MW Okta's earnings show the company is benefiting from the 'identity quagmire' of AI

By Emily Bary

Okta's stock is rising after the company beats earnings expectations and raises its guidance, reflecting the growing need to authenticate users and agents in the AI era

Okta's latest quarterly results exceeded expectations.

Investors have gotten a bit jittery about the software sector lately, as artificial intelligence hasn't proven to be the broad financial tailwind that some on Wall Street had hoped. In fact, there are fears that AI tools from OpenAI and others could chip away at demand for traditional software offerings.

But Okta Inc. (OKTA) is a software company that plays into AI in a different way, and its latest earnings show that the technology is delivering financial benefits. Rather than sell customers things like creative tools or coding support, Okta's software helps users authenticate themselves to get into applications. That sort of technology has become more critical in the AI era, as companies look to do more with AI agents but need to make sure that those agents can access information in a secure and compliant way.

This is the "identity quagmire" brought on by AI, according to Okta Chief Executive Todd McKinnon. "You want your Zoom companion to connect to your calendar, and you want your support bot that your call-center team is rolling out to connect to all of your customer databases."

Helping to solve these complex identity issues contributed to 13% growth in current remaining performance obligations in the latest quarter, Okta reported on Tuesday afternoon. The metric, which measures subscription backlog expected to be recognized over the next 12 months, came it at $2.265 billion in the fiscal second quarter, while analysts tracked by FactSet were expecting $2.203 billion.

Revenue for the quarter came in at $728 million, up 13% from a year before and above the $711 million that analysts were modeling. The company recorded 91 cents in adjusted earnings per share, versus the 84-cent consensus.

Okta is also taking a more upbeat view of what's to come, relative to what analysts had been anticipating. The company is calling for $728 million to $730 million in fiscal third-quarter revenue, ahead of the $721 million FactSet consensus. Okta boosted its full-year revenue outlook, which stands at $2.875 billion to $2.885 billion now versus $2.85 billion to $2.86 billion as of the prior release.

Shares of Okta were up 4% in after-hours trading Tuesday. They've advanced about 16% so far this year.

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McKinnon said that Okta is also benefiting from its platform-neutral approach, as the company helps users access all sorts of software. While Okta competes against giants like Microsoft Corp. $(MSFT)$ in identity management, McKinnon said the bigger rivals lock customers into using software products of theirs that go beyond identity management, while he thinks his customers appreciate being able to choose vendors freely, especially as they experiment with AI agents.

"It's one thing to be locked into a market that's mature like, let's say, like Office Suite," he said. "It's another thing to be locked into how you're going to build agents when no one knows how it's going to work out."

Read: Will Figma's stock keep riding the AI hype? Wall Street isn't so sure.

Meanwhile, McKinnon noted that newer products are paying off for Okta, and the company will soon have one more to add to the arsenal. Okta announced earlier Tuesday that it's agreed to acquire Axiom Security, a privileged-access-management company.

The deal is part of Okta's strategy to connect "every identity type," including employees, agents and partners, to "every resource or technology," from software applications to servers and containers. The product helps connect databases into containers and bolsters Okta's ability to serve varied identity needs.

"Our worldview is that identity is so important that you want one company looking after it all," McKinnon said.

-Emily Bary

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August 26, 2025 16:34 ET (20:34 GMT)

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