Direct answer
Direct answer: Okta reported Q2 FY2027 (ended July 31, 2026) total revenue of $805 million, up 11% year over year, with subscription revenue of $793 million, up 12%. The company achieved GAAP operating income of $107 million (13% margin) and free cash flow of $227 million (28% margin). Current RPO (cRPO), the primary forward revenue indicator, was $2.585 billion, up 14% year over year. Full-year FY2027 guidance is $3.216 billion to $3.226 billion in total revenue.
Q2 FY2027 financial results in detail
Okta's fiscal quarter ended July 31, 2026 is labeled Q2 FY2027 because Okta's fiscal year ends January 31. This offset is common among companies that went public with fiscal years aligned to their business cycles rather than the calendar year. Investors comparing Okta to calendar-year software peers should account for this timing difference.
Revenue breakdown
| Revenue line | Q2 FY2027 | Year-over-year change |
|---|---|---|
| Subscription revenue | $793 million | +12% |
| Professional services revenue | ~$12 million | Approximate; remainder of total |
| Total revenue | $805 million | +11% |
Subscription revenue consistently represents approximately 98% of Okta's total revenue. The slight gap between subscription revenue growth (12%) and total revenue growth (11%) reflects the intentional de-emphasis of lower-margin professional services, which is consistent with Okta's strategy of building a high-margin recurring-revenue model rather than a services-heavy business.
Operating income: GAAP versus non-GAAP
| Income metric | Q2 FY2027 | Margin | Prior year comparison |
|---|---|---|---|
| GAAP operating income | $107 million | 13% | Approximately 6% in the prior year period |
| Non-GAAP operating income | $226 million | 28% | Reflects cash economics before SBC and amortization |
The gap between GAAP and non-GAAP operating income at Okta is driven primarily by stock-based compensation. SBC is a real economic cost: it dilutes existing shareholders by increasing the share count over time. Excluding it from non-GAAP metrics is a common software industry practice, but investors who rely solely on non-GAAP figures will systematically overestimate the value accruing to existing shareholders. The GAAP operating margin trajectory is the more important signal: its improvement from approximately 6% to 13% in one year indicates meaningful operating leverage, meaning revenue is growing faster than costs.
Cash flow
| Cash flow metric | Q2 FY2027 | Margin |
|---|---|---|
| Operating cash flow | $234 million | 29% |
| Free cash flow | $227 million | 28% |
Free cash flow is operating cash flow minus capital expenditures. Okta's capital expenditure is modest because it is a software company without significant physical infrastructure requirements; most of its infrastructure costs are cloud service fees that run through the income statement rather than as capital expenditures. The 28% FCF margin is strong for a software company at this stage of maturity and indicates that Okta's subscription model is generating real cash even after accounting for the full operating cost base.
RPO and cRPO explained
Remaining performance obligations (RPO) and current RPO (cRPO) are among the most important metrics for understanding a SaaS company's future revenue trajectory. They are analogous to a backlog for a manufacturing company: signed contracts that will generate revenue in the future but have not yet been recognized under accounting rules.
What RPO measures
Under ASC 606 revenue recognition rules, Okta cannot recognize subscription revenue upfront even if a customer pays for a multi-year contract in full. Instead, revenue is recognized ratably over the subscription period. RPO is the total value of all subscription contracts that have been signed but not yet recognized as revenue. It represents a forward-looking indicator of revenue that is more reliable than a sales pipeline because it reflects committed contractual obligations rather than sales intentions.
What cRPO adds
cRPO (current RPO) is the portion of total RPO expected to be recognized within the next 12 months. Because Okta's subscription contracts are typically one to three years in duration, cRPO reflects the near-term contracted revenue rather than the full multi-year backlog. cRPO growth is the most actionable metric for forecasting revenue growth in the next four quarters because it is not affected by how far out contracts extend.
| Metric | Q2 FY2027 | Year-over-year growth | Interpretation |
|---|---|---|---|
| Total RPO | $4.858 billion | +17% | Multi-year forward contracted revenue; higher growth than cRPO suggests expanding long-term contract wins |
| cRPO (next 12 months) | $2.585 billion | +14% | Leading indicator for near-term revenue; strong at 14% growth |
The fact that total RPO is growing faster (17%) than cRPO (14%) is a positive signal: it suggests customers are signing longer contracts and committing more revenue further into the future, which adds visibility and reduces near-term renewal risk.
How to read deferred revenue versus RPO
Deferred revenue on the balance sheet is a related but different concept: it represents subscription revenue that has been billed and received as cash but not yet recognized as revenue. RPO includes both billed deferred revenue and unbilled future obligations (contracts where the invoice has not yet been sent). Investors should be aware that deferred revenue can create a misleading impression of financial health: a company can have high deferred revenue simply because it bills annually upfront. RPO is a better measure of backlog because it captures the full contractual commitment regardless of billing cadence.
FY2027 full-year guidance
Okta's FY2027 full-year guidance (for the fiscal year ending January 31, 2027) as of the Q2 FY2027 earnings release:
| Metric | FY2027 guidance |
|---|---|
| Total revenue | $3.216 billion to $3.226 billion |
| Non-GAAP free cash flow | $910 million to $930 million |
| Non-GAAP FCF margin | 28% to 29% |
This guidance represents management's expectations based on information available at the time of the Q2 report. It is not a guarantee of outcomes. Investors should verify the most current guidance directly from Okta's investor relations disclosures, as guidance is updated each quarter.
The narrow revenue guidance range ($10 million spread on a $3.2 billion base) reflects the high visibility that subscription contracts provide. When most of a company's revenue for the year is already contracted in RPO, there is less uncertainty about the full-year outcome than there would be for a transactional business model.
Balance sheet highlights
As of July 31, 2026, Okta held approximately $2.299 billion in cash, cash equivalents, and short-term investments. This cash position was reduced from the prior period by the settlement of $350 million of 2026 convertible notes during the quarter. The company's net cash position (cash minus debt) provides a financial cushion that supports continued investment in product development and potential future acquisitions while reducing risk of a credit event.
The convertible notes redemption is worth noting because it removes a potential dilution overhang. Convertible notes, if converted to equity rather than repaid in cash, would have increased the share count. Settling them in cash means existing shareholders are not diluted by the conversion. Investors should check the current capital structure for any remaining convertible notes or other dilutive instruments.
Stock-based compensation and dilution
The largest single adjustment between Okta's GAAP and non-GAAP financials is stock-based compensation. SBC is paid to employees as part of their total compensation in the form of restricted stock units or stock options, which vest over time and increase the total share count when they vest. For a software company at Okta's scale, SBC can run into hundreds of millions of dollars annually.
The economic impact of SBC on shareholders depends on whether the dilution from new share issuance is offset by share repurchases. If Okta issues 2% more shares per year through SBC but repurchases 2% of shares on the market, the net dilution is zero. If Okta issues 2% more shares with no repurchases, existing shareholders own 2% less of the company each year even as the business grows. Investors should track the diluted share count on a year-over-year basis as a direct measure of SBC's impact on per-share value.
How to read an Okta earnings quarter
When Okta reports quarterly results, a useful sequence for investors is:
- Check cRPO growth first. This is the forward indicator. Is it accelerating, stable, or decelerating compared to recent quarters?
- Check subscription revenue growth. This confirms the current period's health and should be consistent with cRPO growth from 1 to 2 quarters ago.
- Check GAAP operating margin trend. Is it expanding? This is the evidence that the business is genuinely scaling its economics, not just growing revenue while SBC grows in parallel.
- Check free cash flow margin. Is it consistent with guidance? FCF quality (operating cash flow relative to non-GAAP income) tells you whether working capital management is masking or amplifying underlying performance.
- Check the diluted share count. Is it growing, flat, or declining? This tells you whether SBC is being offset by repurchases.
- Read management's commentary on large enterprise deals, Microsoft competitive dynamics, and new product adoption. The numbers confirm what happened; management commentary gives context for what to expect next.
Frequently asked questions
What was Okta's revenue in Q2 FY2027?
Okta reported total revenue of $805 million in Q2 FY2027 (the quarter ended July 31, 2026), up 11% year over year. Subscription revenue was $793 million, up 12% year over year, and represents approximately 98% of total revenue. Professional services revenue made up the remaining 2%.
What is the difference between RPO and cRPO for Okta?
RPO (remaining performance obligations) is the total value of all contracted subscription revenue that Okta has not yet recognized, regardless of when it will be earned. cRPO (current RPO) is the portion of that total expected to be recognized in the next 12 months. As of Q2 FY2027, Okta's total RPO was $4.858 billion (up 17% year over year) and cRPO was $2.585 billion (up 14% year over year). cRPO is the more actionable metric for near-term revenue forecasting because it directly maps to the next four quarters of expected revenue recognition.
What is Okta's free cash flow margin?
Okta's free cash flow margin was approximately 28% in Q2 FY2027, with free cash flow of $227 million on total revenue of $805 million. For the full fiscal year 2027, management guided to non-GAAP free cash flow of $910 million to $930 million, representing a 28% to 29% FCF margin on the guided revenue range of $3.216 billion to $3.226 billion.
Why does Okta report both GAAP and non-GAAP operating income?
Okta reports both GAAP and non-GAAP operating income because stock-based compensation (SBC), amortization of acquired intangibles, and restructuring charges are excluded from non-GAAP metrics. The GAAP figure includes all of these costs. In Q2 FY2027, GAAP operating income was $107 million (13% margin) while non-GAAP operating income was $226 million (28% margin). The $119 million difference is driven primarily by SBC. Investors should use GAAP figures as the economic baseline because SBC is real dilution even though it is a non-cash charge, and use non-GAAP figures to understand cash-generation capacity before SBC.
What is Okta's full-year FY2027 guidance?
Okta's full-year FY2027 guidance (for the fiscal year ending January 31, 2027) calls for total revenue of $3.216 billion to $3.226 billion and non-GAAP free cash flow of $910 million to $930 million (28% to 29% FCF margin). This guidance was provided alongside the Q2 FY2027 earnings release and represents management's outlook, not a guaranteed outcome. Investors should verify the most current guidance directly from Okta's investor relations disclosures.
Related research
- Okta (OKTA) Investor Overview: business model, moat, risks, and what to watch
- Okta Investment Analysis: platform moat, Microsoft risk, and AI identity opportunity
- Okta Stock History and Valuation Framework: how to value a maturing cloud software company
- Fundamental Analysis: how to read financial statements and evaluate software unit economics
References
- Okta Investor Relations: official earnings releases, press releases, and SEC filings containing the source data for all financial figures on this page
- SEC EDGAR: Okta 10-Q Quarterly Reports: quarterly financial statements with full footnote disclosures