Is Okta (OKTA) Stock a Buy at the Floor? Q2 Earnings Signal AI-Driven Enterprise Upside

The cybersecurity industry is undergoing a seismic shift as artificial intelligence reshapes enterprise infrastructure. Okta’s Q2 2026 earnings report, released on August 28, 2025, underscores why the identity management leader is uniquely positioned to capitalize on this transformation. With total revenue hitting $728 million—a 13% year-over-year increase—and subscription revenue growing 12% to $711 million, Okta’s financials reflect a company accelerating into the AI era [1]. But the real story lies in how its product innovations align with the explosive demand for identity security in AI-driven environments.

The AI Identity Imperative

As AI agents proliferate across enterprises, securing non-human identities (NHIs) has become a critical challenge. Okta’s CEO, Todd McKinnon, emphasized this in his post-earnings commentary: “AI agents require secure identity protocols to function within enterprise systems, and Okta’s platform is the fabric that enables this.” The company’s recent launches—such as Identity Threat Protection with Okta AI and Cross App Access, an open protocol for securing AI interactions—directly address this need [2]. These tools are not just incremental upgrades; they represent a strategic pivot to become the go-to solution for identity governance in AI workflows.

The market is already responding. Okta’s public sector segment, which includes federal agencies modernizing legacy systems, contributed five of its top ten deals in Q2. A landmark $100+ million contract with the Department of Defense to overhaul identity infrastructure highlights the urgency of this shift [3]. As McKinnon noted, “The federal government is racing to secure AI-driven operations, and Okta’s solutions are at the forefront.”

Valuation Metrics and Market Tailwinds

Okta’s valuation appears undervalued relative to its growth trajectory. At a price-to-sales (P/S) ratio of 7.62 and a price-to-earnings (P/E) ratio of 161.06, the stock trades at a discount to peers in the high-growth cybersecurity space [4]. This discrepancy may reflect skepticism about the company’s ability to monetize AI-driven demand—but Okta’s Q2 results suggest otherwise.

The global AI in cybersecurity market is projected to grow from $25.35 billion in 2024 to $93.75 billion by 2030, a compound annual growth rate (CAGR) of 24.4% [5]. Okta’s recent acquisition of Axiom Security, which bolsters its privileged access management (PAM) capabilities, positions it to capture a larger share of this market. The integration of Axiom’s technology into Okta’s identity fabric will enable enterprises to secure AI models, data lakes, and agent interactions—a $20 billion opportunity by 2030 [6].

Strategic Execution and Guidance

Okta’s Q2 performance validates its long-term strategy. The company raised its full-year 2026 revenue guidance to $2.875–$2.885 billion, reflecting 10–11% growth [7]. This optimism is grounded in tangible metrics: remaining performance obligations (RPO) surged 18% year-over-year to $4.152 billion, signaling robust future cash flow. Additionally, free cash flow margin hit 22%, up from 19% in the prior year, demonstrating operational efficiency [8].

The company’s go-to-market strategy is equally compelling. By creating specialized sales teams for AI-native customers and federal agencies, Okta has driven record pipeline generation. CFO Brett Tighe noted that macroeconomic concerns in the public sector have “dissipated,” with federal spending on identity modernization accelerating [9].

Conclusion: A Buy at the Floor

Okta’s Q2 results and strategic clarity make a compelling case for a value re-rating. The company is not just adapting to AI—it is defining the identity security standards for the AI era. With a 24.4% CAGR in the AI cybersecurity market and Okta’s product roadmap aligned with this growth, the stock’s current valuation offers a compelling entry point. For investors seeking exposure to the intersection of AI and cybersecurity, Okta represents a rare combination of financial discipline, product innovation, and market leadership.

Source:
[1] Okta Announces Second Quarter Fiscal Year 2026 Financial Results [https://investor.okta.com/news-and-events/news-releases/news-details/2025/Okta-Announces-Second-Quarter-Fiscal-Year-2026-Financial-Results/]
[2] Okta CEO highlights strong Q2 performance and AI-driven growth [https://www.okta.com/newsroom/articles/okta-ceo-highlights-strong-q2-performance-and-ai-driven-growth-o/]
[3] Okta (OKTA) Q2 2026 Earnings Call Transcript [https://www.fool.com/earnings/call-transcripts/2025/08/28/okta-okta-q2-2026-earnings-call-transcript/]
[4] Okta's Q2 FY2026 Earnings: A Strong Performance [https://www.analystock.ai/news/research_details/transcript/Okta's%20Q2%20FY2026%20Earnings:%20A%20Strong%20Performance]
[5] AI In Cybersecurity Market Size, Share | Industry Report [https://www.grandviewresearch.com/industry-analysis/artificial-intelligence-cybersecurity-market-report]
[6] Okta 'Accelerating' Privileged Access Growth Amid Shift To Agentic AI [https://www.crn.com/news/security/2025/okta-accelerating-privileged-access-growth-amid-shift-to-agentic-coo]
[7] Okta Announces Second Quarter Fiscal Year 2026 Financial Results [https://investor.okta.com/news-and-events/news-releases/news-details/2025/Okta-Announces-Second-Quarter-Fiscal-Year-2026-Financial-Results/]
[8] Okta's Explosive Upside Possible: Q2 Results Affirm Cybersecurity Position, Outperform Guidance [https://www.ainvest.com/news/okta-explosive-upside-q2-results-affirm-cybersecurity-position-outperform-guidance-2508/]
[9] Okta earnings beat expectations as company removes macro caution, bets big on AI security market [https://diginomica.com/okta-earnings-beat-expectations-company-removes-macro-caution-bets-big-ai-security-market]