""We had a solid start to FY '26, highlighted by continued strength with large customers, Auth0, new product contribution, strong cash flow, and record profitability."" - Todd McKinnon
Okta Inc (OKTA) QQ1 2026 Earnings Review: Solid Start to FY26 with Governance Momentum, NHIs Focus, and AI-Driven Growth Opportunities
Executive Summary
Okta delivered a solid QQ1 2026 (fiscal 2026) performance underscored by durable cash generation, a robust gross margin, and continued momentum across the governance and Auth0 platforms. Revenue reached $688 million, up approximately 11.5% year over year, with gross margins near 77.5% and EBITDA of $93 million (margin about 13.5%). Operating income was $39 million (about 5.7% margin), while net income was $62 million and GAAP/EPS figures stood at $0.36 (basic) and $0.35 (diluted). Free cash flow was exceptionally strong at $240 million, translating to a roughly 35% FCF margin for the quarter, supported by $241 million of operating cash flow and a cash balance of about $500 million at period end. The balance sheet remains robust with $2.73+ billion in cash and short-term investments, and total stockholders’ equity of $6.57 billion against modest leverage. Management highlighted continued adoption of new governance products (Okta Identity Governance, Lifecycle Management, and Workflows with substantial 400%+ workflow growth over three years to nearly $40 billion in March) and strong Auth0 performance post a record fourth quarter, aided by a realigned go-to-market (GTM) and an ongoing platform specialization strategy.
Guidance for Q2 and FY26 reflects a prudent stance amid a less visible macro backdrop. Management targets 10% revenue growth in Q2 with current RPO growth of 10-11%, and non-GAAP operating margin around 26% and free cash flow margin near 19%. For the full year FY26, the company projects 9-10% revenue growth, ~25% non-GAAP operating margin, and roughly 27% free cash flow margin. While macro uncertainty is acknowledged, Okta maintains its focus on levered profitability, GTM specialization, and accelerating adoption of new products (including Auth for GenAI, Identity Security Posture Management, and Privileged Access) to sustain long-term growth. The quarter also featured meaningful product announcements and industry participation (Showcase) that underscore a broader AI-enabled identity roadmap.
Overall, QQ1 2026 positions Okta to benefit from a broader identity platform strategy, strong enterprise demand, and a growing emphasis on non-human identities (NHIs) and AI-driven workflows, while balancing execution risk in a potentially slower macro environment.
Key Performance Indicators
Revenue
688.00M
QoQ: 0.88% | YoY:11.51%
Gross Profit
533.00M
77.47% margin
QoQ: 1.72% | YoY:13.65%
Operating Income
39.00M
QoQ: 387.50% | YoY:182.98%
Net Income
62.00M
QoQ: 169.57% | YoY:255.00%
EPS
0.36
QoQ: 176.92% | YoY:250.00%
Revenue Trend
Margin Analysis
Key Insights
Revenue: $688,000,000, YoY +11.5%, QoQ +0.9% (Q1 2026) [YoY and QoQ figures supported by income metrics].
Operating Income: $39,000,000; Operating Margin ≈ 5.67% for the quarter.
EBITDA: $93,000,000; EBITDA Margin ≈ 13.52%.
Net Income: $62,000,000; Net Income Margin ≈ 9.01%.
Financial Highlights
Revenue and profitability summary:
- Revenue: $688,000,000, YoY +11.5%, QoQ +0.9% (Q1 2026) [YoY and QoQ figures supported by income metrics].
- Gross Profit: $533,000,000; Gross Margin 77.47% (Gross profit margin).
- Operating Income: $39,000,000; Operating Margin ≈ 5.67% for the quarter.
- EBITDA: $93,000,000; EBITDA Margin ≈ 13.52%.
- Net Income: $62,000,000; Net Income Margin ≈ 9.01%.
- EPS: $0.36 (basic); $0.35 (diluted).
- Cash flow and liquidity:
- Operating cash flow: $241,000,000; CFO Margin ~35%.
- Free cash flow: $240,000,000; FCF Margin ≈ 34.9% of revenue.
- Net cash provided by operating activities: $241,000,000.
- Cash, cash equivalents, and short-term investments: $2.729 billion total (Cash & Equivalents $494–500 million; Short-term investments $2.231 billion).
- Net debt: $(453) million; Total debt: $947 million; Long-term debt: $438 million; Short-term debt: $509 million.
- Balance sheet strength: Total assets $9.366 billion; Total liabilities $2.798 billion; Total stockholders’ equity $6.567 billion; Retained earnings: $(2.740) billion.
- Share count: Weighted-average shares outstanding 174.172 million; Diluted 181.754 million.
- Revenue mix and product momentum: Growth driven by Okta Identity Cloud governance suite (Identity Governance, Lifecycle Management, and Workflows) and Auth0 platform, with ongoing cross-sell via suite pricing introduced in Q1.
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
688.00M
11.51%
0.88%
Gross Profit
533.00M
13.65%
1.72%
Operating Income
39.00M
182.98%
387.50%
Net Income
62.00M
255.00%
169.57%
EPS
0.36
250.00%
176.92%
Key Financial Ratios
Net Income vs. Revenue
Expense Breakdown
Management Commentary
Key takeaways from management commentary and Q&A:
- Strategy and product momentum: Todd highlighted the governance portfolio as a major value driver, noting that “Workflow executions have increased nearly 400% over the past three years to nearly $40 billion in March alone,” and emphasized ongoing mainstream adoption of Okta Identity Governance (OIG) with new capabilities like separation of duties and on-prem connectors. He also highlighted new products such as Okta Identity Governance, Privileged Access, Device Access, Fine Grained Authorization, Identity Security Posture Management, and Identity Threat Protection with Okta AI.
- GenAI and NHIs: The leadership discussed non-human identities (NHIs) as a rising risk and opportunity, with “Auth for GenAI” targeted to enable developers to build secure AI agents, including built-in authentication, Fine Grained Authorization, async workflows, and secure API access. The GA launch is anticipated this summer.
- GTM specialization and pipeline: Brett noted the go-to-market realignment toward specialized Okta and Auth0 sellers, with Auth0 performing well post-Q4, and continued pipeline strength through March and April. Jonathan and Eric Kelleher reinforced learnings: specialization improves the depth of conversations and enables more effective cross-sell into a broad product portfolio, including governance, privileged access, posture management, and device access.
- Public sector and federal outlook: Brett emphasized FedRAMP High and IL4 certifications differentiating Okta and highlighted ongoing public sector momentum, albeit with near-term federal uncertainty. He suggested a measured approach to guidance reflecting macro risks while maintaining long-term confidence in public sector opportunities.
- Guidance and outlook: The management conversation underscored that Q2 is expected to grow revenue ~10% with current RPO growth of 10-11% and non-GAAP operating margin ~26%, free cash flow margin ~19%. For FY26, revenue growth projected at 9-10%, non-GAAP op margin ~25%, FCF margin ~27%. The team stressed prudence but not at the expense of ongoing investment and platform innovation.
"We had a solid start to FY '26, highlighted by continued strength with large customers, Auth0, new product contribution, strong cash flow, and record profitability."
— Todd McKinnon
"For the second quarter of FY '26, we expect total revenue growth of 10%, current RPO growth of 10% to 11%, non-GAAP operating margin of 26%, and free cash flow margin of approximately 19%."
— Brett Tighe
Forward Guidance
Guidance and Outlook (as stated in the earnings call):
- Q2 FY26 targets: Total revenue growth of 10%; current RPO growth of 10-11%; non-GAAP operating margin of approximately 26%; free cash flow margin around 19%.
- Full-year FY26 targets: Total revenue growth of 9-10%; non-GAAP operating margin around 25%; free cash flow margin approximately 27%.
- Macroeconomic assumptions: Management acknowledged potential macro uncertainty and incorporated a modest amount of macro risk into the guidance, while maintaining a disciplined GTM approach and continued product-driven growth. The guidance represents a shift toward less conservatism relative to prior periods but includes a small macro buffer.
- Achievability and indicators: The Q1 results showed solid execution with strong cash flow and pipeline strength, particularly in Auth0 and governance products; the GTM specialization is expected to support cross-sell and larger deals, especially in Global 2000 and public sector segments. Key monitorables include the trajectory of cRPO in subsequent quarters, new logo momentum in Workforce, and normalization of NRR headwinds associated with renewal and seat-based upsells under a potentially softer macro.
- Key factors to watch: (1) Progress of NHIs governance and Privileged Access adoption; (2) GA of Auth for GenAI and uptake in developer ecosystems; (3) Government and federal demand dynamics; (4) Macro environment implications on enterprise IT budgets and security spend; (5) Cumulative effect of GTM specialization on new customer acquisitions and cross-sell efficiency.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
OKTA Focus
77.47%
N/A
N/A
N/A
CRWD
75.60%
0.75%
1.69%
413.99%
NET
75.90%
-11.10%
-2.70%
-253.29%
MDB
72.20%
-21.80%
-6.35%
-82.68%
PANW
74.10%
13.40%
5.93%
83.95%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
Okta remains well-positioned to capitalize on a multi-year shift toward a more centralized, platform-based identity fabric. The governance suite, NHIs focus, and GenAI-enabled capabilities offer a differentiated value proposition in a fragmented market. The QQ1 2026 results underscore strong cash flow and profitability, with substantial headroom for investment in product innovation and GTM execution. However, near-term visibility is tempered by macro uncertainties and evolving renewal dynamics (NRR, cRPO). The 10% Q2 revenue guidance and 9-10% FY26 growth imply a modest step-down from QQ1 growth, but improved efficiency from GTM specialization and cross-sell potential could yield upside if large enterprise deals scale and Auth0 GenAI adoption accelerates. Investors should monitor: (1) progression of NHIs governance adoption and the Auth for GenAI GA impact; (2) cRPO trajectory and renewal dynamics across segments; (3) federal government budget and procurement cycles; (4) pipeline progression into Q3/Q4 and the rate of new logo wins in Workforce with platform-based pricing. Overall, Okta’s risk-adjusted upside remains favorable, supported by a strong balance sheet, robust FCF, and a compelling AI-enabled identity roadmap.
Key Investment Factors
Growth Potential
Broad-based identity platform expansion is a primary growth driver: governance, privileged access, device access, identity threat protection, and Auth0 for GenAI. The 400%+ growth in Workflows' scale over three years demonstrates a strong compound growth trajectory for the governance stack. The Auth for GenAI offering provides an early-stage but potentially meaningful incremental revenue stream as AI agents scale in production environments. The NHI governance combination (Identity Security Posture Management + Privileged Access) addresses a systemic risk, creating a defensible, integrated identity fabric across human and non-human identities.
Profitability Risk
Macro uncertainty impacting IT budgets and renewals; potential headwinds in NRR due to mid-contract seat upsell headwinds; federal government budget dynamics; competitive pressure from large cloud identity suppliers and specialist identity security vendors; execution risk in continuing GTM specialization and enabling broader cross-sell across a large product portfolio.
Financial Position
Robust balance sheet with cash and short-term investments of ~$2.73 billion, net debt of ~$453 million, and total debt of ~$947 million. Strong free cash flow generation in QQ1 (FCF ~ $240 million, ~35% FCF margin), reinforcing financial flexibility to fund product development and potential M&A opportunities. Solid gross margins (~77.5%) and healthy profitability trajectory support ongoing investments in R&D and go-to-market initiatives.
SWOT Analysis
Strengths
Broad, independent, neutral identity platform with breadth across governance, access management, privileged access, device access, threat protection, and posturing.
Strong cash generation and high gross margins, enabling sustained investment in R&D and GTM initiatives.
Leading governance and NHIs capabilities, including Identity Governance (OIG), Privileged Access, and Identity Threat Protection with Okta AI.
Solid enterprise traction, particularly with Global 2000 and US public sector customers, supported by FedRAMP High and IL4 certifications.
Product innovation cadence highlighted by GenAI-related offerings (Auth for GenAI) and ongoing Showcases that demonstrate market leadership.
Weaknesses
Near-term margin pressure from macro uncertainty and go-to-market realignment; potential short-term cRPO fluctuations could weigh on revenue recognition visibility.
NRR headwinds tied to renewal dynamics and seat-based upsells mid-contract, which could persist in a softer macro environment.
Dependence on large enterprise budgets and federal sector allocation; any material federal budget constraints could impact growth.
Opportunities
GenAI-enabled identity capabilities and MCP-related authentication opportunities, with Auth for GenAI monetized on usage and MCP ecosystem expansion.
High potential cross-sell via suite-based pricing across Okta and Auth0 platforms as customers consolidate identity tooling.
Increased adoption of NHIs governance (e.g., machines, service accounts, tokens) through Identity Security Posture Management and Privileged Access.
Public sector expansion in the US and continued federal modernization initiatives.
Threats
Macro slowdown or budgetary constraints impacting enterprise IT and security spend.
Competitive pressure from traditional identity providers and newer security platforms expanding governance and PAM capabilities.
Regulatory shifts or changes in government procurement that could affect federal contracts.