Okta Stock Surges 29% Post Q2 Earnings: Should You Buy?

Okta OKTA shares jumped 28.63% after the company reported second-quarter fiscal 2027 results on Wednesday, reflecting better-than-expected results, accelerating bookings indicators, strong large-enterprise execution and rising investor enthusiasm around AI-agent security. In the second quarter of fiscal 2027, revenues increased 11% year over year to $805 million, while subscription revenues rose 12% to $793 million. Adjusted earnings of $1.05 per share exceeded the Zacks Consensus Estimate by 9.38%, while revenues topped the consensus mark by 1.62%.

More importantly, forward-looking demand metrics strengthened. Remaining Performance Obligation (RPO) increased 17% to $4.86 billion and current RPO (cRPO) rose 14% to $2.59 billion. The cRPO growth accelerated while workforce identity and customer identity ACV increased 11% and 13%, respectively. Free cash flow margin also expanded 580 basis points to 28.1%. However, is this enough for the investors to jump into the stock? Let’s find out.

Okta Rides on Strong Enterprise Demand & New Products

Okta is benefiting from strong enterprise demand. In the second quarter of fiscal 2027, the number of customers generating more than $1 million in Annual Contract Value (ACV) increased more than 20%, taking the total above 600. Upsell, cross-sell and pipeline generation also remained healthy. Anthropic selected Okta as the first identity provider supporting Enterprise Managed Auth for MCP connectors, while Okta has expanded relationships with AWS, Cisco, OpenAI, Databricks and Snowflake and added more than 25 Cross-App Access integrations. The company’s installed base of more than 20,000 customers gives Okta an established distribution channel through which to introduce AI-security products.

New products accounted for roughly 30% of the quarterly bookings, while adding a new product to a transaction generates about a 40% average ACV uplift. Okta for AI Agents secured dozens of deals during the quarter, including several million-dollar-plus transactions. Okta Identity Governance, Privileged Access, Identity Threat Protection and other newer offerings are increasing the amount customers spend on the platform. Okta’s investments in cloud marketplaces, global system integrators and channel partners are also improving deal economics.

The rapid deployment of enterprise AI agents is expanding Okta’s addressable identity-security opportunity beyond human users to machine and agent identities. Okta for AI Agents provides agent discovery, governance, access control and runtime protection, while Auth0 for AI Agents addresses developers building agentic applications. Okta noted that AI security conversations are increasingly expanding into broader identity-modernization projects, potentially creating cross-selling opportunities across Okta's platform.

These factors are expected to help OKTA shares appreciate. The company is facing stiff competition from the likes of Microsoft MSFT, CrowdStrike CRWD and Cisco Systems CSCO. YTD, CrowdStrike, Cisco and Microsoft have returned 94.5%, 45.6% and 4.5%, respectively.

OKTA Stock’s Price Performance

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OKTA Offers Positive FY27 Guidance

For fiscal 2027, OKTA expects revenues between $3.216 billion and $3.226 billion, indicating 10-11% growth from the figure reported in fiscal 2026. Okta expects fiscal 2027 non-GAAP earnings between $3.90 and $3.94 per share. 

For the third quarter of fiscal 2027, OKTA expects revenues between $813 million and $817 million, indicating 10% growth from the figure reported in the year-ago quarter. Okta expects fiscal 2027 non-GAAP earnings between 92 cents and 94 cents per share. 

The Zacks Consensus Estimate for Okta’s fiscal 2027 earnings has increased by a penny to $3.84 per share over the past 30 days. The earnings estimate suggests 9.71% growth over the figure reported in fiscal 2026. The consensus estimate for revenues is currently pegged at $3.21 billion, suggesting 9.96% growth from the figure reported in fiscal 2026.
 

The Zacks Consensus Estimate for Okta’s third-quarter fiscal 2027 earnings has been steady at 93 cents per share over the past 30 days. The earnings estimate suggests 13.41% growth over the figure reported in the year-ago quarter. The consensus estimate for revenues is currently pegged at $813.2 million, suggesting 9.6% growth from the figure reported in the year-ago quarter.

Here’s Why OKTA is a Buy

OKTA shares are trading at a premium as suggested by the Value Score of F.

In terms of forward 12-month price/sales (P/S), Okta is trading at 8.91X, higher than the median of 5.06X and Cisco’s 6.16X. However, OKTA is cheaper than Microsoft and CrowdStrike, shares of which are trading at 9.36X and 34.77X, respectively.

OKTA Stock’s Valuation

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Despite its premium valuation, Okta’s improving growth indicators, expanding large-enterprise footprint and increasing contribution from newer products strengthen its investment case. Rising adoption of Okta for AI Agents could provide an additional growth avenue as enterprises increasingly seek to secure AI agents and machine identities. Accelerating cRPO growth, healthy cross-selling opportunities, expanding free cash flow margins and an encouraging fiscal 2027 outlook further support prospects. 

Okta currently has a Zacks Rank #2 (Buy), which implies that investors should start accumulating the stock right now. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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