Snapshot
Okta, Inc. reported $765M of revenue in Q1 2027, up 11.2% year over year, with diluted EPS of $0.42 and an operating margin of 7.3%.
- Revenue
- $765M
- YoY growth
- +11.2%
- Diluted EPS
- $0.42
- Operating margin
- 7.3%
What management said
- •At around the same time the earnings press release hit the wire, we posted supplemental commentary to our 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.
- •The 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'll quote a number of numeric or growth changes as we discuss our financial performance, unless otherwise noted, each such reference represents a year-over-year comparison.
- •Over the past 17 years, we've built the most modern and comprehensive identity platform, which is now the identity system of record trusted by more than 20,000 customers.
- •Our new product portfolio represented approximately 25% of Q1 bookings, a meaningful increase from Q1 last year.
- •By leveraging our unique advantages, great products, deep partnership, and industry expertise, we are well positioned to help customers thrive in this fast-moving landscape, which will unlock a new growth vector for Okta.
- •My commentary will provide insights into our Q1 performance and then move into our outlook for Q2 and FY 2027.
- •The stability of the sales team, coupled with strong execution, led to positive go-to-market KPI improvements, including increased sales productivity, strong pipeline build, and low AE attrition.
- •We're also seeing the investments we've made in our partner initiatives take root as partner source bookings experienced a meaningful increase, including multiple million-dollar-plus deals in Q1.
- •We had another strong quarter of cash flow in Q1 and ended the quarter with a very healthy balance sheet consisting of approximately $2.6 billion in cash equivalents, and short-term investments.
- •We continue to regularly evaluate Okta's capital allocation priorities to ensure we're well-positioned to deliver sustainable long-term value to shareholders.
What went well
- •Okta delivered a strong start to FY2027 with 12% revenue growth, driven by strength with large enterprises, partner engagement, and contribution from newer products.
- •Net retention inflected up to 107% and current RPO grew 12%, reflecting Okta being viewed in a more strategic light because of its AI thought leadership.
- •The new product portfolio represented approximately 25% of Q1 bookings, a meaningful increase from Q1 last year, with Okta Identity Governance again the leading contributor among new products.
- •Pipeline generation for the new Okta for AI Agents and Auth0 for AI Agents products was the strongest the company has ever seen, with average deal sizes for AI-specific deals significantly larger than the rest of the company.
- •Partner-source bookings experienced a meaningful increase, including multiple million-dollar-plus deals in Q1, and go-to-market KPIs improved with higher sales productivity, strong pipeline build, and low AE attrition.
- •The company saw a 40% ACV uplift when new products are included in a deal, and reported a strong quarter in public sector (federal and state) as well as governance and privileged access.
What went wrong
- •The AI agent products (Okta for AI Agents and Auth0 for AI Agents) did not materially contribute to Q1 revenue and are only modestly and heavily discounted in the guidance, as the products remain early-stage.
- •FY2027 revenue guidance includes about a 1 point headwind from a strategic decision to shift more professional services business to global systems integrator partners, resulting in lower professional services revenue starting in Q2.
- •FY2027 free cash flow margin guidance includes about a 1 point headwind from lower interest income tied to the share repurchase program and the planned cash settlement of the 2026 convertible notes.
- •Management acknowledged industry-wide scrutiny on AI/inference cost ROI is rising and expects more cost discipline over the next 6 to 12 months.
Guidance changes
| Metric | Period | Previous | Current | Change |
|---|---|---|---|---|
| Total revenue growth | Q2 FY2027 | — | 9% | New |
| Current RPO growth | Q2 FY2027 | — | 11% | New |
| Non-GAAP operating margin | Q2 FY2027 | — | 26% | New |
| Free cash flow margin | Q2 FY2027 | — | 20%-21% | New |
| Total revenue growth | FY2027 | — | 9%-10% | New |
| Non-GAAP operating margin | FY2027 | — | 25%-26% | New |
| Free cash flow margin | FY2027 | — | 27%-28% | New |
Performance breakdown
| Metric | YoY change | Reason |
|---|---|---|
| Total revenue | +12% | Growth driven by Okta being put in a more strategic light due to AI thought leadership, strength with large enterprises, partner engagement, and newer products. |
| Net revenue retention | 107% | Inflected upward, driven by agentic AI conversations raising the strategic importance of Okta and pulling through additional products. |
| Current RPO | +12% | Reflects strength being driven by the more strategic positioning of Okta in the AI landscape. |
| New product portfolio bookings | ~25% of Q1 bookings | Meaningful increase versus Q1 last year, led by Okta Identity Governance, reflecting diversification of the product portfolio. |
| Large customer ACV mix | 85% of ACV (up from 80%) | Result of multi-year investments targeting and winning more large customers, with growth in both >$100,000 and >$1 million customer cohorts. |
Earnings call themes & trends
| Topic | Previous mention | Current period | Trend |
|---|---|---|---|
| Agentic AI / AI agent identity opportunity | — | Number one topic of interest; Okta positioned on distribution, product breadth, and neutrality; record pipeline but minimal current revenue contribution. | rising |
| New product attach (governance, PAM) | — | New products ~25% of bookings; governance evolving from cross-sell add-on to a land product; privileged access bolstered by Axiom acquisition. | rising |
| Large enterprise focus | — | Large customers now 85% of ACV; still considered relatively early with upside in the Global 2000. | rising |
| Go-to-market specialization and stability | — | Okta and Auth0 seller teams now fully settled, yielding higher productivity, low AE attrition, and added selling capacity in Q1. | steady |
| Neutrality and partnerships | — | Partnerships with ServiceNow, Google, Amazon Bedrock AgentCore, OpenAI, and Anthropic; positioned as the neutral identity layer above the agent ecosystem. | rising |
| Capital allocation / buyback | — | Repurchased just over 3 million shares for $241 million in Q1; $680 million remains under the $1 billion program; $350 million convertible notes to be settled in cash. | steady |
Q&A summary
How is the AI agent opportunity materializing in the market — are customers actually securing agents yet, and when will adoption happen en masse? (John DiFucci, Guggenheim)
Every enterprise is deploying agents but mostly in haphazard, non-secure ways, and they are just beginning to build governed adoption programs, driving record pipeline. The AI products are not materially contributing yet and are only lightly in the guide, but agentic conversations are already raising Okta's strategic importance and contributing to the 12% revenue growth, 107% net retention, and 12% cRPO.
Given caution then panic around the threat environment (Mythos, Glasswing), are you getting incremental security budget, and is it accelerating sales cycles? (Brian Essex, JPMorgan)
Customers are not panicking or shifting priorities; instead they are reinforcing the fundamentals of zero trust, solid identity, and patching, since about 80% of breaches go through identity. This return to fundamentals is helping the identity and identity security markets, though it is not yet showing up in agentic identity, which remains early.
What is Okta's role in the runtime authorization and policy enforcement layer, and how does it interplay with embedded hyperscaler/platform capabilities? (Todd Weller, Stephens)
Okta provides a directory of agents across multiple platforms as a source of truth, sets policy on what agents can connect to, and surrounds agents with an authorization layer controlling what they can do without rewiring thousands of customer applications. Because agentic capabilities will come from many platforms, apps, and open source frameworks, customers see picking a neutral, independent identity layer as a no-regrets move.
What is the pricing strategy for AI Agents, and what uplift are you seeing from agent deals? (Eric Heath, KeyBanc)
Pricing is consistent with past products — an uplift on a named or monthly active user — because that is how customers want to consume it today and most current use cases involve agents acting on behalf of a user; this will evolve toward per-agent pricing over time, with current focus on market share and reducing friction. Brett added that average deal size for AI-specific deals is significantly larger than the company average.
How big is the AI pipeline, and is there a difference between the Auth0 and Okta sides? (Adam Tindle, Raymond James)
The pipeline is bigger than anything Okta has ever seen, and the challenge is execution and conversion rather than pipeline generation; AI products did not materially contribute to Q1 and are only lightly and prudently in the guide. Both Okta and Auth0 pipelines are healthy, with the Okta side bigger because companies managing internal agents are further along than those embedding agents into their products.
With the average AI deal size larger, is that driven by broader Okta platform adoption, and is there a specific go-to-market push? (Yun Kim, Loop Capital)
Brett clarified the larger size refers to the AI line item itself, not the broader deal, and that AI is also forcing customers to modernize their identity stack, creating pull-through to the rest of the platform. Todd added that unlike prior new products such as governance, AI deals are already big, so scaling is about doing more deals rather than growing deal size; Eric noted over 90% of customers have agents in production but only 22% are confident they are governed.