Okta (OKTA 1.50%), a leader in identity and access management solutions, reported its second-quarter fiscal year 2025 results on Aug. 28, 2024.
The company delivered strong financial performance, surpassing management's expectations in several key areas. Total revenue was $646 million, beating the forecasted range of $631 million to $633 million. Non-GAAP operating income was $148 million, significantly above the expected $123 million to $125 million.
Okta also reported a non-GAAP diluted net income per share of $0.72, exceeding the guidance of $0.60 to $0.61. Overall, this quarter showed solid revenue growth and substantial improvements across financial metrics.
| Metric | Q2 FY 2025 Actual | Management's Expectations | Q2 FY 2024 | YoY Change |
|---|---|---|---|---|
| Total Revenue | $646 million | $631 million to $633 million | $556 million | +16% |
| Subscription Revenue | $632 million | - | $542 million | +17% |
| cRPO | $2.0 billion | $1.955 billion to $1.960 billion | $1.77 billion | +13% |
| Non-GAAP Operating Income | $148 million | $123 million to $125 million | $59 million | +151% |
| Non-GAAP Diluted Net Income Per Share | $0.72 | $0.60 to $0.61 | $0.31 | +132% |
| Free Cash Flow Margin | 12% | Approximately 5% | 9% | +33% |
Source: SEC filings. Expectations based on management's guidance, as provided in 2024-05-29 earnings report.
Understanding Okta
Okta is a prominent provider of digital identity and access management solutions. Its enables organizations to securely connect the right people to the right technologies at the right times. Recently, Okta has been focusing on scaling its operations and diversifying its product and service offerings. Key success factors include market demand for digital transformation, product diversification, a strong partner ecosystem, and scalability of its platform.
The company's identity and access management solutions address workforce identity needs and customer identity needs, benefitting from an accelerating trend toward cloud adoption and digital transformation. Over recent periods, Okta has focused on expanding its customer base while increasing value for existing customers, leveraging partnerships to enhance its market reach.
Quarterly Highlights
In the second quarter of fiscal year 2025, Okta achieved significant milestones across financial and operational metrics. Total revenue was $646 million, representing a 16% year-over-year increase from $556 million. Subscription revenue saw a 17% year-over-year increase to $632 million from $542 million.
The company’s current remaining performance obligations (cRPO) were $1.995 billion, up by 13% year-over-year, which indicates strong future revenue visibility. Non-GAAP operating income rose significantly to $148 million from $59 million, marking a 151% increase year-over-year. Non-GAAP diluted net income per share also showed robust growth at $0.72, up from $0.31. Free cash flow was reported at $78 million, or 12% of total revenue, far exceeding the expected 5%.
In terms of product and service diversification, Okta has continued to push forward with innovations in both its Workforce Identity Cloud and Customer Identity Cloud. Specifically, it has seen increased adoption of its identity management solutions, fueled by the growing need for secure digital access as businesses transition to cloud-based environments. Subscription revenue growth highlights the effectiveness of Okta's strategy to expand its service offerings and increase customer value.
On the financial front, Okta achieved a notable decrease in its GAAP operating loss, which came down to $19 million from $162 million in the prior year period. The GAAP net income turned positive at $29 million, compared to a loss of $111 million a year ago. This improvement underlines the company’s operational efficiency efforts. Additionally, growth of 59%, from $49 million to $78 million, further signifies strong operational execution.
Looking Ahead
Looking ahead, Okta provided its outlook for the third quarter of fiscal year 2025, expecting total revenue between $648 million and $650 million, which represents an 11% year-over-year growth. The company forecasts a cRPO of $1.985 billion to $1.990 billion, a 9% growth year-over-year. Management also anticipates a non-GAAP operating income between $118 million and $120 million. Non-GAAP diluted net income per share is expected to be in the range of $0.57 to $0.58.
For the full fiscal year 2025, Okta's guidance includes total revenue in the range of $2.555 billion to $2.565 billion, marking a 13% year-over-year growth. Non-GAAP operating income is projected to be between $535 million and $545 million. The company expects non-GAAP diluted net income per share to fall between $2.58 and $2.63, with an anticipated free cash flow margin of approximately 23%.
The company continues to keep an eye on its three primary goals: enhancing security, reigniting growth, and efficient scaling. Investors should monitor developments in these areas alongside the company's progress in product diversification and partnerships. Furthermore, Okta has set the stage for sustained growth by capitalizing on emerging trends in AI-driven cybersecurity solutions.
