Net) | Metric | Three Months Ended July 31, 2025 (millions) | Three Months Ended July 31, 2024 (millions) | Six Months Ended July 31, 2025 (millions) | Six Months Ended July 31, 2024 (millions) | | :------------------------------------ | :---------------------------------------- | :---------------------------------------- | :--------------------------------------- | :--------------------------------------- | | Interest expense | $(1) | $(1) | $(2) | $(3) | | Interest income and other, net | $27 | $29 | $57 | $56 | | Gain on early extinguishment of debt | $0 | $3 | $0 | $3 | | Total Interest and other, net | $26 | $31 | $55 | $56 | - Interest and other, net decreased by **$5 million** (3 months) and **$1 million** (6 months) YoY, primarily due to the absence of gains on early extinguishment of debt from convertible senior notes repurchases in fiscal 2025[154](index=154&type=chunk) [Provision for (Benefit from) Income Taxes](index=28&type=section&id=Provision%20for%20(Benefit%20from)%20Income%20Taxes) | Period | Provision for (Benefit from) Income Taxes (millions) | | :------------------------------------ | :--------------------------------------------------- | | Three Months Ended July 31, 2025 | $0 | | Three Months Ended July 31, 2024 | $(17) | | Six Months Ended July 31, 2025 | $6 | | Six Months Ended July 31, 2024 | $1 | - The provision for income taxes increased by **$17 million** (3 months) and **$5 million** (6 months) YoY, reflecting a higher proportion of pre-tax income[156](index=156&type=chunk) - The 'One Big Beautiful Bill Act,' enacted July 4, 2025, led to a **$5 million** cumulative decrease in income tax expense for the three months ended July 31, 2025, mainly due to immediate expensing of domestic R&D expenditures[157](index=157&type=chunk)[158](index=158&type=chunk)[161](index=161&type=chunk) [Key Business Metrics](index=29&type=section&id=Key%20Business%20Metrics) | Metric | As of July 31, 2025 | As of July 31, 2024 | | :--------------------------------------------------- | :------------------ | :------------------ | | Customers with ACV above $100,000 | 4,945 | 4,620 | | Dollar-based net retention rate (trailing 12 months) | 106% | 110% | | Current remaining performance obligations (millions) | $2,265 | $1,995 | | Remaining performance obligations (millions) | $4,152 | $3,505 | - The number of customers with annual contract value (ACV) above **$100,000** increased by **7%** to **4,945** as of July 31, 2025, indicating continued growth in larger enterprise adoption[167](index=167&type=chunk) - The dollar-based net retention rate decreased to **106%** as of July 31, 2025, from **110%** in the prior year, primarily due to the macroeconomic environment slowing ACV growth from existing customers[173](index=173&type=chunk) [Liquidity and Capital Resources](index=30&type=section&id=Liquidity%20and%20Capital%20Resources) - As of July 31, 2025, principal liquidity sources included **$2,858 million** in cash, cash equivalents, and short-term investments, primarily U.S. treasury securities, money market funds, corporate debt securities, and certificates of deposit[176](index=176&type=chunk) - The company expects existing cash, investments, and cash from sales to meet short-term and long-term capital needs, but may seek additional financing for acquisitions or growth[184](index=184&type=chunk) - Deferred revenue totaled **$1,574 million** as of July 31, 2025, with **$1,550 million** expected to be recognized as revenue in the next 12 months, representing a substantial source of cash[185](index=185&type=chunk) | Cash Flow Activity | Six Months Ended July 31, 2025 (millions) | Six Months Ended July 31, 2024 (millions) | | :------------------------------------ | :---------------------------------------- | :---------------------------------------- | | Net cash provided by operating activities | $408 | $305 | | Net cash provided by (used in) investing activities | $118 | $(38) | | Net cash used in financing activities | $(67) | $(87) | [Material Cash Requirements](index=32&type=section&id=Material%20Cash%20Requirements) - No significant changes to material cash requirements were reported for the six months ended July 31, 2025, other than the reclassification of 2026 Notes as a current liability[193](index=193&type=chunk) [Indemnification Agreements](index=32&type=section&id=Indemnification%20Agreements) - The company enters into indemnification agreements with customers, vendors, and directors/officers, but has not incurred significant costs or accrued material liabilities from these obligations to date[195](index=195&type=chunk) [Critical Accounting Estimates](index=32&type=section&id=Critical%20Accounting%20Estimates) - There were no significant changes to critical accounting estimates for the six months ended July 31, 2025, compared to those discussed in the Annual Report on Form 10-K for fiscal year ended January 31, 2025[197](index=197&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=32&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) This section details Okta, Inc.'s exposure to market risks, including foreign currency and interest rate fluctuations, with no material impact expected - Most sales are denominated in U.S. dollars, limiting significant foreign currency risk, and a hypothetical **10%** change in foreign currency exchange rates would not have a material impact[198](index=198&type=chunk) - The company's cash, cash equivalents, and short-term investments (**$2,858 million** as of July 31, 2025) are subject to interest rate risk, but a hypothetical **10%** change would not have a material impact on their value[199](index=199&type=chunk)[201](index=201&type=chunk) - The 2025 Notes (**$510 million** principal, **0.125%** fixed rate) and 2026 Notes (**$350 million** principal, **0.375%** fixed rate) are classified as current liabilities due to upcoming maturities, but their fixed rates limit economic interest rate exposure[202](index=202&type=chunk)[203](index=203&type=chunk)[204](index=204&type=chunk) [Item 4. Controls and Procedures](index=33&type=section&id=Item%204.%20Controls%20and%20Procedures) Management confirms the effectiveness of disclosure controls and procedures, with no material changes in internal control over financial reporting - Management concluded that disclosure controls and procedures were effective at a reasonable assurance level as of July 31, 2025[205](index=205&type=chunk) - No material changes in internal control over financial reporting occurred during the period covered by the report[206](index=206&type=chunk) - The company acknowledges the inherent limitations of control systems, which can only provide reasonable, not absolute, assurance against errors and fraud[207](index=207&type=chunk) [PART II. OTHER INFORMATION](index=35&type=section&id=PART%20II.%20OTHER%20INFORMATION) This part covers legal proceedings, risk factors, other information, and exhibits for the reported period [Item 1. Legal Proceedings](index=35&type=section&id=Item%201.%20Legal%20Proceedings) This section incorporates legal matters from Note 8, detailing a class action settlement and ongoing derivative lawsuits - Legal matters, including the settlement of a class action lawsuit for **$60 million** and the status of derivative lawsuits, are incorporated by reference from Note 8 of the financial statements[209](index=209&type=chunk) [Item 1A. Risk Factors](index=35&type=section&id=Item%201A.%20Risk%20Factors) This section outlines various risks that could materially affect Okta, Inc.'s business, financial condition, and growth prospects [Risk Factor Summary](index=35&type=section&id=Risk%20Factor%20Summary) - Key risks include adverse economic conditions, intense competition (especially from Microsoft), potential for future losses despite recent profitability, reliance on customer retention and growth, and vulnerability to cybersecurity incidents and data breaches[212](index=212&type=chunk)[220](index=220&type=chunk)[223](index=223&type=chunk)[225](index=225&type=chunk)[257](index=257&type=chunk) - Operational risks involve managing rapid growth, maintaining service levels, integrating with diverse technologies, and addressing errors or vulnerabilities in solutions[215](index=215&type=chunk)[218](index=218&type=chunk)[290](index=290&type=chunk) - Financial and governance risks include stock price volatility, the dual-class stock structure concentrating voting control, and potential impacts from convertible note transactions[216](index=216&type=chunk)[324](index=324&type=chunk)[326](index=326&type=chunk)[344](index=344&type=chunk) [Risks Related to Our Business and Industry](index=36&type=section&id=Risks%20Related%20to%20Our%20Business%20and%20Industry) - Adverse economic conditions, including inflation and rising interest rates, could reduce demand for solutions and impact revenue, results of operations, and cash flows[214](index=214&type=chunk) - Failure to effectively manage rapid growth, including challenges in restructuring efforts and maintaining customer satisfaction, could harm business and future prospects[215](index=215&type=chunk)[218](index=218&type=chunk)[219](index=219&type=chunk) - Intense competition from larger, well-established companies like Microsoft, with greater resources and broader product offerings, poses a significant threat to market position and financial performance[220](index=220&type=chunk)[221](index=221&type=chunk)[222](index=222&type=chunk) - The company's ability to sustain profitability depends on retaining existing customers and expanding its customer base, with non-renewal or slower growth adversely impacting revenue[223](index=223&type=chunk)[225](index=225&type=chunk)[226](index=226&type=chunk) - Quarterly results may fluctuate due to factors like demand, sales cycles, security breaches, seasonality, and macroeconomic conditions, making future results difficult to predict[227](index=227&type=chunk)[228](index=228&type=chunk)[229](index=229&type=chunk) - Failure to adequately fund R&D or successfully integrate acquisitions could impair competitiveness, while international expansion efforts face risks like political uncertainties and compliance with foreign regulations[230](index=230&type=chunk)[234](index=234&type=chunk)[237](index=237&type=chunk)[238](index=238&type=chunk) [Risks Related to Intellectual Property, Infrastructure Technology, Data Privacy and Security](index=43&type=section&id=Risks%20Related%20to%20Intellectual%20Property,%20Infrastructure%20Technology,%20Data%20Privacy%20and%20Security) - Interruptions or performance problems in technology, systems, or infrastructure, including those from third-party data centers like AWS, could delay platform deployment, harm reputation, and lead to financial penalties[253](index=253&type=chunk)[254](index=254&type=chunk)[256](index=256&type=chunk)[287](index=287&type=chunk)[288](index=288&type=chunk) - Cybersecurity incidents, including those involving third-party service providers, have harmed reputation and financial results in the past and could lead to unauthorized access, data theft, litigation, and increased costs[257](index=257&type=chunk)[260](index=260&type=chunk)[261](index=261&type=chunk)[262](index=262&type=chunk) - Non-compliance with evolving global data privacy and security laws (e.g., GDPR, U.S. state laws) or perceived failures could result in investigations, fines, litigation, and reputational damage[265](index=265&type=chunk)[266](index=266&type=chunk)[267](index=267&type=chunk)[268](index=268&type=chunk)[269](index=269&type=chunk)[271](index=271&type=chunk) - Real or perceived errors, failures, vulnerabilities, or bugs in solutions, especially during updates or in complex environments, could cause outages, data loss, and harm business operations and reputation[290](index=290&type=chunk)[291](index=291&type=chunk) - The use of AI technologies, including generative AI, presents risks such as uncertain regulatory environments, potential intellectual property infringement claims, ethical concerns, and the creation of inaccurate content, which could lead to reputational harm or liability[292](index=292&type=chunk)[293](index=293&type=chunk) - Failure to adequately protect proprietary rights (patents, trade secrets) or being subject to infringement claims could impair competitive position, lead to costly litigation, and reduce revenue[294](index=294&type=chunk)[296](index=296&type=chunk)[297](index=297&type=chunk)[298](index=298&type=chunk) [Risks Related to Legal, Accounting and Tax Matters](index=53&type=section&id=Risks%20Related%20to%20Legal,%20Accounting%20and%20Tax%20Matters) - Revenue recognition over service periods means sales decreases are not immediately reflected, limiting rapid revenue increases and potentially impacting future periods[303](index=303&type=chunk)[304](index=304&type=chunk) - Exposure to foreign currency exchange rate fluctuations may increase as international contracts become denominated in local currencies, potentially affecting results of operations[306](index=306&type=chunk) - Non-compliance with anti-corruption, anti-bribery, and export control laws, especially with international expansion and channel partners, could lead to criminal penalties, significant fines, and reputational harm[307](index=307&type=chunk)[309](index=309&type=chunk)[310](index=310&type=chunk) - Changes in tax laws, regulations, or interpretations, both domestic and international, could increase costs, lead to additional tax liabilities, and adversely affect liquidity and profitability[311](index=311&type=chunk)[312](index=312&type=chunk)[313](index=313&type=chunk)[314](index=314&type=chunk)[315](index=315&type=chunk) - Limitations on the use of U.S. net operating loss carry-forwards due to past or future ownership changes could increase future tax liability[316](index=316&type=chunk) - Failure to maintain effective disclosure controls and internal control over financial reporting could impair the ability to produce timely and accurate financial statements, leading to regulatory discipline and investor distrust[317](index=317&type=chunk)[318](index=318&type=chunk) [Risks Related to Ownership of Our Class A Common Stock](index=56&type=section&id=Risks%20Related%20to%20Ownership%20of%20Our%20Class%20A%20Common%20Stock) - The stock price of Class A common stock is subject to substantial volatility due to various factors, including market performance, financial fluctuations, analyst coverage, and actions by institutional stockholders[324](index=324&type=chunk)[325](index=325&type=chunk) - The dual-class common stock structure concentrates voting control with pre-IPO stockholders (**32.5%** as of July 31, 2025), limiting other stockholders' ability to influence corporate matters[326](index=326&type=chunk) - Sales of a substantial number of Class A common stock shares by insiders or the perception of such sales could cause the market price to decline[328](index=328&type=chunk) - The company does not intend to pay dividends in the foreseeable future, requiring investors to rely on stock price appreciation for gains[332](index=332&type=chunk) - Provisions in charter documents and Delaware law could make company acquisition more difficult and limit stockholders' ability to replace the board[333](index=333&type=chunk)[334](index=334&type=chunk)[335](index=335&type=chunk) [Risks Related to our Outstanding Convertible Notes](index=59&type=section&id=Risks%20Related%20to%20our%20Outstanding%20Convertible%20Notes) - Servicing debt, including the 2025 and 2026 convertible notes, requires significant cash flow, and insufficient cash could lead to default or restrictive financing terms[338](index=338&type=chunk)[341](index=341&type=chunk) - The company may lack funds for cash settlement upon conversion or repurchase of notes, potentially limited by future debt agreements[339](index=339&type=chunk) - Conditional conversion features of the notes, if triggered, could adversely affect financial condition by requiring cash payments or reclassifying debt as current liabilities[342](index=342&type=chunk)[343](index=343&type=chunk) - Transactions related to convertible notes, including conversions, repurchases, or hedging activities by counterparties, may dilute ownership interests and affect the market price of Class A common stock[344](index=344&type=chunk)[348](index=348&type=chunk) [General Risk Factors](index=61&type=section&id=General%20Risk%20Factors) - The company's success depends on retaining executive officers and key employees; loss of such personnel or inability to attract skilled talent could harm business and growth prospects[350](index=350&type=chunk) - Catastrophic events like natural disasters, power loss, or cyber-attacks could disrupt operations, cause reputational harm, and lead to data security breaches, with insurance potentially insufficient to cover losses[351](index=351&type=chunk) [Item 5. Other Information](index=60&type=section&id=Item%205.%20Other%20Information) This section discloses Rule 10b5-1 trading arrangements adopted by executive officers during the three months ended July 31, 2025 - Larissa Schwartz, Chief Legal Officer, adopted a 10b5-1 Plan on July 3, 2025, for the sale of up to **14,163 shares** of Class A common stock, plus future RSUs, from October 8, 2025, to September 30, 2026[352](index=352&type=chunk) - Brett Tighe, Chief Financial Officer, adopted a 10b5-1 Plan on July 15, 2025, for the sale of up to **40,000 shares** of Class A common stock, from December 8, 2025, to January 27, 2026[352](index=352&type=chunk) [Item 6. Exhibits](index=61&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Quarterly Report on Form 10-Q, including corporate governance documents, certifications, and XBRL data - The report includes certifications from the CEO and CFO (Exhibits 31.1, 31.2, 32.1) and XBRL interactive data files (Exhibits 101.INS, 101.SCH, 101.CAL, 101.LAB, 101.PRE, 101.DEF, 104)[355](index=355&type=chunk) - Corporate governance documents, such as the Amended and Restated Certificate of Incorporation and Bylaws, are incorporated by reference[355](index=355&type=chunk) [Signatures](index=63&type=section&id=Signatures) This section contains the required signatures for the Quarterly Report on Form 10-Q, confirming its submission by the Chief Financial Officer - The report was duly signed on behalf of Okta, Inc. by Brett Tighe, Chief Financial Officer, on August 26, 2025[357](index=357&type=chunk)[359](index=359&type=chunk)