Okta shares rose 7% in after-hours trading on August 26, 2025, after the identity software company posted quarterly results that beat analyst expectations.

Revenue grew 13% year-on-year for the fiscal second quarter ended July 31, while net income reached US$67 million, up from US$29 million a year earlier.

Okta said its net retention rate remained steady at 106%.

The company raised its full-year forecast, now expecting US$3.33 to US$3.4 in adjusted earnings per share and US$2.9 billion in revenue, both above earlier guidance.

For Q3, Okta projects adjusted earnings of 74 to 75 cents per share and revenue between US$728 million and US$730 million.

Okta also announced an agreement to acquire Israeli startup Axiom Security, which provides data access management software, though terms were not disclosed.

🔗 Source: CNBC

🧠 Food for thought

1️⃣ Quarterly profits mask ongoing annual profitability challenges

Okta’s strong Q2 results showing $67 million in net income represent a significant improvement from $29 million the previous year, but they don’t tell the full financial story1.

The company continues to face substantial annual losses, reporting a $1.5 billion net loss in fiscal year 2025, though this has narrowed from $1.33 billion in 20222.

This pattern reflects the common SaaS challenge where companies can achieve quarterly profitability through revenue recognition timing and cost management, while still investing heavily in growth initiatives that create annual losses.

Okta’s current price-to-earnings ratio of 140.86 compared to its historical mean of 13.91 suggests investors are betting on the company’s ability to sustain and scale these quarterly profits into consistent annual profitability3.

2️⃣ Platform consolidation threatens Okta’s best-of-breed strategy

Palo Alto Networks’ $25 billion acquisition of CyberArk represents a direct challenge to Okta’s market position, prompting CEO Todd McKinnon to publicly defend the “customer choice” approach1.

The acquisition creates a formidable competitor offering integrated identity management within a broader security platform, valued at 19.2 times CyberArk’s trailing revenue4.