Okta, Inc. (NASDAQ:OKTA) sells identity software, the tools that let employees and customers log in securely across a company’s many apps. At about $33.7 billion, the company has the size required of a candidate. Additionally, with recent profitability under standard accounting rules, it has a trailing price-to-earnings ratio that the committee can use. That trailing figure is very high, around 124 times, because its reported profit is still thin and freshly positive. The forward multiple tells a friendlier story, nearly 54 times next year’s expected earnings, indicating the anticipated growth rate in profit. Second-quarter revenue of $805 million rose about 11%, and the stock is up roughly 131% this year, so the re-rating has been dramatic.
Bull Case
The stock that is featured among the 9 New Contenders for the S&P 500 Index has renewed momentum, which forms the bull case. The strong quarter drove up the share price of the company afterward, and at its Oktane 2026 conference, Okta leaned into securing the identities of AI agents, a fast-emerging need as companies deploy software that acts on their own. Consecutively, analysts such as BMO Capital and Scotiabank lifted their price targets for the stock. As a neutral platform that works across competing cloud providers, Okta fills a role that is hard for customers to rip out once it is embedded. This strong attachment with its clients supports the case that today’s thin profit can grow steadily from here into the valuation.
OKTA gained 155% over the last six months, and in comparison, the Insider Monkey Billionaire Index saw an 11.6% rise during the period.
Bear Case
The bear case is that GAAP margins are still thin, which is why the trailing multiple looks so extreme, and the growth rate has been decelerating toward the low teens. Much of this year’s gain already reflects optimism about the AI-identity opportunity, so a forward multiple at 54x assumes profit keeps compounding smoothly. A slip in subscription growth, or a stumble in the AI-agent push, would leave little cushion after a 150% run. Additionally, competition remains a threat as larger platform vendors bundle identity into broader security suites.
Bottom line
The bottom line is that Okta is profitable and large enough, and its shares trade heavily. The company’s identity-security niche is a durable one too. Whether the recent surge has already priced in the good news, leaving the stock to grow into its multiple rather than climb much further from here, is the real concern. A buyer at this level is effectively wagering that AI-driven identity demand keeps profit scaling fast enough to reduce that high trailing multiple over the next couple of years.
Market Sentiment
On positioning, Insider Monkey’s database shows rising interest, with 58 hedge funds holding Okta, Inc. at the end of the second quarter of 2026, up from 49 the quarter before. It reflects the growing institutional interest in the AI-identity story attached to the name.
To discover how Okta stacks up against the other companies in 9 New Contenders for the S&P 500 Index, click HERE.
Hedge fund interest is rising, and analysts like the security theme too. See our list of the 10 best cybersecurity stocks to buy according to analysts.
While we acknowledge the risk and potential of OKTA as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than OKTA and that has 10,000% upside potential, check out our report about this cheapest AI stock.
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This article is originally published at Insider Monkey.
