Okta raises forecast as CEO says economic conditions were ‘better than we thought’

Okta's shares surged by 4% in after-hours trading on Tuesday following impressive fiscal results that outpaced Wall Street expectations. In the second quarter, which concluded on July 31, the identity software provider reported a revenue increase of approximately 13% year-over-year. The company recorded a net income of $67 million, translating to 37 cents per share, a substantial rise from last year's second quarter, which saw a net income of $29 million or 15 cents per share. Todd McKinnon, Okta's co-founder and CEO, expressed optimism in a CNBC interview, stating, "It was much better than we thought. The results speak for themselves." Despite a more cautious approach from U.S. government clients since the launch of the Department of Government Efficiency by President Trump in January, McKinnon noted that Okta still performed admirably. The company maintained a net retention rate of 106%, consistent with the previous quarter, highlighting its ability to grow with existing customers. Looking ahead, McKinnon emphasized the growing need for companies to adopt software solutions that manage the identities of artificial intelligence agents, which he believes will lead to further expansion opportunities. He also noted that bundling various Okta services could enhance revenue growth. For the upcoming fiscal third quarter, Okta has projected adjusted earnings per share between 74 to 75 cents and revenue between $728 million and $730 million. Analysts had estimated earnings of 75 cents per share, with revenue expectations of $722.9 million. Additionally, Okta's current remaining performance obligation, a measure of subscription backlog expected to be recognized in the following 12 months, is anticipated to reach between $2.260 billion and $2.265 billion, slightly exceeding the consensus estimate of $2.26 billion. The company has also revised its fiscal 2026 outlook, forecasting adjusted earnings per share between $3.33 and $3.38, with revenue expected between $2.875 billion and $2.885 billion, compared to the consensus of $3.28 and $2.86 billion. In a significant development, Okta recently agreed to acquire Axiom Security, an Israeli startup specializing in data access management software, although the terms of the deal remain undisclosed. Meanwhile, Palo Alto Networks, a major player in cybersecurity, has announced plans to acquire CyberArk, a competitor of Okta, for approximately $25 billion. McKinnon voiced his concerns regarding the trend towards consolidation in the technology space, stating, "We just think that's wrong, because customers need choice. It's very unlikely they're going to get every piece of technology or every piece of security from one vendor." As of Tuesday's market close, Okta's shares had increased by 16%, while the Nasdaq, which is heavily weighted with technology stocks, rose by 11%. Executives will expand on these results during a conference call with analysts scheduled for 5 p.m. ET.