- Large Customer Strength and Upsells: Okta's new products like Okta Identity Governance drove growth, with large customers and upsells contributing significantly to results.
- AI Agents Opportunity: 100+ enterprise customers engaged in Okta for AI agents, representing over $200 million in ARR, targeting a potentially massive TAM for securing AI workloads.
- Strong Financial Position: $510 million in convertible notes settled in Q3, ending with $2.5 billion in cash, cash equivalents, and short-term investments.
- Revenue and Margin Growth: Q4 and FY26 revenue guidance of 10% and 11% growth, respectively, with non-GAAP operating margins expanding to 25%–26%.
Growth Opportunities in AI Agents
Okta is helping customers secure AI agents, representing a significant new opportunity and catalyst for growth. The company has engaged with over 100 customers, representing over $200 million in existing ARR, for its Okta for AI agents solution. Okta's neutral and unified platform positions it to become the identity layer for AI agents. The recent launch of Auth0 for AI agents allows customers to build secure agents, APIs, and users more effortlessly. As Okta's CEO, Todd McKinnon, stated, the company is seeing excitement around its new products, particularly those related to securing AI and agentic identities.
Valuation Metrics
Okta's current valuation metrics are as follows: P/E Ratio of 77.66, P/B Ratio of 2.2, P/S Ratio of 5.12, EV/EBITDA of 54.25, and Free Cash Flow Yield of 4.7%. The market seems to be pricing in high growth expectations, with an estimated revenue growth of 11.5% for next year. The P/S Ratio of 5.12 indicates that investors are willing to pay a premium for Okta's revenue growth.
Operational Efficiency
Okta's sales realignment efforts earlier this year have been effective, with the sales team near a multi-year low in attrition and a multi-year high in tenure. The company has seen productivity improvements quarter-over-quarter and year-over-year. Okta plans to add sales capacity methodically, maintaining high productivity and low attrition. The focus is on larger deals, with its million-dollar deal cohort growing 17% in Q3.
Guidance and Outlook
Okta expects total revenue growth of 10% and 11% for Q4 and FY '26, respectively. The company will issue FY '27 guidance on its Q4 earnings call. Okta's management believes it has a right of first refusal on identity security acquisitions, citing its clear leadership in the space. The company's goal is to accelerate growth while maintaining its rule of 40 framework, which combines revenue growth and margins.