Snapshot
Okta, Inc. reported $728M of revenue in Q2 2026, up 12.7% year over year, with diluted EPS of $0.37 and an operating margin of 5.6%.
- Revenue
- $728M
- YoY growth
- +12.7%
- Diluted EPS
- $0.37
- Operating margin
- 5.6%
What management said
- •Hi everyone, welcome to Okta's Second Quarter of Fiscal 2026 Earnings Webcast.
- •At around the same time that the earnings press release hit the wire, we posted supplemental commentary to the IR website.
- •Today's meeting will include forward-looking statements pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995, including, but not limited to, statements regarding our financial outlook and market positioning.
- •A reconciliation between GAAP and non-GAAP financial measures, and a discussion of the limitations of using non-GAAP measures versus their closest GAAP equivalents, are available in our earnings release.
- •In today's meeting, we will quote a number of numeric or growth changes as we discuss our financial performance, and unless otherwise noted, each such reference represents year-over-year comparison.
- •We are pleased to report solid Q2 results with continued strength with large customers, Auth0, new products, the public sector, and cash flow.
- •They needed a single identity platform to unify workforce identity and scale with growth.
- •In a move that we believe will further accelerate Okta Privilege Access growth, I'm delighted to announce that we've signed a definitive agreement to acquire Axiom Security, a modern PAM vendor.
- •Once we close the acquisition, which we anticipate will be later this quarter, we will support Axiom's customer base while we work to integrate their technology into Okta Privilege Access.
- •At our Octane Conference next month, we will share how we are enabling every organization to build, deploy, and manage AI agents safely, securely, and at scale.
- •I look forward to seeing all of you at Octane, and now here's Brett to cover the financial commentary and talk about how we're positioned for long-term profitable growth.
- •My commentary will provide insights into our Q2 performance and then move into our outlook for Q3 and FY2026.
What went well
- •Okta reported solid Q2 FY2026 results with continued strength in large customers, Auth0, new products, the public sector, and cash flow. New products spanning Okta Identity Governance, Okta Privileged Access, Okta Device Access, Identity Security Posture Management, Identity Threat Protection with Okta AI, and Fine Grained Authorization delivered another strong quarter of contribution. Five of the company's top 10 deals in Q2 were with the U.S. public sector, including the biggest deal of the quarter with a U.S. Department of Defense agency, and renewals across all of federal were strong. Management cited improved sales productivity and record (all-time high) pipeline generation from its go-to-market specialization, with all 20 of the top 20 deals touched by a partner. Customers over $1 million in ACV reached 495, up 15% year-over-year, and Okta signed a definitive agreement to acquire Axiom Security, a modern PAM vendor. The company ended the quarter with roughly $2.9 billion in cash, cash equivalents, and short-term investments.
What went wrong
- •Okta experienced some contract restructuring with civilian agencies and delays in procurement processes in its public sector business, partly reflecting government layoffs that reduced user counts at certain federal customers. Management acknowledged it had overestimated short-term federal/macro uncertainty 90 days earlier, with the CFO conceding he was 'a bit a little wrong on the macro side.' Workforce ACV growth has been decelerating over the prior 12 months, which an analyst flagged despite customer demand to consolidate identity vendors.
Guidance changes
| Metric | Period | Previous | Current | Change |
|---|---|---|---|---|
| Total revenue growth | Q3 FY2026 | — | 9%-10% | — |
| Current RPO growth | Q3 FY2026 | — | 10% | — |
| Non-GAAP operating margin | Q3 FY2026 | — | 22% | — |
| Free cash flow margin | Q3 FY2026 | — | approximately 21% | — |
| Total revenue growth | FY2026 | — | 10%-11% (raised) | raised |
| Non-GAAP operating margin | FY2026 | — | 25%-26% | raised |
| Free cash flow margin | FY2026 | — | approximately 28% | raised |
Performance breakdown
| Metric | YoY change | Reason |
|---|---|---|
| Customers over $1 million in ACV | up 15% (to 495) | Bigger customers getting bigger driven by upsell/cross-sell as new products are added |
| cRPO growth | 13% (referenced) | Strength across the board including enterprise and public sector |
Earnings call themes & trends
| Topic | Previous mention | Current period | Trend |
|---|---|---|---|
| Removal of macro/federal conservatism from guidance | Conservatism introduced last quarter for macro and federal uncertainty | Neither materialized; removed from outlook for remainder of fiscal year | improving |
| Go-to-market specialization | Rolled out at beginning of fiscal year; prior specialization in public sector and U.S. SMB | Two quarters in; improved sales productivity and record pipeline; productivity gains in line with plan | improving |
| Net revenue retention (NRR) | Downsell pressure expected to subside in back half | Stabilized around 106%; expected to stay plus or minus a little depending on business mix | stable |
| Securing AI / agentic identity | — | Identity security fabric, cross-app access open standard, Auth0 for AI agents, NHI management as next frontier | expanding |
| Independence and neutrality | — | Palo Alto Networks/CyberArk deal seen as validating identity's importance but not meaningfully changing competitive landscape | stable |
Q&A summary
Has NRR bottomed, and what indicators support removing the macro caveat from guidance? (Brad Zelnick, Deutsche Bank)
Management said NRR has stabilized around 106% and should stay roughly plus or minus from here depending on business mix; the macro caveat was removed because Q2 showed nothing differentiating versus prior quarters.
What are you seeing in the AI-native customer cohort? (Matt Hedberg)
Adoption of workforce solutions and Auth0 looks similar to other cohorts but these customers are growing very fast; they are investing heavily in identity security to protect valuable data and building their own AI agents.
Why should identity be its own independent platform? (Eric / via Dave Gennarelli)
Todd McKinnon argued the market is too fragmented and complex, driving consolidation, and identity is the one point where customers can consolidate while preserving choice across other vendors—unlike adopting Microsoft identity, which steers all other choices toward Microsoft.
How will cross-app access and the Axiom acquisition be monetized? (Josh Tilton)
Cross-app access is an open industry standard that makes the whole identity market more valuable; Okta monetizes the clear-and-present non-human identity problem today via Okta Privileged Access and ISPM, and over time expects to monetize managing AI agents within the identity system. Axiom adds top PAM talent and database-connection security to Okta Privileged Access.
How did public sector play out versus initial expectations, and is the environment now normalized? (Brian Essex, JPMorgan)
Q2 public sector played out better than the uncertainty three months earlier suggested; some contracts were paused or restructured (fewer users due to government layoffs, offset by upsell of new products), but the overwhelming balance of business was positive and uncertainty has settled.
Why hasn't demand to consolidate vendors lifted decelerating workforce ACV growth? (Andy Nowinski, Wells Fargo)
Management said it expects to do better, citing a large market opportunity, faster IGA deployments (live in ~30 days vs. heavyweight legacy SailPoint), better messaging via specialization, and continued R&D and acquisitions like Axiom.