Okta shares experienced a significant surge of 23% to $160.5 per share following the company's strong Q2 2026 results, with the stock popping more than 20% on Thursday. The cybersecurity company raised its annual revenue outlook for the second time, forecasting 10% to 11% growth for the year. Multiple analysts responded positively to the results, with BMO Capital's Keith Bachman reiterating a Buy rating and increasing his price target to $187 from $168, citing the company's position in a "healthy market segment and growing TAM." Truist analyst Junaid Siddiqui raised his price target to $200 from $165, while RBC Capital's Matthew Hedberg increased his target to $195 from $166. The stock had closed the regular session at $134.42 before jumping 19.4% after hours, putting it above its 52-week high of $157. Wall Street maintains a Strong Buy consensus rating with 30 Buys and six Holds, and the average stock price target of $175.77 indicates 8% upside potential.
The company delivered robust second-quarter performance with revenue surging 11% to $805 million, beating the forecast of $793 million by $12 million. The company also reported a 15.4% rise in adjusted earnings per share (EPS) to $1.05. This marked the continuation of Okta's impressive nine-year streak of double-digit growth. CEO Todd McKinnon described the quarter as a record bookings period for a non-fourth-quarter period, citing pipeline conversion, deal expansions and sales-force productivity. The company had more than 600 customers generating over $1 million in ACV, representing growth of more than 20% in that customer cohort. For the third quarter of fiscal 2027, Okta forecast total revenue growth of 10%, current remaining performance obligations growth of 11% to 12%, a non-GAAP operating margin of 24% to 25%, and a free-cash-flow margin of 21% to 23%. The company ended the quarter with approximately $2.3 billion in cash equivalents and short-term investments.
Okta's subscription backlog exceeded expectations, primarily driven by increased artificial intelligence adoption across its customer base. 30% of bookings came from new products, with Okta Identity Governance serving as the leading contributor. On average, including any new product in a deal generated about a 40% increase in ACV. CEO Todd McKinnon noted that "We are seeing conversations that begin with securing AI broaden into identity modernization initiatives." The company won dozens of AI-related deals during the quarter, including several deals worth more than $1 million. Okta for AI Agents, a generally available product designed to help enterprises discover, govern and secure AI agents, represents a significant growth opportunity in the AI market segment. However, management said the business remains too small to materially affect financial results, with AI-related revenue expected to remain immaterial in fiscal 2027. Management indicated that the AI opportunity is still early and should not materially affect fiscal 2027 results, though it could matter more in 2028 and later if current trends continue. A notable example from Q2 showed one customer's Claude agent count going from 50 to 1,500 in just weeks, highlighting the exponential growth potential in this segment.
Partner activity was a significant factor in the quarter's performance, with channel partners participating in all of Okta's 20 largest deals, while the company's biggest deal was sourced by a partner. Okta expanded work with major technology companies including AWS, Cisco, OpenAI, Databricks and Snowflake. The company completed the acquisition of Spera, a cloud-native identity-security platform focused on detecting and mitigating threats involving human, non-human and agentic identities in multicloud environments. Spera will be integrated with Okta's Identity Threat Protection and Identity Security Posture Management offerings. Okta also received Impact Level 5 authorization, the highest unclassified cloud authorization for the U.S. Department of Defense, which it views as an important milestone ahead of the Defense Department's 2027 Zero Trust mandate. The company repurchased and retired approximately 1.5 million shares for a total cost of $125 million during Q2, with $555 million remaining under its $1 billion repurchase program.
