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Okta, Inc. (OKTA)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 FY2025 delivered strong execution: revenue $665M (+14% YoY), non-GAAP operating margin 21%, non-GAAP diluted EPS $0.67, and GAAP profitability, with operating cash flow $159M and free cash flow $154M .
  • Guidance raised across FY2025: revenue to $2.595–$2.597B (+15% YoY), non-GAAP operating margin to 22%, non-GAAP diluted EPS to $2.75–$2.76, and FCF margin to ~25%; Q4 guide implies continued profitability with non-GAAP op margin 23% and FCF margin ~32% .
  • Strategic momentum: large enterprise and U.S. federal drove top deals; 15% of bookings from new products (OIG, Privileged Access, ITP), and all top-10 deals involved partners—half in U.S. federal—supporting longer contract duration and RPO growth (+19% YoY) .
  • Preliminary FY2026 outlook conservative (revenue $2.77–$2.78B, ~7% growth; non-GAAP op margin ≥22%; FCF margin ≥24%), reflecting macro caution and normalization post-incident while prioritizing profitable growth .

What Went Well and What Went Wrong

  • What Went Well

    • Large customer momentum: $1M+ ACV cohort now ~$1B ACV; top-10 Q3 deals all involved partners and were >$1M ACV, totaling ~$20M, with half in U.S. federal; notable wins include a near-$5M ARR tech company and significant DoD and largest federal healthcare provider deals .
    • New product adoption: ~15% of Q3 bookings from new products; OIG ~1/3 of workforce deal value when attached; early traction in Privileged Access and Identity Threat Protection with Okta AI; governance customers ~1,000 .
    • Profitability/cash flow: GAAP net income $16M, non-GAAP op income $138M (21% margin), OCF $159M (24% margin), FCF $154M (23% margin) .

  • What Went Wrong

    • Net retention pressure: seat/MAU scrutiny continues; NRR expected to tick down in Q4; SMB remains weaker than enterprise, impacting upsell velocity .
    • Macro caution persists: budgets scrutinized; mix tilted to upsell vs. new logos; new logo adds of ~150 QoQ viewed as below aspiration despite improvement .
    • Estimate context unavailable: SPGI consensus data was not retrievable at time of analysis, limiting beat/miss assessment (see Estimates Context) [GetEstimates error].

Financial Results

MetricQ1 FY2025Q2 FY2025Q3 FY2025
Revenue ($USD Millions)$617 $646 $665
Subscription Revenue ($USD Millions)$603 $632 $651
Professional Services & Other ($USD Millions)$14 $14 $14
Revenue YoY Growth (%)+19% +16% +14%
GAAP Diluted EPS ($)$(0.24) $0.15 $0.00
Non-GAAP Diluted EPS ($)$0.65 $0.72 $0.67
Gross Margin (%)76% 76% 76%
Non-GAAP Gross Margin (%)82% 82% 81%
GAAP Operating Margin (%)(8)% (3)% (2)%
Non-GAAP Operating Margin (%)22% 23% 21%
GAAP Net Margin (%)(7)% 5% 2%
Non-GAAP Net Margin (%)19% 20% 18%
Consensus Estimates (Rev/EPS)UnavailableUnavailableUnavailable

Segment breakdown:

SegmentQ1 FY2025Q2 FY2025Q3 FY2025
Subscription ($USD Millions)$603 $632 $651
Professional Services & Other ($USD Millions)$14 $14 $14

KPIs and Cash Flow:

KPIQ1 FY2025Q2 FY2025Q3 FY2025
RPO ($USD Billions)$3.364 $3.505 $3.659
cRPO ($USD Billions)$1.949 $1.995 $2.062
Operating Cash Flow ($USD Millions)$219 $86 $159
Operating Cash Flow Margin (%)36% 13% 24%
Free Cash Flow ($USD Millions)$214 $78 $154
Free Cash Flow Margin (%)35% 12% 23%
Cash, Cash Equivalents & ST Investments ($USD Billions)$2.320 $2.358 $2.248

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue ($USD Millions)Q4 FY2025$667–$669 (from Q3 guide for Q4) $667–$669 Maintained
cRPO ($USD Billions)Q4 FY2025$2.130–$2.135 $2.130–$2.135 Maintained
Non-GAAP Operating Income ($USD Millions)Q4 FY2025$154–$156 (23% margin) $154–$156 (23% margin) Maintained
Non-GAAP Diluted EPS ($)Q4 FY2025$0.73–$0.74 $0.73–$0.74 Maintained
Non-GAAP FCF Margin (%)Q4 FY2025~32% ~32% Maintained
Revenue ($USD Billions)FY2025$2.555–$2.565 (Q2 guide) $2.595–$2.597 Raised
Non-GAAP Operating Income ($USD Millions)FY2025$535–$545 (21% margin) $573–$575 (22% margin) Raised
Non-GAAP Diluted EPS ($)FY2025$2.58–$2.63 $2.75–$2.76 Raised
Non-GAAP FCF Margin (%)FY2025~23% ~25% Raised
Preliminary Revenue ($USD Billions)FY2026N/A$2.77–$2.78 (~7% growth) New preliminary
Preliminary Non-GAAP Op Margin (%)FY2026N/A≥22% New preliminary
Preliminary FCF Margin (%)FY2026N/A≥24% New preliminary

Earnings Call Themes & Trends

TopicQ1 FY2025 (Prior-2)Q2 FY2025 (Prior-1)Q3 FY2025 (Current)Trend
AI/Technology initiativesIdentity Security Posture Management (Spera), Identity Threat Protection with Okta AI rollout plans ITP GA; posture mgmt progress; multi-product innovation cadence; Oktane preview Okta AI embedded in ITP; Auth for GenAI; fine-grained authorization; monetization via MAU/machine metrics Expanding portfolio; early monetization pathways
Macro/Seat & MAU headwindsStable but challenging; upsell > new logos Similar macro; continued seat/MAU scrutiny; SMB softer Macro consistent; NRR under pressure; Q4 NRR expected to tick down Persistent headwind
Partner ecosystem (GSIs/ISVs)Channel maturation; focus on GSIs 40%+ indirect mix; 8/10 top global deals involved partners; larger deal sizes via partners All top-10 deals involved partners; GSIs increasingly aligned with Okta neutrality Strengthening, driving larger lands
Public sector strengthLargest-ever public sector deal; 5 of top 6 deals in public sector Healthy federal performance; increasing duration and large enterprise penetration Half of top-10 deals in U.S. federal; notable DoD and federal healthcare wins Sustained momentum
Regulatory/Competitive landscapeNeutral platform positioning vs bundles Consolidation plays; reliability/security posture emphasized Commentary on FTC probe into MS bundling; lock-in risks highlighted Heightened focus on neutrality advantage
Go-to-market specializationHunter-farmer SMB model initiated Hunter-farmer in early innings, planned enablement Further specialization planned: dedicated Okta vs Auth0 reps; align to IT/security vs developer buying centers Deepening specialization
InternationalN/AN/AInternational macro tougher than NA; partner-driven expansion focus Mixed; priority to improve
Security incident impactMinimal quantifiable impact; secure identity commitment investments Could not attribute quantifiable impact; prudence in guidance No quantifiable impact in Q3; removed extra conservatism in outlook Normalizing; continued investments

Management Commentary

  • “Our solid Q3 results were once again highlighted by strength with large customers and strong profitability and cash flow driven by continued spend efficiencies.” — Todd McKinnon .
  • “All of our top 10 deals in the third quarter involve partners… these 10 deals were all over $1 million in ACV and in aggregate, represented approximately $20 million” — Todd McKinnon .
  • “Approximately 15% of Q3 bookings were from new products… OIG continues to represent approximately 1/3 of the contract value when sold in a workforce deal.” — Brett Tighe .
  • “We are no longer incorporating additional conservatism into our outlook related to the potential impacts from last year’s security incident.” — Brett Tighe .
  • “Okta was recently recognized as a leader in the 2024 Gartner Magic Quadrant for Access Management for the eighth consecutive year.” — Todd McKinnon; press release corroboration .
  • “From a revenue perspective, we estimate total revenue to be $2.77 billion to $2.78 billion, representing growth of approximately 7% [FY’26].” — Brett Tighe .

Q&A Highlights

  • Guidance philosophy: Removal of extra conservatism tied to 2023 incident; still prudent given macro and slower growth scale dynamics .
  • Product bookings: ~15% bookings from emerging products across OIG, Privileged Access, ITP; expectation of continued ramp, with OIG largest contributor near term .
  • Net retention: Pressured by seat/MAU assumptions; gross retention healthy; NRR expected to tick down in Q4; older cohorts from COVID era under pressure into H1 FY’26 .
  • Competitive/bundling: Discussion of FTC probe into Microsoft bundling; Okta positioning on neutrality to avoid lock-in and improve outcomes .
  • Specialization: Move toward dedicated Okta vs Auth0 reps to improve AE productivity and growth while maintaining profitability .

Estimates Context

  • Wall Street consensus via S&P Global for Q3 FY2025 was unavailable due to data access limits at time of request, so explicit beat/miss vs consensus cannot be provided [GetEstimates error].
  • Company-raised FY2025 guidance (revenue, margins, EPS, FCF) suggests improved internal outlook versus prior quarter’s guidance .

Key Takeaways for Investors

  • Guidance raised across FY2025; Q4 guide implies continued strong margins and cash generation—positive for sentiment and multiple support even amid slower growth normalization .
  • Large enterprise and federal momentum, combined with partner-led selling (GSIs/ISVs/VARs), is translating to longer duration (RPO +19% YoY) and bigger deals—key for sustaining profitability while navigating macro .
  • Emerging products are becoming material (OIG, Privileged Access, ITP with Okta AI); OIG attach near 1/3 of workforce deals indicates tangible uplift path in installed base .
  • Net retention remains under pressure from seat/MAU rationalization and SMB softness; monitor NRR trajectory into Q4 and H1 FY’26 for signs of stabilization .
  • Preliminary FY’26 framework (~7% growth with ≥22% non-GAAP op margin, ≥24% FCF margin) balances growth investment (specialization, partners) with disciplined profitability—setup for medium-term reacceleration if macro improves .
  • Competitive dynamics highlight Okta’s neutrality advantage vs bundled platforms; regulatory scrutiny of bundling may be a tailwind for independent identity platforms .
  • Near-term trading: Positive catalyst from raised FY’25 guide and GAAP profitability; watch Q4 execution (seasonally largest quarter) and NRR in prints for durability signals .

Sources: SEC 8-K earnings releases and reconciliations, Q3 FY2025 earnings call transcript, and press materials as cited above .