Okta, Inc.
For the period ended Jul 31, 2025. Filed Aug 27, 2025.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jul 31, 2025 · Filed Aug 27, 2025
OKTA$168.69-1.4%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2025-04-30; filed 2025-05-28.
0001660134-25-000093
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2025-07-31; filed 2025-08-27.
0001660134-25-000157
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 92 previous paragraphs and 103 current paragraphs.
64 unchanged; 24 reworded; 11 added; 4 removed; 0 previous and 4 current paragraphs rearranged.
Tables are not compared: 12 previous and 12 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (11)
Current report
Provision for (Benefit from) Income Taxes
Current report
For the three and six months ended July 31, 2025, the increase in professional services and other revenue was due to higher bookings associated with professional services.
Current report
For the six months ended July 31, 2025, cost of subscription revenue increased primarily due to an increase in labor costs of $12 million and hosting fees of $6 million, offset by a decrease in stock-based compensation expense of $3 million.
Current report
Our gross margin for professional services and other revenue improved to (25)% for the six months ended July 31, 2025 compared to (28)% for the six months ended July 31, 2024 due to an increase in professional services and other revenue.
Current report
For the six months ended July 31, 2025, research and development expenses decreased due to a reduction in stock-based compensation expense of $21 million, offset by an increase in labor costs of $7 million.
Current report
For the six months ended July 31, 2025, sales and marketing expenses increased primarily due to an increase in labor costs of $3 million and travel costs of $3 million. The decrease in sales and marketing as a percentage of total revenue was primarily driven by improved spend efficiency.
Current report
For the three and six months ended July 31, 2025, interest and other, net decreased primarily due to the gains on early extinguishment of debt from our repurchases of the convertible senior notes in fiscal 2025.
Current report
Provision for (Benefit from) Income Taxes
Current report
On July 4, 2025, the “One Big Beautiful Bill Act” (the “Act”) was enacted. The Act, among other provisions, maintains the U.S. federal 21% corporate tax rate, makes permanent the immediate expensing of domestic research and development expenditures, allows for 100% bonus depreciation for qualified assets, and modifies the U.S. taxation of profits derived from foreign operations. The provisions of the Act have staggered effective dates beginning in 2025 and continuing through 2027.
Current report
We revised our estimated annual effective tax rate to reflect the changes in the Act. As a result, income tax expense reported for the six months ended July 31, 2025 was computed to reflect the effects of the change in the tax law and resulted in a cumulative decrease to income tax expense of $5 million recorded during the three months ended July 31, 2025. This decrease is largely due to the impact of immediate expensing of domestic research and development expenditures under the Act. We expect the immediate expensing of domestic R&D expenditures to be the most significant impact of the Act, resulting in a reduction in federal and state cash tax payments and income tax expense for the remainder of fiscal year 2026 and future periods.
Current report
In addition, certain provisions of the Act, particularly those related to international taxation, are effective beginning in the fiscal period ending January 31, 2027. We are currently evaluating the impact of these provisions on our financial statements and tax positions.
Removed paragraphs (4)
Previous report
Provision for Income Taxes
Previous report
For the three months ended April 30, 2025, professional services and other revenue was relatively flat.
Previous report
For the three months ended April 30, 2025, interest and other, net increased due to an increase in interest income from our short-term investments.
Previous report
Provision for Income Taxes
Reworded paragraphs (24)
Previous wording
Our revenue is relatively predictable as a result of our subscription-based business model, which constituted approximately 98% of total revenue for the three months ended April 30, 2025. Future growth may be impacted by longer sales cycles, which we have experienced, which in turn, could result in delays in deals closing, creating near-term headwinds for cash flow, RPO and billings growth as well as potential future impacts on revenue growth and other key metrics on a trailing basis.
Current wording
Our revenue is relatively predictable as a result of our subscription-based business model, which constituted approximately 98% of total revenue for the six months ended July 31, 2025. Future growth may be impacted by longer sales cycles, which we have experienced, which in turn, could result in delays in deals closing, creating near-term headwinds for cash flow, RPO and billings growth as well as potential future impacts on revenue growth and other key metrics on a trailing basis.
Previous wording
In the past we have experienced cybersecurity incidents, such as the January 2022 incident involving one of our third-party service providers and the October 2023 incident where a threat actor gained unauthorized access to and stole information from our third-party customer support system, that harmed our reputation and customer relations, adversely impacted our financial results and may create additional liabilities. While we expect the impact of these security incidents to adversely affect our future financial performance, we cannot predict the extent of such impact with certainty. Due to the nature of our business, the announcement of any security incidents, even if not significant, could have these impacts.
Current wording
In the past we have experienced cybersecurity incidents, such as the January 2022 incident involving one of our third-party service providers and the October 2023 incident where a threat actor gained unauthorized access to and stole information from our third-party customer support system, that harmed our reputation and customer relations and adversely impacted our financial results. While we expect the impact of these security incidents to adversely affect our future financial performance, we cannot predict the extent of such impact with certainty. Due to the nature of our business, the announcement of any security incidents, even if not significant, could have these impacts.
Previous wording
General and Administrative. General and administrative expenses consist primarily of employee compensation costs for finance, accounting, legal, information technology and human resources personnel. In addition, general and administrative expenses include acquisition and integration-related costs, non-personnel costs, such as legal, accounting and other professional fees, charitable contributions and all other supporting corporate expenses, such as information technology, not allocated to other departments.
Current wording
General and Administrative. General and administrative expenses consist primarily of employee compensation costs for finance, accounting, legal, information technology and human resources personnel. In addition, general and administrative expenses include acquisition and integration-related costs, non-personnel costs, such as legal, accounting and other professional fees, charitable contributions, allocated overhead and all other supporting corporate expenses.
Previous wording
Our provision for income taxes consists of federal and state income taxes in the United States and income taxes in certain foreign jurisdictions where we operate. We evaluate and update our estimated annual effective income tax rate on a quarterly basis based on current and forecasted operating results and enacted tax laws. The timing and mix of actual results compared to forecasted results may impact the timing of recognition of our provision for income taxes.
Current wording
Our provision for (benefit from) income taxes consists of federal and state income taxes in the United States and income taxes in certain foreign jurisdictions where we operate. We evaluate and update our estimated annual effective income tax rate on a quarterly basis based on current and forecasted operating results and enacted tax laws. The timing and mix of actual results compared to forecasted results may impact the timing of recognition of our provision for (benefit from) income taxes.
Previous wording
Comparison of the Three Months Ended April 30, 2025 and 2024
Current wording
Comparison of the Three and Six Months Ended July 31, 2025 and 2024
Previous wording
For the three months ended April 30, 2025, the increase in subscription revenue was primarily caused by volume-driven increases from new business, which includes new customers and sales of additional solutions to existing customers as reflected in our 106% dollar-based net retention rate as of April 30, 2025 and a 7% increase in customers with annual contract value above $100,000 as detailed in our Key Business Metrics.
Current wording
For the three and six months ended July 31, 2025, the increase in subscription revenue was primarily caused by volume-driven increases from new business, which includes new customers and sales of additional solutions to existing customers as reflected in our 106% dollar-based net retention rate as of July 31, 2025 and a 7% increase in customers with annual contract value above $100,000 as detailed in our Key Business Metrics.
Previous wording
For the three months ended April 30, 2025, cost of subscription revenue increased primarily due to an increase in labor costs.
Current wording
For the three months ended July 31, 2025, cost of subscription revenue increased primarily due to an increase in labor costs of $6 million and hosting fees of $4 million.
Previous wording
Our gross margin for subscription revenue improved from 78% to 80% for the three months ended April 30, 2025 compared to the three months ended April 30, 2024. The increase was primarily driven by improved spend efficiency resulting in lower relative cost of subscription revenue.
Current wording
Our gross margin for subscription revenue improved to 80% for the three months ended July 31, 2025 compared to 78% for the three months ended July 31, 2024. The improvement was primarily driven by improved spend efficiency resulting in lower relative cost of subscription revenue.
Previous wording
Our gross margin for professional services and other revenue decreased to (27)% for the three months ended April 30, 2025 compared to (24)% for the three months ended April 30, 2024 due to an increase in cost of professional services and other revenue.
Current wording
Our gross margin for professional services and other revenue improved to (24)% for the three months ended July 31, 2025 compared to (31)% for the three months ended July 31, 2024 due to an increase in professional services and other revenue.
Previous wording
For the three months ended April 30, 2025, research and development expenses decreased due to a reduction in stock-based compensation expense of $16 million, partially offset by higher labor costs of $4 million. The decrease in research and development as a percentage of total revenue was primarily driven by improved spend efficiency.
Current wording
For the three months ended July 31, 2025, research and development expenses decreased due to a reduction in stock-based compensation expense of $5 million. The decrease in research and development as a percentage of total revenue was primarily driven by improved spend efficiency.
Previous wording
For the three months ended April 30, 2025, sales and marketing remained relatively flat. The decrease in sales and marketing as a percentage of total revenue was primarily driven by improved spend efficiency. We expect our sales and marketing expenses will continue to be our largest operating expense category for the foreseeable future. We expect sales and marketing expenses as a percentage of total revenue to decrease as our total revenue grows.
Current wording
We expect our sales and marketing expenses will continue to be our largest operating expense category for the foreseeable future. We expect sales and marketing expenses as a percentage of total revenue to decrease as our total revenue grows.
Previous wording
For the three months ended April 30, 2025, general and administrative expenses decreased due primarily to a reduction in stock-based compensation expense of $7 million and a $7 million charge in legal settlement related costs incurred in the three months ended April 30, 2024. We expect general and administrative expenses as a percentage of total revenue to decrease as our total revenue grows.
Current wording
For the six months ended July 31, 2025, general and administrative expenses decreased due to reductions in consulting costs of $6 million and stock-based compensation expense of $3 million. We expect general and administrative expenses as a percentage of total revenue to decrease as our total revenue grows.
Previous wording
For the three months ended April 30, 2025, our provision for income taxes decreased by $12 million, mainly due to the proportion of pre-tax results recognized in the three months ended April 30, 2025 relative to the proportion of pre-tax results recognized in the three months ended April 30, 2024.
Current wording
For the three and six months ended July 31, 2025, our provision for (benefit from) income taxes increased by $17 million and $5 million, respectively. These increases are related to the proportion of pre-tax income recognized in the three and six months ended July 31, 2025 relative to the proportion of pre-tax income recognized in the three and six months ended July 31, 2024.
Previous wording
The number of customers who have greater than $100,000 in annual contract value ("ACV") with us was 4,870 and 4,550 as of April 30, 2025 and 2024, respectively. We expect this trend to continue as larger enterprises recognize the value of our platforms and replace their legacy identity access management infrastructure. We define a customer as a separate and distinct buying entity, such as a company, an educational or government institution, or a distinct business unit of a large company that has an active contract with us or one of our partners to access our platforms. For purposes of determining our customer count, we do not include customers that use our platforms under self-service arrangements only.
Current wording
The number of customers who have greater than $100,000 in annual contract value ("ACV") with us was 4,945 and 4,620 as of July 31, 2025 and 2024, respectively. We expect this trend to continue as larger enterprises recognize the value of our platforms and replace their legacy identity access management infrastructure. We define a customer as a separate and distinct buying entity, such as a company, an educational or government institution, or a distinct business unit of a large company that has an active contract with us or one of our partners to access our platforms. For purposes of determining our customer count, we do not include customers that use our platforms under self-service arrangements only.
Previous wording
As of April 30, 2025, our principal sources of liquidity were cash, cash equivalents and short-term investments totaling $2,725 million, which were held for working capital and general corporate purposes, including potential future acquisition activity. Our cash equivalents and investments consisted primarily of U.S. treasury securities, money market funds, corporate debt securities and certificates of deposit.
Current wording
As of July 31, 2025, our principal sources of liquidity were cash, cash equivalents and short-term investments totaling $2,858 million, which were held for working capital and general corporate purposes, including potential future acquisition activity. Our cash equivalents and investments consisted primarily of U.S. treasury securities, money market funds, corporate debt securities and certificates of deposit.
Previous wording
In September 2019, we completed our private offering of the 2025 Notes due on September 1, 2025 and received aggregate gross proceeds of $1,060 million. The interest rate on the 2025 Notes is fixed at 0.125% per year and is payable semi-annually in arrears on March 1 and September 1 of each year, beginning on March 1, 2020. In connection with the 2025 Notes, we used a portion of the proceeds to enter into capped call transactions ("2025 Capped Calls") with respect to our Class A common stock. As of April 30, 2025, the 2025 Notes are classified as current liabilities due to their upcoming maturity on September 1, 2025, and we currently intend to settle the principal amount of the 2025 Notes in cash.
Current wording
In September 2019, we completed our private offering of the 2025 Notes due on September 1, 2025 and received aggregate gross proceeds of $1,060 million. The interest rate on the 2025 Notes is fixed at 0.125% per year and is payable semi-annually in arrears on March 1 and September 1 of each year, beginning on March 1, 2020. In connection with the 2025 Notes, we used a portion of the proceeds to enter into capped call transactions ("2025 Capped Calls") with respect to our Class A common stock. As of July 31, 2025, the 2025 Notes are classified as current liabilities due to their upcoming maturity on September 1, 2025, and we have elected to settle the principal amount of the 2025 Notes in cash.
Previous wording
In June 2020, we completed our private offering of the 2026 Notes due on June 15, 2026 and received aggregate gross proceeds of $1,150 million. The interest rate on the 2026 Notes is fixed at 0.375% per year and is payable semi-annually in arrears on June 15 and December 15 of each year, beginning on December 15, 2020. In connection with the 2026 Notes, we used a portion of the proceeds to enter into capped call transactions ("2026 Capped Calls") with respect to our Class A common stock.
Current wording
In June 2020, we completed our private offering of the 2026 Notes due on June 15, 2026 and received aggregate gross proceeds of $1,150 million. The interest rate on the 2026 Notes is fixed at 0.375% per year and is payable semi-annually in arrears on June 15 and December 15 of each year, beginning on December 15, 2020. In connection with the 2026 Notes, we used a portion of the proceeds to enter into capped call transactions ("2026 Capped Calls") with respect to our Class A common stock. As of July 31, 2025, the 2026 Notes are classified as current liabilities due to their upcoming maturity on June 15, 2026.
Previous wording
In the ordinary course of our business, we may, at any time and from time to time, seek to extinguish our outstanding Notes through cash purchases and/or exchanges for equity, in open-market purchases, privately negotiated transactions or otherwise. Such extinguishments, if any, will be conducted on such terms and at such prices as we may determine, and will depend on our evaluation of the prevailing market conditions, trading price of the Notes, our liquidity requirements, legal and contractual restrictions and other factors. During fiscal 2025, we repurchased $42 million principal amount of the 2025 Notes for $40 million in cash, and $258 million principal amount of the 2026 Notes for $240 million in cash, which resulted in an aggregate gain on early extinguishment of debt of $19 million. During fiscal 2024, we repurchased $508 million principal amount of the 2025 Notes for $462 million in cash, and $542 million principal amount of the 2026 Notes for $475 million in cash, which resulted in an aggregate gain on early extinguishment of debt of $106 million. The 2025 Capped Calls and 2026 Capped Calls remained outstanding notwithstanding such repurchase. We may, however, elect to terminate the 2025 Capped Calls or 2026 Capped Calls, in full or in part. In connection with any such termination, the option counterparties or their respective affiliates are expected to modify their hedge positions, which activity could affect the market price of our Class A common stock or the trading price of the Notes that remain outstanding. See Note 7 to our condensed consolidated financial statements “Convertible Senior Notes, Net” for additional information.
Current wording
In the ordinary course of our business, we may, at any time and from time to time, seek to extinguish our outstanding Notes through cash purchases and/or exchanges for equity, in open-market purchases, privately negotiated transactions or otherwise. Such extinguishments, if any, will be conducted on such terms and at such prices as we may determine, and will depend on our evaluation of the prevailing market conditions, trading price of the Notes, our liquidity requirements, legal and contractual restrictions and other factors. During fiscal 2025, we repurchased $42 million principal amount of the 2025 Notes for $40 million in cash, and $258 million principal amount of the 2026 Notes for $240 million in cash, which resulted in an aggregate gain on early extinguishment of debt of $19 million. During fiscal 2024, we repurchased $508 million principal amount of the 2025 Notes for $462 million in cash, and $542 million principal amount of the 2026 Notes for $475 million in cash, which resulted in an aggregate gain on early extinguishment of debt of $106 million. During the three and six months ended July 31, 2025, we unwound and settled in cash a portion of the 2025 and 2026 Capped Calls corresponding to the previously repurchased Notes.
Previous wording
A significant majority of our customers pay in advance for annual subscriptions. Therefore, a substantial source of our cash is from our deferred revenue, which is included on our condensed consolidated balance sheet as a liability. Deferred revenue consists of the unearned portion of billed fees for our subscriptions, which is recognized as revenue in accordance with our revenue recognition policy. As of April 30, 2025, we had deferred revenue of $1,582 million, of which $1,562 million was recorded as a current liability and is expected to be recorded as revenue in the next 12 months, provided all other revenue recognition criteria have been met.
Current wording
A significant majority of our customers pay in advance for annual subscriptions. Therefore, a substantial source of our cash is from our deferred revenue, which is included on our condensed consolidated balance sheet as a liability. Deferred revenue consists of the unearned portion of billed fees for our subscriptions, which is recognized as revenue in accordance with our revenue recognition policy. As of July 31, 2025, we had deferred revenue of $1,574 million, of which $1,550 million was recorded as a current liability and is expected to be recorded as revenue in the next 12 months, provided all other revenue recognition criteria have been met.
Previous wording
During the three months ended April 30, 2025, cash provided by operating activities was $241 million, an increase of $22 million compared to the three months ended April 30, 2024. The increase was primarily attributable to an increase in cash received from customers and improved spend efficiency.
Current wording
During the six months ended July 31, 2025, cash provided by operating activities was $408 million, an increase of $103 million compared to the six months ended July 31, 2024. The increase was primarily attributable to an increase in cash received from customers and improved spend efficiency.
Previous wording
During the three months ended April 30, 2025, cash used in investing activities was $120 million compared to cash used in investing activities of $194 million during the three months ended April 30, 2024. The change was primarily driven by higher proceeds from maturities and sales of available-for-sale securities and lower payments for business acquisitions, offset by increased purchases of available-for-sale and other securities.
Current wording
During the six months ended July 31, 2025, cash provided by investing activities was $118 million compared to cash used in investing activities of $38 million during the six months ended July 31, 2024. The change was primarily driven by higher proceeds from maturities and sales of available-for-sale securities, a decrease in purchases of available-for-sale and other securities and a decrease in payments for business acquisitions.
Previous wording
During the three months ended April 30, 2025, cash used in financing activities was $45 million, an increase of $8 million compared to the three months ended April 30, 2024. The increase was primarily attributable higher taxes paid related to net share settlement of equity awards during the three months ended April 30, 2025. The amount of taxes paid on net share settlement of equity awards are generally predicated on the closing price of our stock on the date of settlement.
Current wording
During the six months ended July 31, 2025, cash used in financing activities was $67 million, a decrease of $20 million compared to the six months ended July 31, 2024. The decrease was primarily attributable to payments for repurchase of convertible senior notes during the six months ended July 31, 2024, offset by an increase in taxes paid related to net share settlement of equity awards during the six months ended July 31, 2025. The amount of taxes paid on net share settlement of equity awards are generally predicated on the closing price of our stock on the date of settlement.
Previous wording
There were no significant changes outside the ordinary course of business to our material cash requirements disclosed in our Annual Report on Form 10-K for the fiscal year ended January 31, 2025.
Current wording
Except for the classification of 2026 Notes as a current liability as discussed in Note 7 to our condensed consolidated financial statements included in Part I, Item 1 of this report, there were no significant changes outside the ordinary course of business to our material cash requirements disclosed in our Annual Report on Form 10-K for the fiscal year ended January 31, 2025.
Previous wording
There have been no significant changes to our critical accounting estimates for the three months ended April 30, 2025 from those discussed in our Annual Report on Form 10-K for the fiscal year ended January 31, 2025.
Current wording
There have been no significant changes to our critical accounting estimates for the six months ended July 31, 2025 from those discussed in our Annual Report on Form 10-K for the fiscal year ended January 31, 2025.
Rearranged current paragraphs (4)
Current report — wording carried from elsewhere
Our gross margin for subscription revenue improved to 80% for the six months ended July 31, 2025 compared to 78% for the six months ended July 31, 2024. The improvement was primarily driven by improved spend efficiency resulting in lower relative cost of subscription revenue.
Current report — wording carried from elsewhere
For the six months ended July 31, 2025, cost of professional services and other revenue increased due to an increase in labor costs.
Current report — wording carried from elsewhere
For the three months ended July 31, 2025, sales and marketing expenses increased due to an increase in labor costs of $8 million. The decrease in sales and marketing as a percentage of total revenue was primarily driven by improved spend efficiency.
Current report — wording carried from elsewhere
For the three months ended July 31, 2025, general and administrative expenses increased primarily due to an increase in stock-based compensation expense of $4 million. We expect general and administrative expenses as a percentage of total revenue to decrease as our total revenue grows.