It has been about a month since the last earnings report for Okta (OKTA Quick QuoteOKTA - Free Report) . Shares have lost about 3.4% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Okta due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its latest earnings report in order to get a better handle on the important drivers.

OKTA Q2 Earnings Surpass Estimates, Revenues Increase Y/Y

Okta reported second-quarter fiscal 2026 earnings of 91 cents per share, beating the Zacks Consensus Estimate by 8.33% and jumping 26.4% year over year.

Total revenues increased 12.7% year over year to $728 million and surpassed the consensus mark by 2.37%. The year-over-year upside can be attributed to higher subscription revenues.

Subscription revenues (97.7% of total revenues) rose 12.5% year over year to $711 million. Professional services and other revenues (2.3% of total revenues) jumped 21.4% year over year to $17 million.

Location-wise, revenues from the United States contributed 79.5% to total revenues in the fiscal second quarter. The figure increased 13.8% year over year to $579 million. International revenues contributed 20.5% to total revenues. The figure increased 8.8% year over year to $149 million.

Okta’s Q2 Top Line Details

Customers with more than $100K in Annual Contract Value (ACV) increased more than 7% year over year to 4,945. Workforce Identity ACV accounted for 59%, while the rest came from Customer Identity ACV.

The dollar-based retention rate in the trailing 12 months was 106%, down 4% from the figure reported in the year-ago quarter.

Remaining Performance Obligations (RPO) totaled $4.15 billion, up 18% year over year. The current RPO, expected to be recognized over the next 12 months, was $2.27 billion, up 13% year over year.

Okta’s Operating Details

Second-quarter 2025 non-GAAP gross margin was unchanged on a year-over-year basis at 81.6%.

As a percentage of revenues, research and development expenses decreased 170 basis points (bps) year over year to 15%. General and administrative expenses declined 110 bps to 10.7%. Sales and marketing expenses fell 220 bps year over year to 28.2%.

Non-GAAP operating margin expanded 480 bps year over year to 27.7% in the reported quarter.

Okta’s Balance Sheet

Okta had $2.86 billion in cash, cash equivalents and short-term investments as of July 31, 2025.

Net cash provided by operations was $167 million in the reported quarter, while free cash flow was $162 million.

Okta Offers Positive Guidance

For third-quarter fiscal 2026, Okta expects revenues in the range of $728-$730 million, indicating year-over-year growth between 9% and 10%. Current RPO is expected to be between $2.26 billion and $2.27 billion, suggesting year-over-year growth of 10%.

Non-GAAP operating income is expected in the range of $160-$162 million. Operating margin is expected to be 22%. Non-GAAP earnings are anticipated to be 74-75 cents per share.
Non-GAAP free cash flow margin is expected to be approximately 21%.

For fiscal 2026, revenues are expected to be $2.88-2.89 billion, indicating year-over-year growth between 10% and 11%. Non-GAAP operating income is expected in the range of $730-$740 million. Operating margin is expected between 25% and 26%. Non-GAAP earnings are anticipated to be between $3.33 and $3.38 per share.

Non-GAAP free cash flow margin is expected to be approximately 28%.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a upward trend in estimates revision.

The consensus estimate has shifted -15.46% due to these changes.

VGM Scores

At this time, Okta has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Okta has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.

Performance of an Industry Player

Okta is part of the Zacks Security industry. Over the past month, Palo Alto Networks (PANW Quick QuotePANW - Free Report) , a stock from the same industry, has gained 7%. The company reported its results for the quarter ended July 2025 more than a month ago.

Palo Alto reported revenues of $2.54 billion in the last reported quarter, representing a year-over-year change of +15.8%. EPS of $0.95 for the same period compares with $0.75 a year ago.

For the current quarter, Palo Alto is expected to post earnings of $0.89 per share, indicating a change of +14.1% from the year-ago quarter. The Zacks Consensus Estimate remained unchanged over the last 30 days.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Palo Alto. Also, the stock has a VGM Score of D.