TenQ

The Okta story

Okta provides workforce and customer identity software, and its central question is whether larger customers and products such as Identity Governance can restore faster subscription growth.

Okta stock reportTenQ Score 21/36 · every chart and check from its filings
  • $187.26share price, last close
  • $32.7Bmarket value
  • 21/36TenQ Score checks passed
  • 24.1%growth a year the price assumes

The story in brief

  • Backlog outpaces revenue. In the quarter to July 2026, subscription backlog expected to become revenue over the next 12 months grew 14%, while total revenue grew 11%.
  • Cash generation strengthens. Free cash flow reached $227 million in the quarter to July 2026, representing 28% of revenue, compared with $162 million and 22% a year earlier.
  • Capital returns expand. Following its January 2026 authorization to repurchase up to $1 billion of stock, Okta repurchased $372 million and settled its remaining 2026 Notes for $350 million in the quarter to July 2026.

What drives the business

  • Okta's independent identity platforms secure access across customers' chosen technologies, with the Okta Platform serving workforce identity and both Okta and Auth0 serving customer identity.
  • As of January 31, 2026, more than 20,000 customers used its solutions, supported by over 7,000 integrations with applications, infrastructure providers and security vendors.
  • Revenue comes primarily from multiyear cloud subscriptions, with expansion driven by more users, additional products and adoption of both platforms within existing customers.
  • At the start of fiscal 2026, Okta specialized its commercial organization around IT and security needs for Okta and developer needs for Auth0, while its product expansion includes identity controls for AI agents.
  • In the quarter to July 2026, subscription revenue reached $793 million, up 12%, and management cited larger customers, core workforce and customer identity demand, and Okta Identity Governance as contributors to growth.

What the price assumes

At $217.49, the reverse DCF implies free cash flow after stock pay grows 26.5% a year for ten years, using a 10.3% discount rate.

That compares with growth of 53.5% over the last twelve months on the same measure and the TenQ check's 28.8% bar, which assumes the record slows halfway to 4%.

The implied growth falls below that check's bar, but sustaining it for ten years is a different requirement from delivering it over the last twelve months.

Value OKTA on your own assumptions

What could change the story

  • Revenue growth of 11.2% over the last twelve months trails both the 16.3% annual pace over the last three years and the TenQ sector benchmark of 17.0%, so stronger backlog has not yet restored the longer-term revenue pace.
  • The operating margin of 7.5% over the last twelve months remains below the sector benchmark of 11.0%, despite improved profitability in the quarter to July 2026.
  • Stock-based pay of $503 million remains substantial alongside $979 million of free cash flow over the last twelve months, and the TenQ checks show repurchases have not outpaced stock compensation.
  • The free cash flow yield of 2.6% falls below the TenQ check's 3.0% threshold, leaving the valuation dependent on continued cash growth.
  • Cybersecurity incidents, service interruptions or failure to retain and expand customer relationships could weaken demand for platforms whose purpose is secure, reliable access.

What to watch next

  • For the third quarter of fiscal 2027, Okta expects revenue of $813 million to $817 million and current subscription backlog of $2.590 billion to $2.600 billion, with backlog growth of 11% to 12% compared with 14% in the quarter to July 2026.
  • Fiscal 2027 revenue guidance of $3.216 billion to $3.226 billion includes an approximately one percentage point growth headwind from shifting professional services to partners, making subscription growth an important measure of underlying demand.
  • Fiscal 2027 non-GAAP free cash flow guidance of $910 million to $930 million includes an approximately one percentage point impact from lower interest income following repurchases and the notes settlement.
  • Further releases can show whether Identity Governance continues contributing to growth and whether repurchases begin to offset stock compensation and share issuance more consistently.

Sources

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