Okta, Inc. (NASDAQ:OKTA) reported fiscal second-quarter 2027 results that strengthened the case for a bookings recovery. Revenue rose 11% year over year to $805 million, while company-defined non-GAAP diluted earnings increased 15% to $1.05 per share. Consensus estimates called for revenue of $793 million and adjusted earnings of $0.97 per share.
The more important signal was in contracted business. Remaining performance obligations, or subscription backlog, increased 17% to $4.858 billion, outpacing recognized revenue growth by six percentage points. Current RPO, which Okta, Inc. (NASDAQ:OKTA) expects to recognize over the next 12 months, grew 14% to $2.585 billion.
Both measures accelerated from the first quarter, when RPO and cRPO grew 16% and 12%, respectively. The contracted subscription backlog of Okta, Inc. (NASDAQ:OKTA) is therefore growing faster than recognized revenue, although RPO can also move with contract duration and deal timing. One quarter of stronger backlog growth is encouraging, but it does not establish a durable trend by itself.
Bull Case
There are signs that the broader platform strategy is contributing. New products represented approximately 30% of second-quarter bookings, up from roughly 25% in the first quarter, and Okta Identity Governance remained the largest contributor. Management said contracts containing at least one new product carried an average annual contract value uplift of about 40%. Customers with at least $1 million in annual contract value also grew 22% to 605 and represented more than $1 billion in aggregate ACV. That supports the case that Okta, Inc. (NASDAQ:OKTA) is selling more than basic authentication, although the new-product mix merely returned to the 30% level reported in the fourth quarter of fiscal 2026.
AI agents could widen that opportunity. As companies deploy software agents that act across applications and data, those agents require identities, permissions and governance. Okta, Inc. (NASDAQ:OKTA) has expanded its AI-agent offering with capabilities covering sign-on, agent-to-agent connections and access certification. Management disclosed dozens of AI-agent deals, including several transactions worth more than $1 million. Those contracts demonstrate early customer demand, although management said the category remained too small to appear separately in reported results. For now, AI is a credible market-expansion argument rather than a separately measurable growth engine.
The recovery also reached reported profitability. GAAP operating income rose to $107 million from $41 million, lifting the GAAP operating margin to 13% from 6%. Company-defined non-GAAP operating margin held at 28%. Free cash flow increased to $227 million from $162 million, while its margin expanded to 28% from 22%. Okta, Inc. (NASDAQ:OKTA) defines free cash flow as operating cash flow minus purchases of property and equipment, net of proceeds, and capitalized software.
Bear Case
The main caution comes from guidance. Okta, Inc. (NASDAQ:OKTA) expects third-quarter cRPO of $2.590 billion to $2.600 billion, representing 11% to 12% growth. That would slow from the second quarter’s 14%, even as projected revenue of $813 million to $817 million implies 10% growth. Okta, Inc. (NASDAQ:OKTA) nevertheless raised its full-year revenue outlook to $3.216 billion to $3.226 billion and its company-defined non-GAAP free-cash-flow forecast to $910 million to $930 million.
Hedge Fund Sentiment
The filings available so far reflect positions held before OKTA reported its recent results. Insider Monkey’s database showed 58 hedge funds holding OKTA at the end of 2Q2026, up from 49 funds three months earlier.
Conclusion
Okta, Inc. (NASDAQ:OKTA) is showing a broader recovery in contracted backlog, GAAP profitability, and year-over-year free cash flow, but the evidence of sustained platform reacceleration is not yet conclusive. Maintaining cRPO growth near or above the second-quarter rate would provide stronger confirmation. Until then, improving cross-selling and operating leverage are the most tangible parts of the recovery, while AI-agent security remains promising but not yet material enough to report separately.
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Disclosure: None. This article is originally published at Insider Monkey.
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