Executive Summary
Okta delivered a solid Q2 FY2025 despite a cautious macro backdrop, with revenue of $646 million, up 16.2% year-over-year and 4.7% quarter-over-quarter, and gross margin of 76.0%. The company achieved GAAP profitability for the first time, reporting net income of $29 million and non-GAAP operating margin of 18% guidance for Q3 FY2025, underscoring a successful margin expansion path driven by operating efficiencies and a favorable mix towards larger, enterprise+ type deals. Management highlighted strength in large customers (fastest-growing cohort: $1 million+ ACV) and the rapid adoption of new products, including Identity Threat Protection with Okta AI, Identity Security Posture Management, and Highly Regulated Identity, signaling a broader platform strategy and cross-sell potential.
Looking ahead, Okta raised full-year expectations to 13% revenue growth for FY2025 with a non-GAAP operating margin target of 21% and free cash flow margin around 23%. The company also emphasized channel acceleration, with more than 40% of revenue driven through indirect partners and partner contributions in eight of the top ten global deals, along with rising deal sizes and a growing Global 2000 footprint (over 40% of Global 2000 now Okta customers). Management acknowledged macro headwinds and the residual impact of last year’s security incident, adopting prudence in guidance while continuing to invest in security and platform capabilities. Taken together, Okta’s framework — land-and-expand discipline, product diversification, and channel-driven growth — supports a constructive long-term growth trajectory and earnings quality ahead of many software peers.
Key Performance Indicators
QoQ: 172.50% | YoY:126.13%
QoQ: 170.83% | YoY:125.00%
Key Insights
Revenue: $646.0M in Q2 FY2025, up 16.19% YoY and 4.70% QoQ.
Gross Profit: $491.0M; Gross Margin: 76.0% (vs. 76.0% prior-year).
Operating Income: $(19.0)M; Operating Margin: (2.94)% (GAAP).
Net Income: $29.0M; Net Margin: 4.49%.
EPS: $0.17 (GAAP); Diluted EPS: $0.15.
EBITDA: $34.0M; EBITDA Margin: 5.26%.
Free Cash Flow: $78.0M; Operating Cash Flow: $86.0M; Net Cash from Operating Activities: $86.0M; Net Change in Cash: $193.0M; Cash at End of Period: $516.0M.
Balance Sheet highlights includ...
Financial Highlights
Revenue: $646.0M in Q2 FY2025, up 16.19% YoY and 4.70% QoQ.
Gross Profit: $491.0M; Gross Margin: 76.0% (vs. 76.0% prior-year).
Operating Income: $(19.0)M; Operating Margin: (2.94)% (GAAP).
Net Income: $29.0M; Net Margin: 4.49%.
EPS: $0.17 (GAAP); Diluted EPS: $0.15.
EBITDA: $34.0M; EBITDA Margin: 5.26%.
Free Cash Flow: $78.0M; Operating Cash Flow: $86.0M; Net Cash from Operating Activities: $86.0M; Net Change in Cash: $193.0M; Cash at End of Period: $516.0M.
Balance Sheet highlights include Total Assets: $9.067B; Total Liabilities: $2.934B; Total Stockholders’ Equity: $6.133B; Cash & Short-Term Investments: $2.358B; Goodwill & Intangibles: $5.616B; Total Debt: $1.220B; Net Debt: $0.705B. Current Ratio: 1.83; Gross Margin: 76%; Operating Margin (GAAP): (2.94%); Net Margin: 4.49%; ROA: 0.32%; ROE: 0.473%; P/S: 24.52x; P/B: 2.58x; P/E: 136.6x; EV/Revenue: 486.6x.
Guidance and trajectory: Q3 FY25 revenue growth 11%, current RPO growth 9%, non-GAAP operating margin 18%, free cash flow margin ~20%. FY25 full-year revenue growth raised to 13%, non-GAAP operating margin ~21%, free cash flow margin ~23%.
Income Statement
| Metric |
Value |
YoY Change |
QoQ Change |
| Revenue |
646.00M |
16.19% |
4.70% |
| Gross Profit |
491.00M |
20.64% |
4.69% |
| Operating Income |
-19.00M |
88.27% |
59.57% |
| Net Income |
29.00M |
126.13% |
172.50% |
| EPS |
0.17 |
125.00% |
170.83% |
Key Financial Ratios
operatingProfitMargin
-2.94%
operatingCashFlowPerShare
$0.51
freeCashFlowPerShare
$0.46
priceEarningsRatio
136.55
Management Commentary
Key management themes from the Q2 earnings call and supplemental materials:
- Product and security focus: Okta highlighted the GAAP profitability milestone and ongoing investment in security as a core enabler of growth, including Identity Threat Protection with Okta AI, Identity Security Posture Management, and Highly Regulated Identity. Todd McKinnon emphasized: Identity is security and has become a critical component of an organization's overall technology strategy and defense against today’s cyber threat environment.
- Growth via product expansion and partnerships: Brett Tighe noted that customers adopting more products have higher retention, and the company is expanding governance and privileged access offerings. The Elevate Partner Program and growing GSI momentum underpin the company’s >40% revenue through indirect channels, with partner deals averaging more than three times larger than direct deals.
- Enterprise strength and longer-duration contracts: Management highlighted that large customers (Global 2000) are a key growth driver, with >40% of Global 2000 now Okta customers and longer contract terms reflected in rising current RPO durations. They see a long runway to penetrate larger accounts with Identity Governance, PAM, and ITDR offerings.
- Macro headwinds and security incident prudence: Both Todd and Brett acknowledged macro headwinds affecting new logo velocity and upsell mix, with conservative guidance for the remainder of FY25 partially related to lapping the prior year security incident. They expect macro stabilization over the back half of the year while continuing to invest in product security and platform capabilities.
- Outlook and execution: The management team reaffirmed a plan for profitable growth, emphasizing disciplined operating costs, channel expansion, and product-driven cross-sell to sustain high retention, while ramping new security-related offerings.
Identity is security and has become a critical component of an organization's overall technology strategy and defense against today's cyber threat environment.
— Todd McKinnon
For the third quarter of FY '25, we expect total revenue growth of 11%, current RPO growth of 9%, non-GAAP operating margin of 18%, and free cash flow margin of approximately 20%.
— Brett Tighe
Forward Guidance
Management Guidance (Q3 FY25 and FY25):
- Q3 FY25 revenue growth: 11%
- Q3 FY25 current RPO growth: 9%
- Q3 FY25 non-GAAP operating margin: 18%
- Q3 FY25 free cash flow margin: ~20%
- FY25 full-year revenue growth: ~13%
- FY25 non-GAAP operating margin: ~21%
- FY25 free cash flow margin: ~23%
Assessment: The guidance reflects a cautious stance in the near term amid macro headwinds and residual effects from last year’s security incident, balanced by a strong product stack and a high-quality, multi-product customer base. The growth trajectory hinges on continued adoption of newly launched Identity Threat Protection, Identity Governance, PAM, and ITDR across expanding enterprise footprints, alongside deeper channel penetration with GSIs. Risks include renewed macro softness, continued slower new logo intake, and potential regulatory/privacy developments. Key metrics investors should monitor include: (1) progression of current RPO and cRPO, (2) acceleration in ITDR and PAM cross-sell within Global 2000 accounts, (3) incremental contribution from GSIs and partners, (4) security incident remediation progress and customer confidence, and (5) the trajectory of operating margins as scale and efficiency initiatives mature.