Okta Q2 FY27 Results: Revenue Growth and Profitability Continue to Improve

Okta, Inc. (NASDAQ: OKTA) delivered a solid second quarter of fiscal 2027, with accelerating subscription backlog, improving profitability, and strong free cash flow. At the same time, the company is increasingly positioning itself as a key independent and neutral identity provider for the emerging AI-agent economy.

Revenue Growth Remains Steady

Okta generated $805 million in revenue in the second quarter of fiscal 2027, an 11% increase from the same period a year earlier. Subscription revenue, which accounted for 99% of total revenue, rose 12% to $793 million.

The company's underlying subscription business continues to show healthy momentum. Remaining performance obligations, or RPO, increased 17% year over year to $4.858 billion, while current RPO (cRPO) rose 14% to $2.585 billion. Because cRPO represents subscription revenue expected to be recognized over the following 12 months, its growth provides an important indication of Okta's near-term revenue visibility.

Workforce Identity Annual Contract Value (ACV) increased 11% and accounted for 59% of total ACV, while Customer Identity ACV grew 13% and represented 41%.

However, the company's dollar-based net retention rate for the trailing 12-month period was 107%. While still above 100%, indicating that existing customers continued to expand their spending overall, the metric also shows that Okta's expansion within its installed base remains relatively moderate.

Profitability and Cash Flow Are Major Strengths

One of the strongest aspects of Okta's latest results was its improvement in GAAP profitability.

GAAP operating income reached $107 million, compared with $41 million in the year-ago quarter. This lifted the GAAP operating margin to 13% from 6%. Non-GAAP operating income increased to $226 million, producing a 28% operating margin, compared to 28% in Q2 last year.

GAAP net income reached $116 million ($0.65 diluted EPS), up significantly from $67 million ($0.37 diluted EPS) in Q2 FY26. Non-GAAP diluted EPS came in at $1.05, compared to $0.91 in the second quarter of fiscal 2026.

Free cash flow was even more impressive. Okta generated $227 million of free cash flow during the quarter, up from $162 million a year earlier. The free cash flow margin consequently increased to 28% from 22%.

The combination of double-digit revenue growth, expanding GAAP profitability, and strong cash generation gives Okta considerable financial flexibility. The company ended July with $2.299 billion in cash, cash equivalents, and short-term investments and has no remaining convertible debt after repaying the final $350 million of its 2026 Notes.

Okta is also returning capital to shareholders. During the quarter, the company repurchased $125 million of stock at an average price of $81.06 per share. Of the original $1 billion authorization, $555 million remained available at the end of the quarter. The repurchase program does not have an expiration date, does not obligate Okta to acquire any particular amount of Class A Common Stock, and may be modified, suspended, or terminated at any time at the discretion of the board of directors.

The AI Opportunity

Beyond the current financial numbers, the most important long-term opportunity may be Okta's role in securing the emerging AI-agent ecosystem.

As enterprises deploy autonomous AI agents, identity becomes increasingly important. An AI agent needs an identity, permissions, authentication, and authorization just as humans and applications do. More importantly, enterprises need to know what an agent can access, what actions it can perform, and who is responsible for those actions.

The company is positioning its existing identity platform as the control layer for these AI agents, with products such as Okta for AI Agents, Okta Identity Governance, and Fine-Grained Authorization. Its partnerships with companies including Google Cloud, Anthropic, NVIDIA, Databricks, Snowflake, Amazon Web Services, and OpenAI further reinforce this strategy.

Fiscal 2027 Guidance Remains Conservative

Okta expects third-quarter fiscal 2027 revenue of $813 million to $817 million, representing 10% year-over-year growth. cRPO is expected to reach $2.590 billion to $2.600 billion, implying 11% to 12% growth. Non-GAAP operating income is guided to $196 million to $200 million, which yields a non-GAAP operating margin of 24% to 25%; non-GAAP diluted EPS to $0.92 to $0.94. Non-GAAP free cash flow is expected to be $175 million to $185 million.

For the full fiscal year, Okta now expects revenue of $3.216 billion to $3.226 billion, representing 10% to 11% growth. The company expects non-GAAP operating income of $830 million to $840 million, which yields a non-GAAP operating margin of 26% and non-GAAP diluted net income per share of $3.90 to $3.94. There is also a structural headwind from Okta's decision to accelerate the shift of professional services business to partners. Management expects this change to reduce total revenue growth by approximately one percentage point.

OKTA Stock Technical Analysis

From a technical perspective, the $186 level is currently the most important price to watch. If OKTA can decisively break through $186 and, more importantly, establish itself above this level, the next major upside target would be around $200.

However, a rejection around this resistance could trigger a pullback as investors take profits or reassess the company's relatively modest 10%–11% revenue growth outlook. In that scenario, the first major support level to watch would be approximately $145. If $145 fails to provide sufficient support, the next important downside level would be around $117.