Okta (OKTA) Q2 2025 earnings summary

Executive summary

• Q2 FY25 revenue grew 16% year-over-year to $646 million, with subscription revenue up 17% to $632 million and total customers exceeding 19,300, including 4,620 with ACV above $100,000.

• Achieved record profitability, including first-ever GAAP net income of $29 million, reversing a $111 million loss a year ago, and non-GAAP operating margin improved to 23%.

• Major product launches included Identity Threat Protection with Okta AI, Identity Security Posture Management, and Highly Regulated Identity for customer identity.

• Security enhancements reduced malicious bot traffic by over 90% for key customers, and the Okta Secure Identity Commitment was updated.

• Indirect channel partners now contribute over 40% of revenue, with partner-led deals averaging more than three times the size of direct deals.

Financial highlights

• Non-GAAP operating income for Q2 FY25 was $148 million (23% margin), with non-GAAP diluted EPS at $0.72 and free cash flow of $78 million (12.2% margin).

• Net income was $29 million, compared to a net loss of $111 million a year ago; GAAP operating loss narrowed to $19 million from $162 million.

• Non-GAAP gross margin reached 82%, up from 80% year-over-year; subscription gross margin at 83.6%.

• TTM dollar-based net retention rate declined to 110% from 115% a year ago, reflecting slower expansion within existing customers.

• Cash, cash equivalents, and short-term investments totaled $2.36 billion at quarter end.

Outlook and guidance

• Q3 FY25 revenue guidance: $648–$650 million (11% y/y growth); cRPO expected at $1.985–$1.99 billion (9% y/y growth); non-GAAP operating margin of 18%.

• FY25 revenue guidance raised to $2.555–$2.565 billion (13% y/y growth), with non-GAAP operating margin of 21% and free cash flow margin of ~23%.

• FY25 non-GAAP diluted EPS expected at $2.58–$2.63.

• Guidance remains cautious due to macroeconomic uncertainty and ongoing monitoring of impacts from the October 2023 security incident.