Okta Jumps 20% as AI-Driven Security Fears Fuel a Beat-and-Raise Quarter

CNBC reported that Okta, Inc. (NASDAQ:OKTA) shares surged as much as 29% after the identity security company beat fiscal second-quarter estimates.

Adjusted earnings per share came in at $1.05 versus $0.97 expected, and revenue rose 11% to $805 million versus $795 million expected. Net income totaled $116 million, up from $67 million a year earlier, and remaining performance obligations, a measure of backlog, climbed 17% to $4.86 billion, beating the $4.70 billion analysts anticipated. Okta made its “Okta for AI Agents” tool available to all customers during the quarter, with new products accounting for 30% of total bookings and “dozens” of AI-related deals closed, including a multi-million-dollar healthcare contract. The company raised full-year revenue guidance to $3.22 billion to $3.23 billion. CEO Todd McKinnon said, “As AI agents transform every layer of technology, every agent needs a trusted identity.”

Bull Case

The beat was broad-based across current results and future visibility. Earnings, revenue, and backlog all topped estimates, with remaining performance obligations up 17% to $4.86 billion. It showed that both this quarter’s performance and Okta, Inc. (NASDAQ:OKTA)’s forward revenue pipeline are strengthening together.

AI-driven demand is showing up in quantifiable deal activity and not just management commentary. New products made up 30% of total bookings, and the company closed dozens of AI-related deals. It includes a multi-million-dollar healthcare contract, concrete evidence that customers are actually paying for Okta’s AI agent security tools rather than merely expressing interest.

Management raised guidance and reinforced its position with an acquisition, backing confidence with action. Okta lifted full-year revenue and earnings guidance while closing its purchase of threat-detection startup Permiso Security. It is extending its platform into identity threat detection specifically relevant to securing AI agents.

Okta can expand its revenue opportunity as customers adopt more identity-security products across their organizations. The company’s new AI-focused products can strengthen its existing platform and create more opportunities to sell more services to customers. It gives Okta another avenue to increase ARR as AI use accelerates.

Bear Case

Even the analysts turning more positive are flagging how early this still is. Bank of America upgraded Okta, Inc. (NASDAQ:OKTA) but said that the adoption remains very early, disclosed metrics remain limited, and management continues to view AI as immaterial to FY27 results. It is a significant caveat from a firm that just raised its rating.

A nearly 29% single-day surge, one of the stock’s best days in years, already prices in substantial optimism. That scale of reaction raises the bar for future quarters and increases the risk of an outsized pullback if AI-driven bookings growth slows even modestly.

The guidance increase itself was fairly modest relative to the size of the stock’s reaction. Full-year revenue guidance moved only from roughly $3.19 billion-$3.21 billion to $3.22 billion-$3.23 billion, a small dollar change next to a stock move of this magnitude. It shows sentiment shifted by more than the underlying numbers did.

Okta faces intense competition as major cybersecurity companies pursue the same AI-driven security opportunity. CrowdStrike, Palo Alto Networks, Zscaler, and other established vendors can invest heavily in AI security, giving customers more alternatives and potentially limiting Okta’s ability to expand market share and pricing.

Hedge Fund Data

Insider Monkey’s database shows Okta, Inc. (NASDAQ:OKTA) was held by 58 hedge funds in the second quarter of 2026, up from 49 in the first quarter. Among the rivals, CrowdStrike was held by 89 funds, up from 79, and Palo Alto Networks by 89 funds, up from 87.

Conclusion

Okta delivered a beat-and-raise quarter with early evidence that AI can drive demand for its identity-security products. However, the stock’s sharp rally outpaced the relatively modest increase in full-year guidance, leaving investors with a higher bar for constant growth and AI monetization.

While we acknowledge the potential of OKTA as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you’re looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

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