Okta’s third quarter results were shaped by strong customer demand for its expanding identity management portfolio, especially among large enterprises. Management credited the outperformance to robust adoption of new products, such as Okta Identity Governance and AI-focused security solutions, which address increasingly complex identity needs. CEO Todd McKinnon highlighted that, “Customers frustrated managing dozens of disparate identity systems are turning to Okta for a modern, unified platform.” However, the negative market reaction reflected concerns about the sustainability of these recent gains, as some partners and customers remain cautious about consolidating identity solutions amid evolving enterprise IT priorities.
Is now the time to buy OKTA? Find out in our full research report (it’s free for active Edge members).
Okta (OKTA) Q3 CY2025 Highlights:
- Revenue: $742 million vs analyst estimates of $729.9 million (11.6% year-on-year growth, 1.7% beat)
- Adjusted EPS: $0.82 vs analyst estimates of $0.76 (8.1% beat)
- Adjusted Operating Income: $178 million vs analyst estimates of $164.1 million (24% margin, 8.5% beat)
- Revenue Guidance for Q4 CY2025 is $749 million at the midpoint, above analyst estimates of $737 million
- Management raised its full-year Adjusted EPS guidance to $3.44 at the midpoint, a 2.4% increase
- Operating Margin: 3.1%, up from -2.4% in the same quarter last year
- Annual Recurring Revenue: $2.9 billion vs analyst estimates of $2.89 billion (11.4% year-on-year growth, in line)
- Billings: $754 million at quarter end, up 9.3% year on year
- Market Capitalization: $15.47 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From Okta’s Q3 Earnings Call
- Gray Powell (BTIG) asked about the drivers behind customer consolidation of identity, access, and governance with Okta. CEO Todd McKinnon explained that technology transformations—especially cloud and AI—are catalysts, with customers seeking a unified platform to reduce complexity and improve security.
- Itay Kidron (Oppenheimer) questioned how Okta’s AI agent security products can be adopted by companies not currently using Okta, and what impact this could have on contract value. McKinnon emphasized early strong interest and flexibility in deployment, suggesting agent security could significantly increase customer spend, but acknowledged adoption is still nascent.
- Jonathan Ho (William Blair) asked about the impact of sales realignment and product suites on go-to-market productivity and net retention trends. President Eric Kelleher noted specialization has improved sales engagement and tenure, while CFO Brett Tighe stated net retention is stable but future upside depends on cross-selling new products.
- Tomer Zuberman (BofA) inquired about the risk of seat count reductions from automation and how Okta’s agentic identity products offset this. McKinnon said agent-based pricing can compensate for reduced human users, and Kelleher added that diversification across products and use cases helps mitigate risks.
- Gabriela Borges (Goldman Sachs) asked about competition from packaged software vendors embedding identity features. McKinnon replied that Okta’s neutral, platform-agnostic approach positions it to serve companies wanting flexibility, while competitors often struggle to cover the breadth of use cases needed by large enterprises.
Catalysts in Upcoming Quarters
In the quarters ahead, our team will be watching (1) the pace at which enterprises adopt Okta’s AI agent security solutions and the corresponding growth in agent-based revenue, (2) sustained improvements in salesforce productivity and retention following the recent specialization, and (3) whether large customers continue consolidating legacy systems onto Okta’s platform. The effectiveness of new product launches and traction in the public sector will also be important indicators of execution.
Okta currently trades at $87.66, up from $82.27 just before the earnings. Is the company at an inflection point that warrants a buy or sell? Find out in our full research report (it’s free for active Edge members).
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