Record Bookings Signal New Momentum for Okta as AI Agents Expand Identity Demand

Okta’s Core Identity Business Strengthens as AI Creates a New Security Opportunity

Okta (OKTA) rallied sharply Thursday after fiscal second-quarter results exceeded expectations and showed improving momentum across its core identity business. Revenue increased 11% year over year to $805 million, while adjusted earnings reached $1.05 per share.

The stronger signal came from bookings and contracted revenue. Okta recorded its strongest non-fourth-quarter bookings performance, total remaining performance obligations rose 17% to $4.86 billion, and current RPO increased 14% to $2.59 billion. The company also raised its fiscal 2027 revenue and earnings outlook.

Key Points

• Okta revenue increased 11% to $805 million, adjusted EPS reached $1.05, and total remaining performance obligations climbed 17% to $4.86 billion.
• New products accounted for about 30% of Q2 bookings, while customers with more than $1 million in annual contract value grew more than 20% to over 600.
• Okta raised fiscal 2027 revenue guidance to $3.216 billion-$3.226 billion, while positioning AI-agent identity security as an early-stage opportunity rather than a material FY27 revenue driver.

Record Bookings Strengthen Okta’s Core Identity Business

Okta's second-quarter performance showed improvement beyond the headline revenue and earnings numbers.

Revenue rose to $805 million from $728 million a year earlier, while subscription revenue increased 12% to $793 million. Adjusted earnings of $1.05 per share exceeded expectations of roughly $0.97.

GAAP net income increased to $116 million from $67 million a year earlier, while GAAP operating income rose to $107 million from $41 million. Non-GAAP operating income reached $226 million, representing a 28% operating margin.

The company's contracted business also expanded. Total remaining performance obligations, or RPO, increased 17% to $4.858 billion. RPO represents revenue contracted with customers but not yet recognized. Current RPO, which covers the portion expected to be recognized over the next 12 months, increased 14% to $2.585 billion.

Management described Q2 as a record bookings quarter outside of a fourth quarter, supported by strong pipeline conversion and deal expansions.

Large enterprises contributed to that momentum. Customers generating more than $1 million in annual contract value increased more than 20%, bringing the total to more than 600.

New products represented approximately 30% of bookings during the quarter. When newer products were included in a transaction, Okta said the average uplift in annual contract value was about 40%.

The company also generated $234 million in operating cash flow and $227 million in free cash flow, up from $162 million in free cash flow a year earlier.

Why Did OKTA Stock Surge After Earnings?

The investor reaction reflected a combination of stronger core demand, higher contracted revenue and increased expectations for the full fiscal year.

OKTA stock jumped about 20% in extended trading following the report and continued sharply higher Thursday. The earnings reaction followed an 11% increase in revenue, record non-Q4 bookings and accelerating current RPO growth.

Okta also raised its fiscal 2027 outlook. Full-year revenue is now expected at $3.216 billion-$3.226 billion, representing growth of 10% to 11% and up from its previous forecast of roughly $3.19 billion-$3.21 billion.

Adjusted full-year earnings are expected at $3.90-$3.94 per share. Okta also projects a 26% non-GAAP operating margin and a free cash flow margin of 28% to 29%.

For the fiscal third quarter, the company expects revenue of $813 million-$817 million, representing approximately 10% year-over-year growth. Current RPO growth is expected at 11% to 12%, while non-GAAP operating margin is projected at 24% to 25%.

The quarter's strength was spread across both workforce and customer identity, with management reporting accelerating annual contract value growth across both businesses.

Okta Identity Governance was the largest contributor within its newer product portfolio, while AI-related customer conversations also expanded into governance, customer identity and legacy identity-platform replacement projects.

Can AI-Agent Security Become a Larger Growth Driver?

Okta is positioning identity as an important security layer for AI agents, but management emphasized that the opportunity remains early.

Okta for AI Agents became available to all customers during the quarter and generated dozens of deals, including several million-dollar-plus transactions. However, management said AI-related revenue remains too small to materially affect companywide results and is not expected to become material during fiscal 2027.

The significance of AI in Q2 instead came partly from its ability to initiate broader customer conversations. Management said discussions about unsecured AI agents have expanded into other areas of Okta's portfolio, including identity governance and legacy-platform migrations.

CEO Todd McKinnon said every AI agent requires a trusted identity and controls governing what it can access and do. A customer survey cited by management found that 81% of CISOs were aware that agents were being deployed without adequate security.

Okta is also preparing its pricing model for potentially heavier agent usage. The current Okta for AI Agents model uses a per-user uplift, while the company is developing consumption-based frameworks for agent single sign-on.

The company completed its approximately $200 million acquisition of Permiso Security during the quarter. Permiso adds identity threat-detection capabilities, including 400 native risk detections compared with Okta's existing 90, along with behavioral analysis and threat research capabilities.

Management characterized Permiso as a tuck-in acquisition designed to extend identity threat protection across human, nonhuman and agentic identities.

Another near-term marker will be Okta's participation in the Goldman Sachs Communacopia & Technology Conference on September 9, 2026.

What It Means for Investors

Okta's fiscal second quarter showed that the company's near-term momentum is still being driven primarily by its core identity business rather than direct AI revenue.

Record non-Q4 bookings, 14% current RPO growth, 17% total RPO growth and increasing penetration among customers with more than $1 million in annual contract value all pointed to stronger enterprise activity. New products also contributed about 30% of bookings and generated an average annual contract value uplift of approximately 40% when included in deals.

AI adds a different dimension to the story. Although management does not expect AI security to materially affect fiscal 2027 revenue, conversations around AI-agent security are already contributing to deals across other areas of the portfolio.

That distinction matters when evaluating the OKTA earnings reaction. The current financial improvement does not depend on AI becoming a major revenue contributor immediately. Instead, Okta reported stronger core demand while building products aimed at securing AI agents as their adoption expands.

Profitability and cash generation are also part of the picture. Q2 non-GAAP operating margin reached 28%, free cash flow totaled $227 million, and the company expects a 28% to 29% free cash flow margin for fiscal 2027.

The next measures of progress include Q3 current RPO growth, continued large-enterprise expansion, adoption of newer products and whether early AI-security discussions increasingly translate into broader identity contracts.

Conclusion

Okta's second-quarter results combined stronger core identity demand with an emerging AI-security opportunity.

Revenue increased 11% to $805 million, subscription revenue rose 12%, and total remaining performance obligations climbed 17% to $4.86 billion. The company also delivered record non-Q4 bookings and increased its base of customers generating more than $1 million in annual contract value to over 600.

At the same time, newer products accounted for about 30% of bookings, and Okta for AI Agents generated dozens of deals even though management said AI remains immaterial to overall fiscal 2027 revenue.

The sharp move in OKTA stock followed those improving business indicators and a higher full-year outlook. The next question is whether stronger bookings and broader product adoption continue translating into contracted revenue growth while Okta develops AI-agent identity security into a more meaningful business.

FAQs

Why did Okta stock rise after Q2 earnings?

Okta stock rose after revenue and adjusted earnings exceeded expectations, the company reported record non-Q4 bookings, current RPO increased 14%, and total RPO grew 17%. Okta also raised its fiscal 2027 revenue and earnings outlook.

How much did Okta revenue grow in Q2?

Okta reported fiscal second-quarter revenue of $805 million, up 11% from $728 million a year earlier. Subscription revenue increased 12% to $793 million.

How important is AI to Okta's current revenue?

Management said AI-related revenue remains immaterial to Okta's overall financial results and is not expected to become material in fiscal 2027. However, AI-agent security conversations are already contributing to broader identity and modernization deals.

What is Okta's fiscal 2027 guidance?

Okta expects fiscal 2027 revenue of $3.216 billion to $3.226 billion, representing growth of 10% to 11%. The company expects adjusted earnings of $3.90 to $3.94 per share, a 26% non-GAAP operating margin and a 28% to 29% free cash flow margin.

What should investors watch next for Okta?

Key areas include Q3 current RPO growth, large-enterprise customer expansion, adoption of newer products, continued core identity momentum and whether early demand for AI-agent security develops into a more meaningful revenue contributor.

This article was created with AI assistance and reviewed by an editor. For details, please refer to our Terms of Use.

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