Key Highlights

● Total revenue was $805 million, up 11%, with subscription revenue up 12%.

● Remaining performance obligations were $4.858 billion, up 17%.

● Free cash flow was $227 million, or 28% of revenue.

● Third-quarter revenue is guided at $813 million to $817 million.

Okta, Inc. (NASDAQ:OKTA) is arguing that the spread of AI agents increases demand for identity controls, and its second-quarter fiscal 2027 results, announced on August 26, 2026, supply early numbers to test that claim. Revenue grew 11%, remaining performance obligations grew 17%, and cash flow improved sharply, but guidance points to slightly slower growth in the third quarter. The chief financial officer highlighted accelerating current RPO and success with the largest customers, and said new products led by Okta Identity Governance contributed to top-line growth.

Business and sector

Okta describes itself as the leading independent identity provider. Its software controls who and what can access applications and data, covering workforce identity, customer identity through its Auth0 developer business, and newer products such as Okta Identity Governance. Customers buy subscriptions, so remaining performance obligations, meaning contracted subscription backlog, are a guide to future revenue. The sector is competitive.

Reported results

For the quarter ended July 31, 2026, total revenue was $805 million, up 11%, and subscription revenue was $793 million, up 12%. Remaining performance obligations were $4.858 billion, up 17%, and current remaining performance obligations, the portion expected to be recognized within twelve months, were $2.585 billion, up 14%.

GAAP operating income was $107 million, or 13% of revenue, against $41 million, or 6%. Non-GAAP operating income was $226 million, a margin of 28%, against $202 million, also 28%. GAAP net income was $116 million, or $0.65 per diluted share, against $67 million, or $0.37. Non-GAAP net income was $194 million, or $1.05 per diluted share, against $169 million, or $0.91.

Cash flow and balance sheet

Net cash from operations was $234 million, or 29% of revenue, against $167 million, or 23%, a year earlier. Free cash flow was $227 million, or 28% of revenue, against $162 million, or 22%. Cash, cash equivalents and short-term investments were $2.299 billion at July 31, 2026. During the quarter Okta settled the remaining principal of its 2026 Notes for $350 million in cash. The company also noted that its stock repurchase program and the cash settlement of the notes will reduce interest income.

Guidance and risks

The company described its approach to guidance as prudent. For the third quarter it expects revenue of $813 million to $817 million, growth of 10%, non-GAAP operating income of $196 million to $200 million and non-GAAP diluted earnings per share of $0.92 to $0.94. For fiscal 2027 it now expects revenue of $3.216 billion to $3.226 billion, growth of 10% to 11%, non-GAAP operating income of $830 million to $840 million, earnings per share of $3.90 to $3.94 and free cash flow of $910 million to $930 million. The third-quarter non-GAAP operating margin is guided to 24% to 25%, below the 28% reported in the second quarter, while full-year free cash flow margin is guided to 28% to 29%.

Okta said its decision to accelerate the shift of professional services to partners reduces expected revenue growth by about one percentage point. The lower interest income reduces free cash flow guidance by about one percentage point. Third-quarter free cash flow is guided to $175 million to $185 million, a 21% to 23% margin.

Current RPO Guidance Sets the Third-Quarter Test

Okta's second-quarter revenue grew 11% to $805 million, remaining performance obligations grew 17% to $4.858 billion, and free cash flow reached $227 million, or 28% of revenue. Guidance points to slower third-quarter revenue growth of 10% and a non-GAAP operating margin of 24% to 25% against 28% reported, and the shift of professional services to partners reduces expected revenue growth by about one percentage point.

The third-quarter report, for the period ending October 31, 2026, will test the guided current RPO of $2.590 billion to $2.600 billion, a growth rate of 11% to 12%, which is below the 14% reported for the second quarter. The contribution of newer products such as Identity Governance, the effect of moving services work to partners, the margin outlook, and evidence that interest in AI agent security converts into larger contracts are further points to follow.