Q4 2025 Earnings Summary
- Okta is uniquely positioned to capture the large enterprise market, as companies are shifting away from legacy identity systems and seeking modern, cloud-based solutions. Todd McKinnon stated, "They need a cloud solution, and we're the only game in town". This positions Okta as the preferred independent provider over competitors like Microsoft, especially for enterprises that require a neutral solution.
- Strong financial performance with record bookings and raised guidance underscores Okta's growth momentum. The company achieved over $1 billion in bookings in Q4, marking a significant milestone. Additionally, they increased their FY '26 revenue growth outlook to 9% to 10%, reflecting confidence in sustained growth.
- Okta is poised to benefit from the exponential increase in machine identities due to the rise of AI and agentic workloads. As Todd McKinnon explained, the challenge of machine identity is "on steroids, turbocharged to like 2 orders of magnitude higher" with AI advancements. Okta's solutions, like Auth for GenAI—which already has a waitlist of eager customers—are addressing this growing demand.
- Okta continues to face seat-based headwinds as customers rightsize contracts upon renewal, potentially impacting future revenue growth. As contracts come up for renewal, customers are reducing seat counts to match current needs rather than overprovisioning as in the past.
- Exceptional Q4 performance may not be sustainable, as management acknowledges that repeating such a blowout quarter is tough, which may lead to challenges in meeting future growth expectations.
- Limited international growth, with only about 20% of revenue coming from outside North America, posing a potential risk to future growth if global expansion is not effectively executed.
| Metric | YoY Change | Reason |
|---|---|---|
Total Revenue | +12.7% (from $605M to $682M) | Total revenue rose by 12.7% YoY largely driven by the dominance of subscription revenue—which now accounts for 98% of total revenue (approximately $670M)—demonstrating continued strength in customer acquisition and cross-selling of additional products, building on the growth momentum observed in earlier quarters. |
Net Income | Turnaround from -$666M to $23M | Net income rebounded sharply from a loss of $666M in Q4 2024 to a profit of $23M in Q4 2025. This dramatic shift is attributed to improved revenue performance and significant cost reductions, reflecting enhanced operational efficiency and better margin management compared to the heavy losses in the previous period. |
EPS | Improved from -$4.08 to $0.13 | EPS experienced a substantial improvement from a loss of $4.08 per share to a positive $0.13 per share. This change mirrors the net income turnaround and indicates that the combined effect of cost control measures and revenue enhancements has positively impacted profitability on a per-share basis, marking a clear recovery from the adverse EPS in the prior period. |
Operating Income | Modest positive of $8M | Operating income reached $8M, reflecting a cautious improvement despite continued volatility in operating margins. While revenue growth and cost efficiencies contributed positively, the margin pressures and recurring volatility suggest that challenges in managing operating expenses persist relative to previous periods. |
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Total Revenue Growth | Q4 2025 | 10% to 11% | no current guidance | no current guidance |
Current RPO Growth | Q4 2025 | 9% | no current guidance | no current guidance |
Non-GAAP Operating Margin | Q4 2025 | 23% | no current guidance | no current guidance |
Free Cash Flow Margin | Q4 2025 | 32% | no current guidance | no current guidance |
| Metric | Period | Guidance | Actual | Performance |
|---|---|---|---|---|
Total Revenue Growth | Q4 2025 | 10% to 11% | 12.7% (from 605To 682) | Beat |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Large Enterprise Market Capture | Q1–Q3 earnings emphasized capturing large enterprises, highlighting growth in the $1M+ ACV cohort and record large deals. | Q4 focused on a strong cloud‐based identity solution position with record large deals and increased large customer numbers. | Consistent focus with enhanced performance metrics |
Product Innovation and Expansion of Identity Solutions | Q1–Q3 highlighted new product launches such as Okta AI, Identity Governance, PAM, and ITP that drove upsell and retention. | Q4 reiterated innovative momentum with significant contributions from new products (including Auth for GenAI) and an integrated identity platform strategy. | Steady innovation with a broadened and deepened product portfolio |
Machine Identities and AI-Driven Workloads | Q1 and Q3 discussed addressing nonhuman identities and the need for AI-driven security solutions, including early mentions of Auth for GenAI. | Q4 doubled down on machine identities and agentic AI with robust features like fine-grained authorization and a strong early access waitlist for Auth for GenAI. | Growing emphasis and maturity in addressing machine identities and AI workloads |
Go-to-Market Strategy and Sales Productivity Initiatives | Q1–Q3 detailed shifts to specialized sales approaches such as the hunter–farmer model and improvements in sales productivity driven by increased partner reliance. | Q4 maintained sales specialization with record sales productivity and highlighted that over 70% of deals were partner-influenced. | Consistent execution with enhanced specialization driving growth |
Financial Performance and Growth Guidance | Q1–Q3 reported strong free cash flow, record operating profitability, and record bookings even as they cautioned about slowing growth due to macro factors. | Q4 delivered record booking numbers and robust financial performance with raised guidance—albeit with intentionally moderated revenue growth to balance sustainability. | Robust performance amid a moderated, more sustainable growth outlook |
Customer Contract Dynamics and Seat-Based Headwinds | Q1–Q3 noted challenges with historical over-purchasing and the shift to more conservative seat counts affecting upsells and retention. | Q4 explained a transition from over-purchasing (e.g., 1,500 seats) to measured, needs-based licensing (e.g., 700 seats), resulting in contract adjustments that help reduce seat-based headwinds. | Ongoing challenge that is being managed through contract normalization |
SMB Segment Weakness and Declining Upsell Opportunities | Q1–Q3 repeatedly raised concerns over SMB segment weakness and declining upsell opportunities, leading to the introduction of the hunter–farmer model and focused mitigation efforts. | Q4 made no mention of SMB segment weakness or declining upsell opportunities. | Topic dropped from current discussion, possibly deprioritized in Q4 |
Partner Ecosystem Maturation | Q1–Q3 emphasized evolving partner relationships—with focus on large system integrators and diversified partner types driving larger deals. | Q4 reported that over 70% of deals were partner-influenced and highlighted significant success in the AWS Marketplace partnership, reinforcing the maturity of their partner ecosystem. | Consistent growth with deeper integration and reliance on strategic partners |
Public Sector Growth and Strategic Deals | Q1 and Q3 stressed strong gains in the public sector with major strategic wins (including DoD and large federal deals) and a significant presence in top deals. | Q4 continued to highlight robust momentum in the public sector with record strategic deals and new offerings like a dedicated SIEM product for U.S. public sector customers. | Steady, significant focus on public sector opportunities with continued strategic wins |
Limited International Growth | Q3 observed slower international market growth with tougher conditions in regions like Europe; Q1 had little specific mention. | Q4 noted that international revenue remains around 20% of total revenue while North America led growth, signaling that international expansion continues to be a challenge. | Persistent challenge that continues to lag behind domestic performance |
Macroeconomic Uncertainty and New Customer Acquisition Challenges | Q1–Q3 detailed macroeconomic headwinds—budgetary scrutiny, rationalized spend, and slowed new customer acquisition—impacting both new logos and the mix of upsell versus new business. | Q4 indirectly addressed macroeconomic uncertainty in the context of changing customer contract dynamics (i.e., more cautious seat purchasing), with no explicit mention of new customer acquisition challenges. | Less explicitly discussed in Q4, suggesting these concerns may have been integrated into broader contract discussions |
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Blowout Q4 and Guidance Philosophy
Q: Is the strong Q4 performance sustainable, and has the guidance philosophy changed?
A: Q4 was a blowout quarter with over $1 billion in bookings for the first time. Despite the strong results, Okta maintains a prudent guidance philosophy, expecting the macro environment to remain consistent. The team is excited and aims to continue this momentum into FY'26. -
Seat-Based Headwinds Abating
Q: Are seat-based headwinds diminishing, and what's offsetting them?
A: Seat-based headwinds persist due to prior over-purchasing, but as contracts renew at rightsized levels, these headwinds are abating. Growth is driven by customers buying more products, with new products comprising 20% of bookings. -
Okta Identity Governance (OIG) Growth
Q: How significant is the growth opportunity with OIG?
A: OIG has over 1,300 customers and $100 million in ACV, with potential to increase customer ACV by 30-40% upon upgrading. The vast majority of OIG sales are upsells, highlighting a substantial growth opportunity within the existing customer base. -
Large Enterprise Focus
Q: What is the importance of large enterprise customers for Okta's future growth?
A: Success with large enterprises is critical, as Okta is engaged in transformative deals replacing numerous legacy identity systems. The company believes this is the key catalyst for growth over the next fiscal year. -
Agentic AI Opportunity
Q: How does Okta view the opportunity with agentic AI?
A: The agentic AI opportunity is massive, potentially increasing machine interactions by two orders of magnitude. Okta's Auth for GenAI addresses the authentication and authorization challenges posed by AI agents, with over 200 Fortune 100 and start-ups on the waitlist. -
Sales Productivity and Capacity
Q: How is sales productivity affecting growth, and are there plans to invest in capacity?
A: Sales productivity reached multiyear highs, contributing significantly to the strong quarter. Okta is comfortable with current sales capacity and aims for balanced growth and productivity without overextending resources. -
Customer Identity Growth
Q: What is driving growth in the Customer Identity segment?
A: Auth0 had its largest quarter ever, contributing to 16% ACV growth in Customer Identity. Okta sees a massive market opportunity and continues to invest in both workforce and customer identity solutions. -
Longer-Duration Contracts Impact
Q: Are customers committing to longer contracts, and what does this imply?
A: Customers are more apt to sign longer-term contracts when undertaking significant identity transformations, providing Okta with increased visibility and cRPO growth. Longer durations reflect customers' strategic commitment to Okta's platform. -
Public Sector Opportunity
Q: How significant is the public sector for Okta's growth?
A: The public sector, including federal, state, and local governments, showed strong momentum. Okta sees a substantial opportunity to modernize government identity systems and enhance security, despite current federal uncertainties. -
Sales Specialization Strategy
Q: How will sales specialization impact Okta's performance?
A: Specializing the sales force allows reps to focus on specific products, leading to better customer outcomes and higher win rates. This strategy is expected to drive long-term growth as products become more detailed and span multiple submarkets.
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