01—Abstract
Summary
Summary of the 10-Q filed August 27, 2025. Cited figures are marked; the original filing is the authoritative source.
Okta, Inc. reported total revenue of $728 milliona for the three months ended July 31, 2025, up from $646 million a year earlier, and $1,416 million for the six months, up from $1,263 million.
Subscription revenue was $711 millionb in the quarter versus $632 million. Operating income was $41 million for the quarter, compared with an operating loss of $19 million in the prior-year quarter. Net income was $67 million for the quarter ($0.37 diluted per share) and $129 million for the six months, compared with a net loss of $11 million in the prior-year six-month period.
Gross margin was 77% for both the quarter and six months, and the company attributed the subscription gross margin improvement to 80% to improved spend efficiency. The company's cash and cash equivalents and short-term investments totaled $2,858 millionc at July 31, 2025, and net cash provided by operating activities was $408 million for the six months, versus $305 million a year earlier. Total stockholders' equity rose to $6,754 million.
Okta's convertible senior notes are now current liabilities: $510 milliond of 2025 Notes mature September 1, 2025, and $350 million of 2026 Notes mature June 15, 2026. Management stated it has elected to settle the 2025 Notes principal in cash. Key business metrics showed customers with annual contract value above $100,000 rising to 4,945 from 4,620, while dollar-based net retention fell to 106% from 110%, which management attributed primarily to the macroeconomic environment.
Subsequent to the quarter, on August 25, 2025, Okta agreed to acquire Axiom Security Ltd, a privileged access management provider, to be financed with cash on hand, with closing expected in the third quarter of fiscal 2026 and no material expected impact on fiscal 2026 financial results. The One Big Beautiful Bill Act, enacted July 4, 2025, produced a cumulative $5 million decrease in income tax expense in the quarter, and the company continues to maintain a full valuation allowance on its U.S. deferred tax assets. Remaining performance obligations totaled $4,152 million, of which $2,265 million is expected to be recognized over the next 12 months.
02—Key points
Key Highlights
- Q2 fiscal 2026 total revenue of $728 million, up from $646 million; six-month revenue of $1,416 million, up from $1,263 million.
- Operating income of $41 million in the quarter versus an operating loss of $19 million a year earlier; net income of $67 million, or $0.37 per diluted share.
- Gross margin of 77% for both the quarter and six months, with subscription gross margin improving to 80% from 78%.
- Operating cash flow of $408 million for the six months, up from $305 million, and cash, cash equivalents and short-term investments of $2,858 million at July 31, 2025.
- Both convertible note series are now current: $510 million of 2025 Notes due September 1, 2025 (to be settled in cash) and $350 million of 2026 Notes due June 15, 2026.
- Dollar-based net retention declined to 106% from 110%, which management attributed primarily to the macroeconomic environment; customers above $100,000 ACV rose to 4,945 from 4,620.
- Agreement to acquire Axiom Security Ltd on August 25, 2025, financed with cash on hand and not expected to be material to fiscal 2026 results.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q2 FY2026, Okta kept $0.09.
- Revenue$728.0M100.0%
- Cost of revenue−$168.0M23.1%
- Gross profit$560.0M76.9%
- Operating costs−$519.0M71.3%
- Operating income$41.0M5.6%
- Interest, other & tax$26.0M3.6%
- Net income$67.0M9.2%
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2026filed August 27, 2025Financial Statements
Q2 FY2026 against Q2 FY2025
| Line item | Q2 FY2026Q2 FY2025 | Change |
|---|---|---|
| Revenue | $728.00M$646.00M | +12.7% |
| Cost of Revenue | $168.00M$155.00M | +8.4% |
| Gross Profit | $560.00M$491.00M | +14.1% |
| R&D Expenses | $160.00M$164.00M | −2.4% |
| Operating Expenses | $519.00M$510.00M | +1.8% |
| Operating Income | $41.00M-$19.00M | +315.8% |
| Net Income | $67.00M$29.00M | +131.0% |
| EPS (Basic) | $0.38$0.18 | +111.1% |
| EPS (Diluted) | $0.37$0.15 | +146.7% |
| Shares Outstanding (Basic) | 175.46M168.61M | +4.1% |
| Shares Outstanding (Diluted) | 180.97M174.44M | +3.7% |
05—Questions
Frequently Asked Questions
How did Okta's profitability change compared with the prior year?
For the three months ended July 31, 2025, Okta reported operating income of $41 million, compared with an operating loss of $19 million in the same period of 2024, and net income of $67 million versus $29 million. For the six months, net income was $129 million compared with a net loss of $11 million. The filing attributes the subscription margin improvement to improved spend efficiency.
How will the convertible notes affect Okta's liquidity?
As of July 31, 2025, the 2025 Notes ($510 million principal) and 2026 Notes ($350 million principal) are classified as current liabilities because they mature on September 1, 2025 and June 15, 2026. Management has elected to settle the 2025 Notes principal in cash. The company stated that its existing cash, investments and cash from solution sales are expected to be sufficient to meet its short- and long-term projected needs.
What signals did Okta's retention and customer metrics send?
Customers with annual contract value above $100,000 increased to 4,945 from 4,620 as of July 31, 2024. However, dollar-based net retention fell to 106% from 110%. Management attributed the decline primarily to the macroeconomic environment, with ACV from existing customers growing at a slower rate in the current period.
What is the outlook for the Axiom Security acquisition?
On August 25, 2025, Okta entered into a definitive agreement to acquire Axiom Security Ltd, a privately held privileged access management company. The transaction is expected to close in the third quarter of fiscal 2026, subject to customary closing conditions, and will be financed with cash on hand. The company expects no material impact on fiscal 2026 financial results.
How did recent tax legislation affect Okta's results?
The One Big Beautiful Bill Act, enacted July 4, 2025, resulted in a cumulative decrease to income tax expense of $5 million recorded in the three months ended July 31, 2025, primarily from immediate expensing of domestic research and development expenditures. The company expects reduced federal and state cash tax payments for the remainder of fiscal 2026 and future periods. Okta continues to maintain a full valuation allowance on its U.S. deferred tax assets.
06—Continue