Okta Q2 2027 Earnings Report

Okta EPS Results

• Actual EPS: $1.05
• Consensus EPS: $0.97
• Beat/Miss: Beat by +$0.09
• One Year Ago EPS: $0.91

Okta Revenue Results

• Actual Revenue: $805.00 million
• Expected Revenue: $793.00 million
• Beat/Miss: Beat by +$12.00 million
• YoY Revenue Growth: +10.60%

Okta Announcement Details

• Quarter: Q2 2027
• Date: 8/26/2026
• Time: After Market Closes
• Conference Call Date: Wednesday, August 26, 2026
• Conference Call Time: 5:00PM ET

Okta (NASDAQ:OKTA) is a publicly traded provider of identity and access management solutions, headquartered in San Francisco, California. Founded in 2009 by Todd McKinnon and Frederic Kerrest, the company completed its initial public offering in April 2017. Under the leadership of McKinnon as chief executive officer and Kerrest as chief operating officer, Okta has grown into a leading vendor in the cybersecurity space, focusing on secure user authentication, single sign-on and lifecycle management for digital identities.

At the core of Okta’s offering is the Okta Identity Cloud, a suite of cloud-native services that enable organizations to manage user access across web and mobile applications, on-premises systems and APIs. Key components include Single Sign-On (SSO) to streamline user authentication across multiple applications, Adaptive Multi-Factor Authentication (MFA) for risk-based security checks, and Lifecycle Management to automate onboarding and offboarding processes. Additional modules, such as API Access Management and custom workflow automation, allow enterprises to extend identity controls into custom applications and developer environments.

Okta serves a global customer base spanning sectors such as financial services, healthcare, technology, education and government. Its platform is leveraged by organizations of all sizes, from startups to large enterprises, to secure employee, partner and customer identities. With data centers and cloud regions distributed across North America, Europe, Asia and Australia, Okta supports compliance requirements and performance needs for customers in more than 100 countries.

Okta Q2 2027 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Core business momentum strengthened, with acceleration in workforce and customer identity ACV, record Q2 bookings, strong pipeline conversion, and more than 600 customers generating over $1 million in ACV.
• Positive Sentiment: New products represented approximately 30% of bookings, with Identity Governance the largest contributor and deals including new products producing roughly 40% higher ACV on average.
• Neutral Sentiment: Okta reported growing demand for its AI-agent security products, including dozens of Q2 deals and several million-dollar-plus wins, but management emphasized that the business remains very early and AI revenue will be immaterial to FY2027.
• Positive Sentiment: Management raised full-year FY2027 expectations to 10%–11% revenue growth, 26% non-GAAP operating margin, and 28%–29% free-cash-flow margin, while Q3 guidance calls for 10% revenue growth and 11%–12% current RPO growth.
• Neutral Sentiment: Okta completed its $350 million convertible-note cash settlement and repurchased approximately 1.5 million shares for $125 million; however, shifting more professional-services work to partners is expected to reduce FY2027 revenue growth by about one percentage point.

Presentation

[Dave Gennarelli, SVP of Investor Relations at Okta]

Hi, everyone. Welcome to Okta's Second Quarter of Fiscal 2027 Earnings Webcast. I'm Dave Gennarelli, Senior Vice President of Investor Relations at Okta. Presenting in today's meet will be Todd McKinnon, our Chief Executive Officer and Co-founder, and Brett Tighe, our Chief Financial Officer. Eric Kelleher, our President and Chief Operating Officer, will join the Q and A portion of the meeting. At around the same time that the earnings press release hit the wire, we posted supplemental commentary to the IR website. Today's meeting will include forward-looking statements pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, including but not limited to statements regarding our financial outlook and market positioning. Forward-looking statements involve known and unknown risks and uncertainties that may cause our actual results, performance, or achievements to be materially different from those expressed or implied by the forward-looking statements.

[Dave Gennarelli, SVP of Investor Relations at Okta]

Forward-looking statements represent our management's beliefs and assumptions only as of the date made. Information on factors that could affect our financial results is included in our filings with the SEC from time to time, including the section titled Risk Factors in our previously filed Form 10-K. In addition, during today's meeting, we will discuss non-GAAP financial measures. Though we may not state it explicitly during the meeting, all references to profitability are non-GAAP. These non-GAAP financial measures are in addition to and not a substitute for or superior to measures of financial performance prepared in accordance with GAAP. A reconciliation between GAAP and non-GAAP financial measures and a discussion of the limitations of using non-GAAP measures versus their closest GAAP equivalents are available in our earnings release.

[Dave Gennarelli, SVP of Investor Relations at Okta]

You can also find more detailed information in our supplemental financial materials, which include trended financial statements and key metrics posted on our investor relations website. In today's meeting, we will quote a number of numeric or growth changes as we discuss our financial performance, and unless otherwise noted, each such reference represents a year-over-year comparison. I'd like to turn the meeting over to Todd McKinnon. Todd?

[Todd McKinnon, CEO and Co-Founder at Okta]

Thanks, Dave, and thank you everyone for joining us this afternoon. Our Q2 financial performance was driven by broad-based strength across our core workforce identity and customer identity platforms. Particular areas of strength were once again with large enterprises, partner engagement, and contribution from our newer products. This afternoon I'll walk through the strength of our core business, the momentum of our portfolio of new products, and our investments in product innovation and breadth. Finally, with AI security remaining top of mind for our customers, I'll share the advancements we're making with AI product development and early customer wins. We were pleased to see an acceleration in annual contract value growth for both workforce identity and customer identity, driven by strong execution and sales productivity. Additionally, the emerging use of AI by organizations and threat actors alike has further elevated the role identity plays within a company's security posture.

[Todd McKinnon, CEO and Co-Founder at Okta]

Organizations are accelerating their infrastructure modernization timelines to address this heightened threat environment. We are seeing conversations that begin with securing AI broaden into identity modernization initiatives. Our portfolio of new products are an important and fast-growing component of our solution set. in Q2, new products represented approximately 30% of bookings. Okta Identity Governance was once again the leading contributor. On average, the ACV uplift when any of the new products are included in a deal is about 40%. Product innovation is a primary investment area aimed at accelerating top-line growth. Those efforts have already resulted in faster product velocity, including advancements in our AI products and in the public sector. We are excited about the launch of Agent Gateway, which enforces policy at runtime and delivers vendor-neutral protection across platforms and clouds, including Cloud Code, Cursor, GitHub Copilot, Salesforce Agentforce, and any agent pointed at an MCP endpoint.

[Todd McKinnon, CEO and Co-Founder at Okta]

The public sector has been one of our best performing verticals over the past few years. We look to build on this momentum with the general availability of Okta for AI Agents Core. With this new SKU, Okta became the first independent neutral identity platform to bring AI agent governance to highly regulated environments, including FedRAMP and HIPAA. We are also unlocking more U.S. federal opportunities with the recently earned Impact Level 5, or IL5, the highest level unclassified cloud authorization for the U.S. Department of Defense. Achieving IL5 authorization is a critical milestone as defense organizations aim to meet the DoD's 2027 Zero Trust mandate. In addition to our organic product innovation, we have a successful track record with our tuck-in acquisition strategy, which helps accelerate our product roadmap.

[Todd McKinnon, CEO and Co-Founder at Okta]

We just completed the acquisition of Permiso, a cloud-native identity security platform that detects and mitigates threats across human, non-human, and agentic identities in multi-cloud environments. Permiso Will be integrated into a unified security offering with our existing Identity Threat Protection and Identity Security Posture Management solutions. The combination strengthens Okta's AI security offerings with enhanced visibility into autonomous agent behaviors and additional runtime controls to ensure secure agentic activity in real time. While there has been a lot of talk by other companies about identity security for AI, Okta has generally available products that are already delivering real value for our customers. Okta's proven leadership and identity uniquely positions us to secure the AI era. Identity is the primary control plane for securing AI, and customers are extending the trusted foundation they already rely on with Okta's neutral, modern, enterprise-grade identity platform to now cover agents.

[Todd McKinnon, CEO and Co-Founder at Okta]

We continue to build on three unique advantages to help our customers navigate this shift: distribution, product breadth, and neutrality. While adoption remains in its early stages, momentum is growing, and those advantages are translating into customer demand reflected in the dozens of AI deals we won in Q2. Our product breadth was a key driver in securing a multimillion dollar Okta for AI Agents deal with a Fortune 50 healthcare company. AI was spreading across their organization, and they could not tell where their agents were, what those agents were connected to, and what they could do. Okta will give them a single control plane to discover, secure, and govern those agents, helping them meet strict HIPAA compliance requirements. Okta will manage their entire identity fabric, including agent governance, Privileged Access Management, and identity security, helping to ensure every human, non-human, and agent identity is managed.

[Todd McKinnon, CEO and Co-Founder at Okta]

Our distribution advantage comes from the reach and trust we've built as the identity system of record for more than 20,000 customers. We saw it at work with a global business management consulting firm that was racing to put its own AI agents into production. After considering an in-house build, the firm chose Okta for AI Agents for its single control plane for human and non-human identities, faster deployment, and lower cost of ownership. Okta will carry the agents' identities through every handoff, binding the agents to the original employee's delegation with a verifiable record that can satisfy client and regulator requirements. Our neutrality was critical to an Okta for AI Agents deal with one of the world's largest asset managers, where AI was rolling out faster than their security team could govern.

[Todd McKinnon, CEO and Co-Founder at Okta]

Thousands of agents from multiple vendors were running in production, creating risks the organization couldn't consistently see or control. Only Okta's independent and neutral platform could cover their heterogeneous environment, from employees and devices to AI agents without vendor lock-in. Okta will provide visibility across all agents and enforce least privileged access so every agent gets only what it needs. The common theme across these three wins and the other AI deals we've closed is that customers want to move quickly without compromising on security and control. Okta for AI Agents lets them do both by helping them discover, govern, and protect every agent. More broadly, the fragmentation of the AI landscape creates significant opportunities for Okta. As enterprises deploy agents across models, clouds, applications, and infrastructure, they need a neutral identity layer that can secure it all.

[Todd McKinnon, CEO and Co-Founder at Okta]

That's why we partner with industry leaders, including Anthropic, which this quarter named Okta the first identity provider supporting enterprise-managed auth for MCP connectors. Now generally available, enterprise-managed auth enables IT teams to centrally authorize and govern how Claude connects to enterprise applications. We also recently expanded our work with AWS, Cisco, OpenAI, Databricks, and Snowflake, alongside more than 25 new Cross App Access integrations, providing a standardized way to govern how AI agents connect to a growing ecosystem of enterprise applications and resources. In just a few weeks, we'll talk more about AI security and product innovation at Oktane, our annual customer conference. We'll bring the market's leading minds together to lay out the industry blueprint, open standards, and new innovations required for building the secure agentic enterprise. In addition to the keynotes and product demos, we will host a Q and A for analysts and investors.

[Todd McKinnon, CEO and Co-Founder at Okta]

Come join us in Las Vegas or join us online for the AI security event of the year. To wrap things up, we're pleased with the strength and durability of our core workforce and customer identity businesses, and we're enthusiastic about the early success we're having with our AI products as customers recognize our advantage as the leading neutral modern identity platform. It was a strong start to the first half of FY 2027, and we look to build on our momentum as we move through this year and beyond. I want to thank the entire Okta team and our loyal customers and partners who put their trust in us every day. Now, here's Brett to cover the financial commentary.

[Brett Tighe, CFO at Okta]

Thanks, Todd, and thank you, everyone, for joining us today. Our strong Q2 financials build on the momentum we've generated over the past several quarters. We continue to focus on operational efficiencies throughout the organization while driving top-line growth by investing in product innovation, go-to-market, and our partner ecosystem. As a result, we experienced acceleration in many of our top-line metrics while also maintaining very healthy profit and free cash flow margins. I'll provide insights into our Q2 performance and then move into our outlook for Q3 and FY 2027. Q2 was a record bookings quarter for a non-Q4, driven by strong pipeline conversion and deal expansions. We continue to see productivity gains within our go-to-market organization, aided by our stable sales force that has low attrition and high AE tenure rates. Strength with large enterprise customers was punctuated by over 20% growth in $1+ million ACV customers.

[Brett Tighe, CFO at Okta]

We now have over 600 customers with greater than $1 million in ACV. Additional areas of strength included our upsell and cross-sell motion and pipeline build. The investments we've been making into our partner ecosystem are resulting in positive outcomes for the business. When our partners are involved, our average deal size is bigger, and the close rates improve. Channel partners were engaged in all of our top 20 deals in Q2, and our biggest deal of the quarter was partner sourced. At the beginning of this fiscal year, we made the decision to shift more of the professional services business to our GSI partners. This change is reflected in the decrease in Q2 professional services revenue to approximately 1% of total revenue.

[Brett Tighe, CFO at Okta]

We believe this change will lead to greater long-term benefits to fuel top-line growth by deepening the relationship with these important partners and increasing our business with large enterprises. Moving on to our balance sheet and capital allocation. We had another strong quarter of cash flow in Q2. While Q2 is typically our seasonal low for cash flow, it was much better than expected based on strong operating profitability and collections. We ended the quarter with a healthy balance sheet consisting of approximately $2.3 billion in cash equivalents, and short-term investments. In June, our convertible notes reached maturity, and we settled the remaining principal amount of $350 million in cash. Okta no longer has any convertible debt on the balance sheet. Over the course of Q2, we repurchased and retired approximately 1.5 million shares for a total cost of $125 million.

[Brett Tighe, CFO at Okta]

$555 million remains under the $1 billion repurchase program. We continue to regularly evaluate Okta's capital allocation priorities to ensure we're well-positioned to deliver sustainable long-term value to our shareholders. Now let's turn to our business outlook. We continue to take a prudent approach to forward guidance. For the third quarter of FY 2027, we expect total revenue growth of 10%, current RPO growth of 11%-12%, non-GAAP operating margin of 24%-25%, and free cash flow margin of 21%-23%. For the full year FY 2027, we now expect total revenue growth of 10%-11%, non-GAAP operating margin of 26%, and a free cash flow margin of 28%-29%. As a reminder, the FY 2027 revenue guidance includes about a one-point impact related to a strategic decision to shift more of our professional services business to our GSI partners.

[Brett Tighe, CFO at Okta]

In addition, the FY 2027 free cash flow margin guidance includes about a one-point impact related to lower interest income due to the stock repurchase program and our cash settlement of the remainder of the 2026 Notes. To wrap things up, we are pleased with the first half of FY 2027 and are optimistic about the trends we are seeing in the business. We are investing for growth while remaining disciplined with our cost structure. Our strong core business and growing portfolio of new products provides the foundation to extend Okta's leadership in identity security. We are well-positioned to deliver profitable growth for years to come. With that, I will turn it back to Dave for Q&A. Dave?

[Dave Gennarelli, SVP of Investor Relations at Okta]

Thanks, Brett. There is quite a few hands raised already, and I will take them in order till the top of the hour. In the interest of time, please limit yourself to one question. With that, we will go to Eric Heath at KeyBanc.

[Eric Heath, Director of Equity Research Analyst at KeyBanc]

Thanks, Dave, and congrats on the strong results, Todd and Brett. Maybe sticking with the theme for Okta for AI Agents. Todd, I was curious to hear just how material the Anthropic partnership you are having is contributing to the go-to-market and the product maturity that you are delivering. Secondarily, maybe for you, Todd or Brett, just the uplift you are seeing on these deals for Okta for AI Agents, and maybe just some sort of perspective on what the ratio is looking like in terms of the agents to humans thus far. Thanks.

[Todd McKinnon, CEO and Co-Founder at Okta]

Yeah. We are really excited about the quarter. It was an amazing quarter on a lot of fronts. Specifically, one of the highlights is our place in the ecosystem. Our place in the ecosystem is super important and super strategic. It is not just me saying that. I think it is in all these customer conversations. I am having many customer conversations. I am flying around meeting these customers that are trying to solve these security challenges in general, but in particular around AI agents. They see us as like the naturally well-positioned to secure this agentic future. We are going after that on all fronts. Okta for AI Agents is the main product front there. But it is also, in short term, we can solve these problems in a lot of different ways. We can help them roll out agents today. We can give them visibility.

[Todd McKinnon, CEO and Co-Founder at Okta]

I think longer term is something we are working on as well. I think longer term, the entire industry needs to work better together. The industry right now in security, everyone is coming at the customer saying they have the only answer. They can secure agents. They are going to be the one to do it. The reality is it is going to take us all working together. Okta has been working on this. On these calls, the last five or six calls, we have talked about standards and ecosystem. We made a huge step forward in terms of one of the main standards we have been working on, which is the standard we have talked about called Cross App Access. The huge step forward this time is when the biggest AI agent in the world, Claude, is supporting Cross App Access.

[Todd McKinnon, CEO and Co-Founder at Okta]

They released Enterprise-managed authorization, which is the first time an AI agent has been compatible with this protocol. Okta is the first identity provider to support this protocol. Now it is an open protocol, so we hope every identity technology and company supports it. We hope every other AI agent supports it. Everyone in the resource side of the equation is starting to support it as well. We announced 26 top SaaS vendors are supporting from a resource perspective this protocol. This is one example of many things we are going to be doing in the ecosystem to make this whole world fit together better because that is what customers need. We need to stop everyone confusing the customer by saying one company is going to do it all and start defining how we can all work together to bring concrete solutions to these customers.

[Todd McKinnon, CEO and Co-Founder at Okta]

In terms of where the products stack up, in the quarter we had, as I mentioned, a quarter was strong across almost every dimension. Particularly strong was the 30% of the new bookings were from new products. Okta for AI Agents inside of that bucket, there were dozens of deals in the quarter, including several million-dollar-plus deals, which is super exciting. The reality is it is still very early. We do thousands of transactions every quarter.

[Todd McKinnon, CEO and Co-Founder at Okta]

As exciting as that is, Okta for AI Agents, it is too small to show up in the numbers right now. Going forward, especially over the next couple of years, we are super optimistic. We think this being the system of record for agentic, for agents in the enterprise and being the system of record for agent identity. In the fullness of time, it could be the biggest category of cyber. That is how bullish we are on it. It is going to take us some time to get there, but I think we are off to a good start.

[Brett Tighe, CFO at Okta]

Yeah, I would just add, Eric, like Todd said, we did close some million-dollar deals in the quarter, and we have dozens of customers. But what I said last time around, the average deal size for AI deals being bigger than the average deal size for the rest of Okta, that still remains the case. But like Todd said, it is very early on. It is a very nascent opportunity for us and so looking forward to continue to execute against that opportunity going forward.

[Dave Gennarelli, SVP of Investor Relations at Okta]

Yeah. We will take the next question from Jefferies.

[Analyst at Jefferies]

Hi, guys. This is Grant on for Joseph Gallo. Thanks for taking the question. Results were super impressive, and it was great to see those early AI security wins. I wanted to touch a little bit more on just competitive dynamics. Could you help us understand that scene right now? Maybe what are bake-offs looking like? Is competition more the Wild West? Are you seeing more existing customers going to you without bake-offs? Just anything on competitive dynamics would be helpful. Thanks.

[Todd McKinnon, CEO and Co-Founder at Okta]

Two interesting trends there. First is that, the biggest competitor is confusion. We are competing against confusion, so our solution has to be clarity. And customers are confused because there is so much excitement and so much opportunity in AI. It is the natural tendency of every vendor to say, "What we are doing and what we have done in the past is critical to AI. We have the answer. We have the one answer." And I think that confuses the customer because they have 17 vendor meetings, and every vendor tells them they have the right answer. So one of the things we are very focused on is getting close to the customers and learning from them and pouring that quickly back into our product roadmap.

[Todd McKinnon, CEO and Co-Founder at Okta]

That process not only enables us to build a better product, a product that will deliver value to the customer and cut through the hype, it also those experts on the ground help clarify in the customer's mind what needs to be done. The simple fact is that it's a big trend. AI security is going to take a lot of different vendors working together. We don't have all the answers, but what we do know is that there are some no regrets investments.

[Todd McKinnon, CEO and Co-Founder at Okta]

We know that every customer is going to have to figure out where their agents are. They're coming from all over the place. They're going to have to figure out what they can connect to, and they're going to have to figure out what they can do. No matter what happens at the model layer or the platform layer or the app layer, or if applications build their own agents or they get disrupted with agents, what the companies build themselves, that's all going to unfold. What model is the best? Is it an open source model? Is it a frontier model, some combination?

[Todd McKinnon, CEO and Co-Founder at Okta]

That's all going to unfold as it will over the next several years. But the no regrets decision is you have to have this foundation of where are my agents, what can they connect to, and what can they do? This no regrets decision is what's leading to this momentum. It's leading to these dozens of deals, these million-dollar deals. They look at us as, they say, "Hey, most of the use cases for agents now, they're working on behalf of a user. They're automating workflows, helping users." It's a very natural place for the identity provider across the enterprise to step in there and answer these questions.

[Eric Kelleher, President and COO at Okta]

One thing I would add to that is, in addition to the agentic competition and the confusion, Todd really well articulated the conversations we're having with customers right now on that front. In addition to that, the overall core business also had a very strong quarter in every category, as we talked about, our workforce strength and customer identity strength. The competitive dynamics there, our differentiators remain the same as they've been. We have broad distribution with over 20,000 companies that already trust Okta to secure identity for their humans, to secure identity for their service accounts. Having an adjacent conversation about how we are now also going to be able to secure identity for their agents as they're deployed is a natural extension for us, and it's how we can bring clarity to that overall conversation. That distribution helps.

[Eric Kelleher, President and COO at Okta]

Our neutrality has always been a key differentiator for us as well. You hear us talk here about how we have over 8,000 integrations. Todd talked earlier about the expansive partnerships we have in the AI space and with the frontier models and technology providers, the platform providers, and the hyperscalers. Our customers know that their stack is going to evolve, and they know that they're going to need to work with all of these technologies because they're advancing so rapidly. Okta is the neutral provider that allows them to work with all of that. The standards that Todd mentioned, the distribution we have, the neutrality that we have, all positions us very well to be able to win this next opportunity.

[Dave Gennarelli, SVP of Investor Relations at Okta]

Thanks, Eric. Next up, we'll go to John DiFucci at Guggenheim.

[John DiFucci, Senior Managing Director and Analyst at Guggenheim]

Thanks, Dave. Todd and Brett and Eric, listen, subscription revenue growth has really stabilized over the last four quarters. In our calculations of new ACV, which is going to drive future revenue growth, looks really strong for this quarter against the toughest comp of the year. I guess at the same time, you've talked a lot about AI and securing AI agents per our work. That message is really resonating well with customers and partners in the field. But you also say it's really early, and by the way, we hear that in the field too.

[John DiFucci, Senior Managing Director and Analyst at Guggenheim]

I guess I'm just curious, so I think we're all curious, based on your expertise and experience, when do you think this is going to turn into meaningful revenue? I know you said you had some deals and it sounds like it's starting, but do you think we're going to have to wait until something really unfortunate happens in the world, or will corporate customers get ahead of this before something like that happens?

[Todd McKinnon, CEO and Co-Founder at Okta]

John, the quarter was really a successful quarter. The bookings in the quarter, you mentioned ACV, the bookings in the quarter were a record all-time for Q2. They are also, by the way, a record all-time for Q1 and Q3. So all-time record outside of Q4, and even if we had a competition for Q4, it would almost be on the podium. Not quite, but close to being on the podium for Q4. We are very excited about the momentum, and like you said, the materiality of the AI contribution, the business is $3 billion roughly in revenue, and you saw the cRPO growth.

[Todd McKinnon, CEO and Co-Founder at Okta]

It is a big number. We are optimistic about it moving the needle on that. We think we are on the right path. One interesting thing is that the conversations I have, it is almost like an infrastructure foundational conversation. It is not necessarily like, oh, a breach happened and now we are reacting.

[John DiFucci, Senior Managing Director and Analyst at Guggenheim]

Okay.

[Todd McKinnon, CEO and Co-Founder at Okta]

I think that is good for what you said, because I do not want a big breach to knock this all down, the industry. I want customers to proactively put these no regrets investments in place and then have the right foundation to be successful. I am optimistic that we are on the right track there in terms of clarifying the message for customers, having the right product in the market. By the way, one of the things that is true and helping cut through the confusion is that we have a GA product. It has been generally available for a couple of months now. That is pretty rare, actually. If you go around and ask all the vendors, "Is your product generally available?"

[Todd McKinnon, CEO and Co-Founder at Okta]

You get no a lot of the times. Or it is an acquisition that is kind of still running as an acquisition. So we have a generally available product. We have shipped 24 significant enhancements to that product in the last two months. We are moving fast, we are innovating, we are listening to customers, and we are trying as hard as we can to make sure we turn this into solid top-line acceleration across the board as soon as possible.

[John DiFucci, Senior Managing Director and Analyst at Guggenheim]

I guess maybe just real quick, Dave, on the same topic, Todd, what percentage of your customers are you having these conversations with AI security? Is it just about all of them? Is it half of them? Just trying to understand timing a little bit.

[Todd McKinnon, CEO and Co-Founder at Okta]

One of the things, we've put the organization in place to, like I mentioned, we have a dedicated expert team in the field helping customers have these conversations. As many smart, motivated people as we put in that team to have these conversations, we fill up their calendar. They're working six days a week, 12 hours a day, and we keep adding people and keep filling up the conversations. That's leading to this record pipeline we have.

[Todd McKinnon, CEO and Co-Founder at Okta]

Last quarter, we talked about record pipe. The pipe is even bigger, and there's more pipeline. The question is how fast it will convert, right? We don't have four years of history on conversion. When we think about the future, there's obviously some degree of being prudent about how fast that's going to convert. But the pipeline's there. Now it's up to us to take this generally available product and convert it as fast as possible.

[Eric Kelleher, President and COO at Okta]

John, this product went GA on April 30th, right?

[Todd McKinnon, CEO and Co-Founder at Okta]

Yeah.

[Eric Kelleher, President and COO at Okta]

90 days ago, so it is relatively new. To your question around how many customers, and a stat that might be valuable for you, and we published this, I think with our post commentary today. Recent surveys we have run across our customers, 81% of the CISOs that we talk to are aware right now that they are exposed with agents deployed in their enterprises where they do not yet have an adequate security platform in place. A very high percentage of our customers know that they have the need. As Todd mentioned, our teams are working aggressively to schedule as many customer conversations as we can to make it really clear how we can help. This has been, we are very pleased with what we have seen in Q2.

[John DiFucci, Senior Managing Director and Analyst at Guggenheim]

Great. Well, nice job, guys.

[Dave Gennarelli, SVP of Investor Relations at Okta]

Thanks. Next up, we will go to Matt Hedberg at RBC.

[Matt Hedberg, Analyst at RBC]

Thanks, Dave. Congrats from me as well. I think one of the most encouraging elements here is the 200 basis points of cRPO acceleration, and it does not feel like it is even being driven by AI yet. I think we all see the pipeline. Could you sort of force rank the most important elements for that cRPO acceleration? As a follow-up to that, are you seeing deal cycles accelerate? Todd, you just mentioned the pipe is as big as ever. With AI-driven concerns, even if it is not AI-specific products, are you seeing faster deal cycles in this environment?

[Todd McKinnon, CEO and Co-Founder at Okta]

I would rank them as follows. The first number one thing is large enterprise. You see the 22% growth in million-dollar-plus customers. So large enterprise, it has been for several quarters, is a very important part of the performance of the business. The second thing I would say is that we are the only identity vendor with this broad range of products. You see the 30% of bookings and new product introductions. That is a little bit of AI, governance, privilege, Identity Threat Protection. We have this broad platform of products, and you are seeing that really shine. So this message of you can buy from a one-stop shop for identity. I was having a conversation with a large Fortune 25 customer yesterday, and they have 200 identity vendors. 200.

[Todd McKinnon, CEO and Co-Founder at Okta]

They are already paying a significant amount of money for the part of their identity we are doing, but that, I mean, 200, they could save tens of millions of dollars by standardizing on us across the board. We are the only identity vendor that could do that. Everyone else has a silo, whether it is just access management or it is really tied to their own stack or it is very privileged or governance. We are the only one that has that breadth of product, so that is very important.

[Todd McKinnon, CEO and Co-Founder at Okta]

Then the third thing, which is really exciting, is that these conversations about AI and our ability to help clarify how they can secure AI and how this ecosystem can fit together to help them secure, it is catalyzing change conversations that are resulting in deals for other products. You might go in and have an AI conversation, and they are like, "You know what? We have been talking about upgrading our governance legacy product for six years.

[Todd McKinnon, CEO and Co-Founder at Okta]

We just have to do that. Oh, and by the way, we should probably think about customer identity." You are starting to see that happen. So that is not an AI deal per se, but it is kind of like a large enterprise that has a bunch of vendors it wants to take out, and it is coming to the company that seems smart about AI and has a GA product and has real success there. By the way, it has a large platform. It is a powerful combination.

[Dave Gennarelli, SVP of Investor Relations at Okta]

Okay, next up we will go to Josh Tilton at Wolfe Research.

[Josh Tilton, Analyst at Wolfe Research]

Thank you, Dave. Hedberg sort of stole my question, so I am just going to maybe ask it, but a little bit more directly. Are you seeing strength in the core business because it is accelerating the pace of legacy migrations? Said differently, are customers coming up to you and saying, "I might not need the AI security product today, but I definitely need to replace my core product because I know the legacy product I have is definitely not going to support my AI strategy whenever I get there." Then maybe the second part to that question is just 15% short-term bookings growth year to date sounds like most of that is not from AI. How do we think about the durability of that growth profile when AI really starts to layer into the model?

[Eric Kelleher, President and COO at Okta]

I think for the first part of your question, we absolutely believe that the exposure our customers are feeling to agents proliferating in their organizations and not yet being able to secure them is starting a lot of conversations. Those conversations, as Todd just mentioned, can expand into other areas of the portfolio. So your question around legacy migrations are people looking to the future and ensuring they have the identity security fabric, the platform that can solve all those use cases. That is absolutely part of the conversations that we are seeing evolve with customers. In that sense, the agent conversation is bringing a more acute awareness to perhaps their lack of readiness and their need to find a secure identity partner that they can have confidence is going to solve for their challenges both today and in their roadmap in the future.

[Eric Kelleher, President and COO at Okta]

That is absolutely something that we think is contributing. But overall, as you look at the core business, and Todd and Brett mentioned this, we saw strength up market in the million-dollar and 100,000+ cohort. We saw strength down market. We saw strength in public sector. Our largest deal of the quarter was a public sector deal. So we continue to have confidence in the durable strength of the core business as we are also starting to convert the pipe we talked about in Q1 and continued to build in Q2 for these new AI products that have come out. As mentioned, with multiple million-dollar wins just in this first quarter of availability.

[Brett Tighe, CFO at Okta]

I will give you a very specific example. A couple weeks ago, I was in Pennsylvania talking to a large customer of Okta. It is a retailer. The conversation was about a big M&A they were doing, and the company they bought had a legacy identity provider. The conversation I had was all about AI agents, Okta for AI Agents, how we answer these three questions. That conversation and the POC and the sales cycle that is just starting there absolutely helped us win the consolidation business to consolidate the acquired company all on Okta.

[Brett Tighe, CFO at Okta]

Because it was not on Okta. It had legacy identity, and of course, when you bring a big company in like that, everyone wants to evaluate which vendor should we use. Is this better for this? That AI conversation catalyzed just the whole thing to be, hey, Okta knows where they are going. They are the leaders here. Let's just get rid of all that old stuff and standardize on Okta. That is a very concrete example of this phenomenon you just outlined in the abstract, but it is for sure happening day to day.

[Dave Gennarelli, SVP of Investor Relations at Okta]

Next up, we will go to Rudy Kessinger at D.A. Davidson.

[Rudy Kessinger, Managing Director and Analyst at D.A. Davidson]

Great. Thanks, guys, and congrats on the strong results here, especially given it does not really sound like AI is really kicking in yet. Brett, questions for you. Your cRPO outperformance, this was the largest since fiscal Q4 of 2025, which was obviously a really, really strong quarter. The outperformance in Q1 and Q2 were stronger than Q1 and Q2 the last two years. Does your Q3 cRPO guidance assume that any of this level of stronger execution and conversion rates, et cetera, that you have seen in Q1 and Q2, does that Q3 guide assume any of that continues, or does it still have the same kind of proven assumptions that your Q1 and Q2 cRPO guidance had?

[Brett Tighe, CFO at Okta]

Yeah, you hit the nail on the head, Rudy. Q1 and Q2 this year have been quite strong. Q2, like we talked about, record non-Q4 bookings quarter for us. It was really good. When we think about the guidance going forward, we are applying the same guidance philosophy we have for several quarters now. We have talked about getting closer to the pin. It is quite simple, right? We had a great quarter in Q2, great quarter in Q1. Q3, we are applying that same guidance philosophy. So no change in terms of any of the variables that you just mentioned.

[Dave Gennarelli, SVP of Investor Relations at Okta]

Next up, we'll go to Shrenik Kothari at Baird.

[Shrenik Kothari, Sector Head Director of Cybersecurity and Infrastructure Software Equities at Baird]

Hey, yeah. Congrats on the great results, and thanks for taking the question. To follow up on an earlier competitive question, and Todd and Eric, you touched upon it a bit. We are increasingly hearing on the field the CISOs who are exploring agentic identity also becoming wary of these AI-first private vendors like Oasis Security as Okta is getting acquired, further creating that integration roadmap uncertainty. Are you seeing that also catalyze a move in terms of pipeline towards a scaled sort of independent platform by you guys?

[Shrenik Kothari, Sector Head Director of Cybersecurity and Infrastructure Software Equities at Baird]

On a related note, importantly, since you and Eric mentioned the phrase no regret investment a couple of times, with the simplified agent pricing that you launched and overall packaging also designed to remove this procurement friction and more scalable as deployment scale, is that also pulling a lot of these evaluations towards other areas, as you said, and customers wanting this no regret, quote unquote, durable, economically scalable plan across humans and agents? I know it's a couple of questions, but yeah.

[Eric Kelleher, President and COO at Okta]

Yeah, I think there are about three in there. Let me approach the first one, and then Todd and Brett can comment on the second. We absolutely believe that the uncertainty in the market right now around that customers are faced with. In fact, I was with a customer event last week abroad, and had an opportunity to talk to a half dozen CISOs on their plans for how they're solving both core workforce and customer identity and also agentic identity. And they share the concern that you just articulated, which is the various players in the space and the venture-funded companies are moving very rapidly, and it's difficult for them to have confidence in predicting what the future is going to be. And one of the reasons that they come to Okta and talk to Okta is specifically because we are a proven company.

[Eric Kelleher, President and COO at Okta]

We've been solving this problem for 17 years for over 20,000 customers, and we've earned the trust of those customers and the partners that we work with to solve these problems. They have confidence in our ability to work with them for the long term as well, not just for a short term. In addition to that, this also again highlights the importance of our neutrality. As they know the various stack components that they're using, the various frontier models they're using, all of those technologies are evolving and leapfrogging each other regularly. They know that a bet with Okta is a bet that's going to carry them with continuity through whatever happens elsewhere in the technology landscape. That's absolutely one of the primary reasons our customers have confidence that Okta's a smart long-term bet.

[Todd McKinnon, CEO and Co-Founder at Okta]

One of the interesting things is that a lot of these little companies are pivots. They started off as trying to detect service accounts or trying to do service account discovery or agent discovery, and they've more recently pivoted into this comprehensive vision like we have of discovery, where are my agents, what can they connect to. What can they do. A lot of their products end-to-end are quite immature. They might be strong in one area, but end-to-end, and that's pretty frustrating for these CISOs and CIOs I talk to because they're hesitant enough about buying a small vendor because they're worried about getting it acquired or having it go away or run out of money.

[Todd McKinnon, CEO and Co-Founder at Okta]

They sure don't want to have to buy five of them to get the solution that we have. A generally available product, comprehensive vision, iterating quickly, that really resonates. I talk to CIOs and CISOs that are amazed. We're iterating faster than startups, and they're amazed by that. It's tough to go wrong when you have a trusted vendor that's already in front of all your people and in your infrastructure and trusted security vendor. It's a good position to be in.

[Dave Gennarelli, SVP of Investor Relations at Okta]

Okay, let's go to Steve Koenig at Macquarie.

[Steve Koenig, Managing Director at Macquarie]

Okay. Thanks, Dave, for getting me in. Todd, question for you. Maybe pivoting from talking about these small upstarts trying to do AI identity, looking at some of the majors that are all claiming to have control towers or control planes or what have you. You got Microsoft, Salesforce, ServiceNow. Maybe can you give us some perspective about to what extent do those products overlap and compete with your Okta for AI Agents? Or to what extent are they useful even if you have Okta? If you're, say, a Salesforce customer, maybe just some perspective on are you really competing with those products, and how are you differentiated from them? Thanks a lot.

[Todd McKinnon, CEO and Co-Founder at Okta]

Yeah. I think Microsoft is copying us, which I think they have been for 15 years. I think they're copying what we're doing, and they see the value of an agent registry. I think the challenge for them is going to be it's really hard to be neutral, and it's really hard to make an agent registry that works as well for Amazon and Google and OpenAI and Anthropic as it does for Azure and Microsoft. But I think they have a similar vision, and it looks at least from their blogs, I don't know if they have a real product yet, but at least from their blogs, it seems like they are copying us.

[Todd McKinnon, CEO and Co-Founder at Okta]

Then, I think ServiceNow and Salesforce are like every vendor. I think they're coming at the problem from their perspective. ServiceNow is coming at it from a very asset management, workflow management perspective, and we found it very valuable to work with them because we can add a lot of value in that environment. We can really help them sever the connections, the trusted connections between agents and the rest of the ecosystem. We're at that level of detail. We have the tokens, we have the protocols, so that can really help the control tower from ServiceNow actually come to fruition with a kill switch that can actually kill the connections. That's been a really valuable partnership. Salesforce, similar, it's like they're coming from more of the service and support and platform layer to some degree, but guess what?

[Todd McKinnon, CEO and Co-Founder at Okta]

People log in to Agentforce through Okta, and we can help people securely connect Agentforce to everything else in the ecosystem. Because the more Agentforce agents are connected to data across the ecosystem, the better, and we can help with that. So everyone's kind of sticking in their own lane, and lucky for us, our lane is perfect for this world. Our lane is people to technology and then technology to multiple different vendors with multiple different plays in the technology space. We're very good at that. We've existed in that middle for 17 and a half years. It's a muscle we have in the company, it's a culture we have in the company, and it's really paying off.

[Steve Koenig, Managing Director at Macquarie]

That is great. Really helpful. Thanks, Todd.

[Todd McKinnon, CEO and Co-Founder at Okta]

Yeah.

[Dave Gennarelli, SVP of Investor Relations at Okta]

Let us go to Trevor Rambo at BTIG.

[Trevor Rambo, Software Equity Research Associate at BTIG]

Great. This is Trevor Rambo, Gray Powell. Thanks for taking our question, guys. So maybe looking at the rest of the portfolio, it seems like OIG is getting more and more mature every quarter from a technology standpoint. While the AI side of the business is very exciting and doing well, feels like OIG is contributing more to the business right now. So maybe if you take a step back, can you give us a sense of how that product performed in Q2, and are you starting to see more net new lands there, or it is still mostly just expansion from the core base?

[Todd McKinnon, CEO and Co-Founder at Okta]

The whole new product portfolio was super strong. OIG is the biggest bucket in there, so you are right, it is the biggest bucket. The whole bucket outperformed, like I mentioned, 30% of bookings. Performance was across the board. I think every product in there beat our plan internally, which was great. I think when you think about OIG and Privileged Access Management and access management, the most important thing is that we are starting to see them be sold as a suite more.

[Todd McKinnon, CEO and Co-Founder at Okta]

Because we are transforming the identity industry. We are going from an identity industry that was very stovepiped. It was OIG was separate, then access management was separate, then customer was separate, then privilege was separate. So that world is going away, and we are the only vendor that has everything under one vendor, and it is all integrated. It works great. It is not a bunch of stuff that was bought and slammed together.

[Todd McKinnon, CEO and Co-Founder at Okta]

There's some acquisitions in there, but the vast majority of it is organically developed, which is better for customers. Customers want a real platform that works together, not a platform that was bought and renamed and slammed together and sold from one salesperson. That's really resonating. So yeah, that part of the business, like I've said before in a couple answers, that's what drove the over-performance, is the new products and the core business workforce and customer both accelerated since the ACV growth accelerated since we last released it in Q4.

[Todd McKinnon, CEO and Co-Founder at Okta]

So that's kind of the secret sauce there. You have to build that up over years, right? We've been working on OIG and Okta Privileged Access for six years, six and a half years, and it just takes time. You can't slap stuff together and have a leading product. Leading products take time. As much as I'd like to rename it and have it be something cool and new, you can't do it. It takes time.

[Dave Gennarelli, SVP of Investor Relations at Okta]

Okay, next we'll hear from Jonathan Ho at William Blair.

[Jonathan Ho, Partner at William Blair]

Congratulations on the strong quarter.

[Todd McKinnon, CEO and Co-Founder at Okta]

What do you think? Do you think we should rename everything?

[Jonathan Ho, Partner at William Blair]

It would be pretty interesting. You usually have Okta in front of everything.

[Todd McKinnon, CEO and Co-Founder at Okta]

It used to be Azure Active Directory, then they renamed it to Entra.

[Jonathan Ho, Partner at William Blair]

Yeah.

[Todd McKinnon, CEO and Co-Founder at Okta]

It sounds exactly like Okta. Why did they do that?

[Jonathan Ho, Partner at William Blair]

Good question. With the Permiso acquisition, can you help us understand how this sort of expands your product set, and what does post-authentication behavioral, what does that opportunity look like particularly in the AI-driven world?

[Todd McKinnon, CEO and Co-Founder at Okta]

We see an interesting phenomenon in the customer base. 80% of breaches are identity-based attacks. But when you look at our customer base, relatively small percentage have the most advanced Identity Threat Protection product. Identity Threat Protection, we have talked about it for a while, Jonathan. It is very important and very unique, and by the way, very differentiated. None of the other IdPs have this. It not only evaluates session risk at the time of login, but also post-login. Continuously monitors it, looks for risk signals, not only from Okta, but risk signals from the ecosystem, from CrowdStrike and Palo Alto Networks, and takes those all together and can shut down sessions after login. So any company that is running identity without this technology, you are at risk and you are behind, but not everyone has upgraded to it. So, I guess this is a plug.

[Todd McKinnon, CEO and Co-Founder at Okta]

Everyone should upgrade to this thing, and if you do not get it from Okta, force your vendor to build it and so you can get it. Or you can just buy it from us. Permiso, the way to think about Permiso, it is like the next generation of that. So instead of 90 native risk detections, they have 400 native risk detections. So it is a much richer and deeper set of correlative processes and machine learning that can really look at a session deeply across many vectors and many variables and detect risk. And of course, that is going to pay off in just person login. It is going to pay off in just an agent login. They also have a very strong threat research team they bring to the company, and this is probably the most exciting thing.

[Todd McKinnon, CEO and Co-Founder at Okta]

It is the perfect size for Okta to take and add to our products and extend our products. For what is going to be a big area for us is this advanced Identity Threat Protection over time. We are really lucky to have them on board, and it has been great to get to know them. It just closed. I think the acquisition actually officially closed only today. So we have been working with them preliminarily, but now it is going to be great to dig in with them and build something great together.

[Jonathan Ho, Partner at William Blair]

I asked ChatGPT, and it said to call the product Okta Nexus.

[Todd McKinnon, CEO and Co-Founder at Okta]

Okta Nexus.

[Jonathan Ho, Partner at William Blair]

There you go. Thank you.

[Brett Tighe, CFO at Okta]

Jonathan, I would just add, this is another one of these tech tuck-in M&As that we've done over the last several years. You've seen them be very successful in a variety of products. We've got a good track record here, and we think this is going to be another nice addition to the portfolio of products, like Todd just said. It's pretty exciting for us. Looking forward to selling a bunch of this in the future.

[Dave Gennarelli, SVP of Investor Relations at Okta]

Great. Let's go to Yun Kim at Loop.

[Yun Kim, Managing Director at Loop Capital]

All right, thanks. First, congrats on the quarter. Just given how quickly agentic AI adoption is happening out there, how are you incorporating the number of AI agents in your deal? Because that number will probably grow really fast. Are those numbers staged over a period of time, so you would expect renewals to happen pretty quickly as customer will probably underestimate what they need initially?

[Todd McKinnon, CEO and Co-Founder at Okta]

I'll tell you an interesting story. You said that the number of agents is growing fast. I want to be super concrete. I think it's the most helpful for everyone on the call when I'm super concrete about stuff. We were talking to a company that ended up being a nice Okta for AI agent deal in the quarter. When the evaluation started, we ran our technology, and we detected 50 instances of a Claude agent in the environment. They were thinking about what they wanted to do, then we came back a few weeks, and there was 1,500 Claude agents in the environment. It's like 50, two weeks, 1,500. These customers are really tangible, the risk that they're seeing and the way this is coming into their organization. This is catalyzing some of these deals, this onrush of agents.

[Todd McKinnon, CEO and Co-Founder at Okta]

To your question about licensing and pricing and renewals and so forth, everyone's figuring out how to price this stuff. I mentioned a lot of companies don't have a GA product, so they can get up here and talk about what they might do and this and that and the other and talk about all this stuff. We have to have a pricing model because we're in the market. Our pricing model is per user. If you want to buy Okta for AI agents, it's an uplift to your per user charge. The product works across different use cases, so it can be login for the user and the agent, it can be passing the agent credential across the whole chain of command, it can be governing the agent, but the pricing is per user, an extension of the per user price.

[Todd McKinnon, CEO and Co-Founder at Okta]

Now, the first thing everyone says is, "Well, that's crazy. Seats are going away, and you've got to charge per agent." That all may be true, but the way customers are using agents now and the way they want to buy is per user. One of our advantages is we're super close to the customers, and as I'm sure this is for sure going to evolve, and as we come up with ways that work for the customer and work for Okta, how to package it and price it differently, we'll iterate quickly and give them what they want. But for now, they like the predictability, they like the investments, matches the business value they see. It's helping these deals move faster. I think that's the winning formula for now.

[Yun Kim, Managing Director at Loop Capital]

Is there any consumption limit on those per user pricing?

[Todd McKinnon, CEO and Co-Founder at Okta]

Yeah. It's an interesting question. In our products, we haven't done that much, but we're starting to add that stuff.

[Yun Kim, Managing Director at Loop Capital]

Okay.

[Todd McKinnon, CEO and Co-Founder at Okta]

Because particularly, I don't know if you guys saw the announcement we did about supporting Agent SSO in our base edition across the board, as we did it on Monday. Agents are going to log in way more than people. So in that product, we actually have a cap of Agent SSO that we're actually not going to enforce right away, but we're putting the framework and the scaffolding in there to have a consumption-based pricing eventually, because it's very likely that with agents proliferating and how they behave, that the usage is going to be quite high.

[Yun Kim, Managing Director at Loop Capital]

Okay, great. Thank you.

[Todd McKinnon, CEO and Co-Founder at Okta]

Yeah.

[Dave Gennarelli, SVP of Investor Relations at Okta]

Yeah, let's go to Kingsley Crane at Canaccord.

[Kingsley Crane, Managing Director of Equity Research at Canaccord]

Great, thanks. I want to ask on CIAM. Todd, you mentioned you're talking to customers, enterprises all the time. In developer CIAM, you won the hearts and minds of developers, but how dev source products is somewhat changing with AI. If they prompt-

[Todd McKinnon, CEO and Co-Founder at Okta]

Somewhat. It's completely changing.

[Kingsley Crane, Managing Director of Equity Research at Canaccord]

Yeah. Well, of course, yeah. They may be amenable to whatever vendor is suggested, as an example. How important is it for you to be the default in

[Todd McKinnon, CEO and Co-Founder at Okta]

Super important.

[Kingsley Crane, Managing Director of Equity Research at Canaccord]

those kinds of environments, and what can you do?

[Todd McKinnon, CEO and Co-Founder at Okta]

Yeah. The last six months, we have tons of focus on this. You have to show up in the LLMs. Agents are searching for tools, and so you have to be at the top of the leaderboard there. So we are really focused on making that happen. We made a ton of progress. Yeah, it is really important.

[Kingsley Crane, Managing Director of Equity Research at Canaccord]

Great, thanks.

[Todd McKinnon, CEO and Co-Founder at Okta]

Yeah.

[Dave Gennarelli, SVP of Investor Relations at Okta]

Great. Let's go to Mark Cash at Raymond James.

[Mark Cash, Associate Analyst of Equity Research at Raymond James]

Yeah. Thanks, Dave. One for Adam today. I do not know if this is for Todd or Brett, but last quarter mentioned how AI contribution was significant to the guide. Maybe they were a little bit expected to get big. Now 90 days later, I completely understand that AI is still relatively small compared to your scale in the quarter. But maybe can you talk about how much the raise in the outlook was due to AI? Thank you.

[Brett Tighe, CFO at Okta]

Still immaterial. Still very small. We are very early innings. But like we have talked about here, we are excited about the long-term opportunity. So for FY 2027, we do not think it is going to be material, but 2028 and beyond, if things keep going the way that they are going, then we do think that there is a real possibility for this to be material for the business in the long run.

[Dave Gennarelli, SVP of Investor Relations at Okta]

Great. We got about five minutes left. Let's try to get to the rest of the questions. We'll go to Junaid at Truist.

[Junaid Siddiqui, Analyst at Truist]

Great. Thanks, Dave. Todd, you've noted Identity Governance being a leading contributor in your new products bucket, and it's matured into a LAN product. You've talked about PAM remaining earlier in its life cycle and more of a cross-sell product, with AI agents requiring capabilities like token vaulting, credential management, and just-in-time privilege access. Are you seeing agentic workloads materially increase the strategic importance of PAM? Could agentic identity be the catalyst that drives PAM from this cross-sell motion towards a much more meaningful opportunity?

[Todd McKinnon, CEO and Co-Founder at Okta]

I think that this association between PAM and agentic was overemphasized. I think there was this mindset three years ago that agents needed privileged access, and so PAM was going to be the right place to do agents. I think it's wrong. I think agents do need privileged access, for sure, but it needs to start on a much broader base. PAM is too narrow. PAM had very small number of users and super locked down environments. Agents, the whole dream of agents is that they're there for everyone. It doesn't make sense to start your agent journey and figuring out where the agents are and what they can do and what they connect to. It makes no sense to start it from the most locked down thing sitting next to the Oracle Database on a Sun server.

[Todd McKinnon, CEO and Co-Founder at Okta]

It makes sense to start it from the broad IdP, whether it's customers or whether it's employees, and then start from there and say, "Hey, how can I take this token that was generated for this user and pass it through with traceability and accountability all the way through the chain it needs to go through?" That's what we're seeing in the industry. It's a much better place to start, which is, I think a lot of these vendors are seeing that, and that's why it's hard for them to get their products out. That's why the products are more narrowly adopted, and I think you're seeing us be really well-positioned. Which is why, I think if you look at what Microsoft is doing or, its companies with the access to more users that are at an advantage there versus narrow security vendors that were more boxed in.

[Dave Gennarelli, SVP of Investor Relations at Okta]

Okay, next up is Joe Vandrick at Scotiabank.

[Joe Vandrick, Equity Research Associate Director of U.S. Software at Scotiabank]

Thanks, Dave. You got Joe Vandrick here on for Patrick Colville. Todd, we did see the release of Agent SSO a couple of days ago, which is now included in the core SSO product. We were wondering if this is a way for Okta to give your existing customers a taste of that AI agent solution, and then what will eventually cause a customer to upgrade into purchasing that broader Okta for AI Agents product.

[Todd McKinnon, CEO and Co-Founder at Okta]

You described it exactly right. It's spreading the core foundation of Okta for AI Agents, which is the directory entry that tracks the identity of an agent, that puts that everywhere. Ubiquitous. What the upsell is policy, how you want to do governance, how you want to have a software, MCP gateway, a virtual MCP server. There's five or six or seven really key upsells, but in SSO edition is the core entry in the directory. There's another more important strategic reason to do it, and that's because we're on this mission to standardize AI security and particularly this agent single sign-on across the industry. We're doing that on many fronts. The biggest front right now is this Cross App Access protocol, and we mentioned a huge step forward where Anthropic is supporting Cross App Access in what they call enterprise-managed authorization.

[Todd McKinnon, CEO and Co-Founder at Okta]

We're the only identity provider that speaks this language, and they're seeing it solve a problem in their customer base, so they're putting it in Claude, and we're trying to get every agent company to follow their lead. That's all very important. Now imagine going to every app, Salesforce, Slack, Asana, all these companies, hundreds and hundreds of these SaaS companies and tell them, "Hey, we want you to support this new protocol for agent single sign-on." The first question is, how many customers can do it? Now the answer is 20,000. That's the reason to do it, is to spread the standard and really catalyze this whole industry with customers benefiting the most.

[Dave Gennarelli, SVP of Investor Relations at Okta]

Okay, we're getting to what looks to be our last question from UBS.

[Jack Ott, Analyst at UBS]

Great. Thanks, guys. This is Jack Ott for Roger Boyd. Brett and Todd, I wanted to understand a little on the Fed side as we head into Q3 here. You mentioned you had a good Q1 on the PubSec side and there was a nice customer identity solution win in the prepared remarks with the DoD here. So as we enter Q3 with the IL5 certification, the DoD Zero Trust mandate, Brett, I would love to understand just what is baked into Q3 guidance relative to last year with the federal mandate here.

[Todd McKinnon, CEO and Co-Founder at Okta]

Public sector overall is really important, and I am pumped up about it. We have done so much work. I was recently in Maryland and Virginia talking to top government people, and like everyone else, they are really, really excited/freaked out about AI. And we have super relevant offerings for them both on just talk about legacy identity. They have the most legacy of the legacy identity and also an understanding of how critical it is. So U.S. Federal DoD public sector in general is a tremendous opportunity for us. It is less than 10% of our business right now. So we have tons of success or tons of momentum, but tons of room to run there, which is quite impressive.

[Todd McKinnon, CEO and Co-Founder at Okta]

The other interesting thing in U.S. Federal specifically, I do not know if you are hearing this from other companies, but the first part of this year was kind of a mess. It was DOGE. No one knew if they were going to have a job. Every spending was being scrutinized. It is starting to normalize now. It is starting to get back to, hey, they know they have projects to do. It is more of a sane environment. They have to invest. They have to make long-term decisions. I think that is benefiting us. Like we mentioned, the largest deal in Q3 was in U.S. Federal. And if you look at the next couple of quarters for us, there are tons of big opportunities out there we are working hard to close.

[Dave Gennarelli, SVP of Investor Relations at Okta]

Okay, great. Well, apologies we were not able to get to everybody. Before you go, just to let you know that in addition to the on-site and virtual bus tours coming through this quarter, we have of course, got our Oktane conference the week of September 21st. We will be at the Goldman Sachs conference in San Francisco on September 9, the Wolfe Conference in San Francisco on September 10, the Piper Sandler Growth Conference in Nashville on September 15, and the J.P. Morgan Software Forum in Napa on October 2nd. We hope to see you at one of those events. Thanks.

[Eric Kelleher, President and COO at Okta]

Thanks, everyone.

[Todd McKinnon, CEO and Co-Founder at Okta]

Thanks, everyone.

Participants

Executives

• Dave Gennarelli, SVP of Investor Relations
• Todd McKinnon, CEO and Co-Founder
• Brett Tighe, CFO

Analysts

• Eric Heath, Director of Equity Research Analyst at KeyBanc
• Analyst at Jefferies
• Eric Kelleher, President and COO at Okta
• John DiFucci, Senior Managing Director and Analyst at Guggenheim
• Matt Hedberg, Analyst at RBC
• Josh Tilton, Analyst at Wolfe Research
• Rudy Kessinger, Managing Director and Analyst at D.A. Davidson
• Shrenik Kothari, Sector Head Director of Cybersecurity and Infrastructure Software Equities at Baird
• Steve Koenig, Managing Director at Macquarie
• Trevor Rambo, Software Equity Research Associate at BTIG
• Jonathan Ho, Partner at William Blair
• Yun Kim, Managing Director at Loop Capital
• Kingsley Crane, Managing Director of Equity Research at Canaccord
• Mark Cash, Associate Analyst of Equity Research at Raymond James
• Junaid Siddiqui, Analyst at Truist
• Joe Vandrick, Equity Research Associate Director of U.S. Software at Scotiabank
• Jack Ott, Analyst at UBS