10-K: Okta Posts Strong Profit, Eyes AI Identity Market Growth

Okta, Inc. reported a significant turnaround to net income in fiscal year 2026, driven by subscription revenue growth and strategic investments in AI identity solutions.

Summary

• Okta, Inc. achieved a net income of $235 million for fiscal year 2026, a substantial improvement from $28 million in fiscal 2025 and a net loss of $355 million in fiscal 2024.
• Total revenue grew by 12% to $2,919 million in fiscal 2026, up from $2,610 million in fiscal 2025.
• Subscription revenue, which constitutes 98% of total revenue, increased by 12% to $2,855 million in fiscal 2026.
• The company expanded its customer base, reaching over 20,000 customers, with 5,100 customers having an annual contract value (ACV) above $100,000 as of January 31, 2026.
• Gross margin improved to 77% in fiscal 2026 from 76% in fiscal 2025, primarily due to improved spend efficiency in subscription revenue.
• Okta is actively developing and introducing new product offerings for AI agents, including 'Okta for AI Agents' and 'Auth0 for AI Agents', currently in early access.
• The company completed the acquisition of Axiom Security Ltd for $54 million in cash on September 4, 2025, to broaden its privileged access management capabilities.
• A stock repurchase program of up to $1 billion was authorized in January 2026, with $921 million remaining available as of January 31, 2026.
• The Dollar-Based Net Retention Rate for the trailing 12 months ended January 31, 2026, was 106%, a slight decrease from 107% in fiscal 2025, attributed to the macroeconomic environment.
• Remaining Performance Obligations (RPO) increased to $4,827 million as of January 31, 2026, with $2,513 million expected to be recognized as revenue in the next 12 months.

Sentiment

Score: 8

Explanation: StockSavvy.ai views this filing positively due to the strong financial turnaround to profitability, solid revenue growth, and clear strategic direction into the emerging AI identity market. While the slight decline in DBNRR and ongoing cybersecurity risks warrant attention, the overall trajectory and proactive innovation are favorable.

Positives

• Net income significantly improved to $235 million in fiscal 2026, a strong turnaround from previous losses.
• Total revenue increased by 12% to $2,919 million, demonstrating continued growth.
• Subscription revenue, the core business, grew by 12% to $2,855 million.
• Gross margin improved to 77%, indicating better operational efficiency.
• The number of customers with ACV over $100,000 increased to 5,100, reflecting success in attracting larger enterprises.
• Strategic investments in AI identity solutions (Okta for AI Agents, Auth0 for AI Agents, Cross App Access) position the company for future growth in an emerging market.
• Successful acquisition of Axiom Security Ltd enhances privileged access management capabilities.
• The company maintains strong liquidity with $2,553 million in cash, cash equivalents, and short-term investments.

Negatives

• Dollar-Based Net Retention Rate decreased slightly to 106% from 107% in the prior year, primarily due to the macroeconomic environment.
• Professional services and other revenue, while increasing in fiscal 2026, is expected to decline in fiscal 2027 as more engagements shift to the partner ecosystem.
• The company has experienced cybersecurity incidents in the past that harmed its reputation and customer relations, and similar incidents may occur in the future.
• Operating expenses remain substantial, with sales and marketing being the largest category, though they decreased as a percentage of total revenue.
• The company maintains a full valuation allowance on its deferred tax assets in the United States, indicating uncertainty about future taxable income utilization.

Risks

• Adverse general economic, market, and industry conditions, including economic downturns, geopolitical events, inflation, and interest rates, could reduce demand for solutions.
• Inability to retain existing customers or grow the customer base could harm revenue growth and profitability.
• Intense competition, especially from larger, well-established companies like Microsoft, could impact market position and financial results.
• Failure to adapt to rapid technological change, particularly with new AI technologies and evolving industry standards, could impair competitiveness.
• Cybersecurity incidents, including unauthorized access to systems or data, could harm reputation, create liability, and adversely impact financial results.
• Non-compliance with new or existing laws and regulations related to privacy, security, and personal information processing could adversely affect the business.
• Interruptions or performance problems with technology, systems, or infrastructure, including reliance on third-party data centers, could delay platform deployment and harm the business.
• Real or perceived errors, failures, vulnerabilities, or bugs in solutions could harm the business and results of operations.
• Issues with the use, development, adoption, deployment, and maintenance of AI technologies, combined with an uncertain regulatory environment, may result in reputational harm or liability.
• The dual-class stock structure concentrates voting control with pre-IPO stockholders, limiting the ability of other stockholders to influence corporate matters.
• Servicing the company's convertible notes may require a significant amount of cash, and there's a risk of not having sufficient funds for cash settlement or repurchases.
• Loss of executive officers or other key employees, or inability to attract and retain skilled talent, could harm the business.
• Catastrophic events such as natural disasters or cyber-attacks could disrupt business operations.

Future Outlook

The company plans to continue significant investments in research and development, particularly in AI capabilities like 'Okta for AI Agents' and 'Auth0 for AI Agents', to extend its platforms and address new use cases. It aims to deepen relationships with existing customers, drive growth with large enterprises, and expand its international footprint. Professional services revenue is expected to decline in fiscal 2027 as more engagements shift to the partner ecosystem. The company also expects interest income to decrease in fiscal 2027 due to the Share Repurchase Program, settlement of 2026 Convertible Senior Notes, and changes in interest rates. The 'One Big Beautiful Bill Act' is expected to reduce federal and state cash tax payments and the provision for income taxes in future periods, with certain international taxation provisions effective in fiscal 2027.

Management Comments

• Our vision is to free everyone to safely use any technology, and we believe identity is the key to making that happen.
• Our purpose is to bring simple and secure digital access to people and organizations everywhere.
• The emergence of artificial intelligence (AI) and the deployment of AI agents may, over time, create new opportunities for identity management.
• We see a potential long-term opportunity for our platforms to serve as a unified, independent control plane for non-human identities (NHIs) and AI agents.
• We are expanding these capabilities to include AI agents with the introduction of new product offerings currently in development and early access.
• Our commitment to our customers' success helps drive increased customer investment in the number of users of our Okta Platform and Auth0 Platform and adoption of our additional product offerings.

Industry Context

StockSavvy.ai notes that Okta's strong financial performance and strategic focus on AI agents align with broader industry trends emphasizing identity as the critical layer for Zero Trust security models. The acceleration of digital transformation and cloud adoption continues to drive demand for robust identity management solutions. The company's proactive development of offerings for non-human identities and AI agents positions it to capitalize on an emerging, high-growth segment within the cybersecurity landscape, potentially expanding its accessible market beyond traditional human user identity management.

Comparison to Industry Standards

• The filing identifies Microsoft as its principal competitor, noting that many competitors have significantly greater financial, technical, sales, and marketing resources, larger intellectual property portfolios, and more established relationships.
• The company emphasizes its product strategy, platform architecture, technology, and independence as key competitive factors, allowing it to co-exist alongside competitors' products within customer bases.
• No specific comparative financial metrics or project outcomes against named competitors (e.g., Microsoft, IBM, Ping Identity) are provided in the filing to assess performance relative to industry benchmarks.

Management Changes

Corporate Governance

Legal Proceedings

• A securities class action lawsuit, 'In re Okta, Inc. Securities Litigation', filed on May 20, 2022, alleging false or misleading statements regarding cybersecurity controls and Auth0 integration, was settled for $60 million (covered by D&O insurance and a $10 million retention) and dismissed with prejudice on November 19, 2024.
• Multiple derivative lawsuits ('ODell v. McKinnon et al.', 'LR Trust v. McKinnon et al.', 'Buono v. McKinnon et al.', 'Nasr v. McKinnon, et al.', 'Grimaldi v. McKinnon, et al.', 'Duprat v. McKinnon, et al.') were filed against current and former executive officers and directors, alleging breaches of fiduciary duties related to cybersecurity and Auth0 integration.
• These derivative actions were globally resolved with a Memorandum of Understanding on January 10, 2025, including a non-monetary settlement and an agreement for the company's D&O insurers to pay $2.25 million for plaintiffs' counsel fees. All consolidated derivative actions were dismissed with prejudice by December 1, 2025.

Stakeholder Impact

• Shareholders: The significant turnaround to net income and continued revenue growth are positive for shareholders. The share repurchase program could also enhance shareholder value. However, the slight decline in Dollar-Based Net Retention Rate and the dual-class stock structure may be areas of concern.
• Customers: Continued investment in AI and platform enhancements, along with the acquisition of Axiom Security, aims to provide more secure and comprehensive identity solutions. Past cybersecurity incidents have negatively impacted customer relations and reputation, which could affect trust and retention.
• Employees: The company emphasizes growth and development opportunities, competitive compensation, benefits, and wellness programs. Restructuring charges indicate workforce reductions, which could impact employee morale, though the scale was reduced in fiscal 2026.
• Partners: The shift of professional services engagements to the partner ecosystem indicates increased opportunities for channel partners, system integrators, and other distribution partners.
• Creditors: The company's ability to settle its 2025 Notes and its intention to settle the 2026 Notes in cash demonstrates financial stability in managing its debt obligations.

Next Steps

• Continue significant investments in research and development to innovate and extend platforms with new products, especially for AI agents.
• Deepen relationships within the existing customer base through cross-selling and up-selling additional product offerings.
• Drive growth with large customers using a land-and-expand sales model, focusing on key markets and highly regulated sectors.
• Further leverage the partner ecosystem for sales efforts, growth, scale, and specialized expertise.
• Expand international footprint, aiming to grow business outside the United States.
• Go-to-market specialization to better meet the needs of IT and security buyers (Okta sellers) and developers (Auth0 sellers).
• Leverage unique data assets with powerful analytics, potentially exploring monetization opportunities in the future.
• Evaluate opportunities to acquire or invest in emerging and adjacent technologies to complement organic investments.
• Settle the outstanding principal balance of $350 million for the 2026 Convertible Senior Notes in cash upon maturity on June 15, 2026.
• Continue repurchasing Class A common stock under the authorized $1 billion Share Repurchase Program.

Key Dates

Recommendation

Okta's fiscal 2026 results demonstrate a strong financial turnaround, moving from a significant net loss to substantial profitability. The company's core subscription revenue continues to grow, and its strategic focus on emerging AI identity management solutions positions it well for future market expansion. While the slight dip in Dollar-Based Net Retention Rate and ongoing cybersecurity risks are noted, the overall positive financial trajectory, coupled with proactive investments in innovation and a clear growth strategy, suggests a compelling long-term opportunity. A seasoned investor would likely view this as a strong buy, anticipating continued execution on its strategic initiatives and further market penetration in the critical identity and access management space.

Keywords

Identity Management, Cybersecurity, SaaS, Cloud Security, Zero Trust, AI Agents, Workforce Identity, Customer Identity, Authentication, Access Management, Corporate Governance, SEC Filing