By Dan Victor

Okta helps organizations manage digital identities, ensuring the right users can securely access necessary software applications. As enterprises deploy artificial-intelligence-powered agents to handle tasks autonomously, such digital workers will require the same level of authentication.

A future in which these AI agents become ubiquitous creates a big boost for Okta's growth potential, on top of its already sizable $80 billion total addressable market. Management is eager to capitalize on this. "Our biggest growth opportunity will be in helping organizations secure AI by safely building, deploying, discovering, and governing these agents," Okta President and Chief Operating Officer Eric Kelleher said in a statement to Barron's.

The catalyst may just be starting to play out, according to Ian Murray, managing partner of Peak Ten Capital, a tech-focused investment fund and Okta shareholder. "Because we expect that there will be millions of AI agents, we think it is a big opportunity for the company," he says.

Financial results are already trending the right way. Okta has made a decisive shift toward consistent profitability and is generating growing free cash flow. Investors should buy the stock ahead of what could be significant upside through 2026 and beyond.

At its core, Okta's platform solves a common problem. It provides a single sign-in portal that verifies and grants appropriate access to various programs. Since its 2017 initial public offering, however, the company has evolved well beyond that role as a digital front door, adding products to manage compliance functions and governance -- such as automating audit trails and ensuring adherence to various regulations that its enterprise customers across multiple industries are required to maintain. Securing AI agents has become a pillar of the story.

These layers are all critical to modern enterprises and together are driving impressive financial performance, with a case to be made that the company's outlook is stronger than ever.

In December, Okta reported third-quarter results, posting revenue of $742 million, a 12% year-over-year increase, surpassing Wall Street expectations. Adjusted earnings per share of 82 cents surged by 22% compared with the prior-year quarter, reflecting a combination of efforts to operate more efficiently and the impact of newer high-margin products.

The trend of large enterprises consolidating their security spending onto Okta's platform is evident, with the number of customers generating over $1 million in annual contract value growing 17% in the third quarter.

The company's current remaining performance obligation -- the backlog value of all signed contracts that have not yet been recognized as revenue, but expected to be recognized over the next 12 months -- has climbed by 13% from last year, reaching a record $2.3 billion, suggesting a solid tailwind for the growth momentum to continue. Indeed, management announced a $1 billion share-repurchase authorization to signal its confidence in Okta's balance sheet and long-term prospects.

Okta boosted guidance for the full fiscal year 2026, and now expects revenue growth of 11% and earnings per share between $3.43 and $3.44, representing an approximate 22% increase from 2025, up from an earlier projection of $3.33 to $3.38. Within those amounts, management has highlighted engagement with over 100 customers specifically on AI security initiatives, which is already contributing more than $200 million in annual subscription revenue and rising.

Wall Street analysts are starting to get onboard. In December J.P. Morgan's Brian Essex reiterated an Overweight rating on Okta's stock while hiking his price target to $121 -- implying a 45% increase from a recent $83.42. Essex says Okta is the "primary beneficiary of the growing strategic importance of Identity Security," highlighting its trajectory of expanding profitability margins.

Yet it seems the broader market hasn't yet fully appreciated Okta's unique positioning. Okta shares are down about 35% from their 52-week high and trade at just 23 times forward earnings. This recent weakness could offer investors a compelling opening to pick up the stock at a discount to its tech peer group.

Larger cybersecurity players such as Palo Alto Networks and CrowdStrike Holdings are growing rapidly but command much higher valuation premiums, with price/earnings multiples of 40 and 86, respectively. The ability of AI security to reaccelerate Okta's growth could be key for its shares to reprice higher.

The underlying risks shouldn't be understated. The stock has been volatile, and any sign the company is losing share to competitors or failing to monetize the AI category of security could keep it under pressure. The market will want to see growth accompanied by further gains in profitability.

Okta's key differentiator is precisely its pure-play focus on identity, where there is an advantage in the platform being a neutral third party, not a secondary feature within a broader product suite. Unlike Microsoft, for example, which bundles its Entra ID offering within the Office software family, Okta's platform-agnostic approach preserves flexibility across cloud providers and application-operating environments, allowing it to dedicate its resources entirely to innovation, keeping it a best-of-breed solution.

Okta's independence may have other benefits as well. "We think the task it performs and the role it plays in the tech ecosystem is so important that we expect it to be acquired," says Peak Ten's Murray.

Ultimately, given its sticky customer base and solid fundamentals -- and the indispensable nature of identity security -- investors have plenty of reasons to sign on and own Okta for the long run.

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February 05, 2026 08:00 ET (13:00 GMT)

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