Okta, Inc. (OKTA): A Bull Case Theory

Core Thesis - Okta, Inc. is demonstrating operational improvement with expanding margins and strong revenue growth, positioning itself favorably in the identity management sector [1][5] Financial Performance - As of February 3rd, Okta's share price was $82.31, with trailing and forward P/E ratios of 80.12 and 23.58 respectively [1] - Revenue grew by 11.6%, driven by an 11.2% increase in subscription revenue and enhanced professional services [1] - Gross margin expanded to 77%, operating margin reached 3%, and free cash flow margin climbed to 29% [1] Guidance and Market Position - Guidance for Q4 and FY26 exceeded sell-side estimates, indicating confidence in pipeline quality and stabilizing win rates [2] - Momentum among large customers is a significant growth driver, with million-dollar cohorts growing in double digits and RPO expanding by 17.3% [2] - Management is focused on the Rule of 40, with FY26 guidance suggesting 11% revenue growth, 26% non-GAAP operating margin, and approximately 29% free cash flow margin [5] Product Development and AI Integration - Okta is positioning its products, such as Okta for AI Agents and Auth0 for AI Agents, as essential for enterprise AI, with early deployments yielding tangible ACV uplifts [4] - The company has engaged over 100 customers in AI initiatives, contributing more than $200 million in ARR [3][4] Customer Retention and Expansion - There is a noted deceleration in dollar-based net retention at 106%, indicating some moderation in expansion as customers consolidate architectures [3] - Low AE attrition and multi-year high tenure provide management with the capacity to expand quotas heading into FY26 [2]