Okta, Inc.

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 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.

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 nine months ended October 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

Worldwide economic and political uncertainties and negative trends, including financial and credit market fluctuations, tariffs and increasing trade protectionism, changes in government spending levels, uncertainty in the banking sector, rising interest rates, inflation and other impacts from the macroeconomic environment have, and could continue to, adversely affect our business operations or financial results. As we continue to monitor the direct and indirect impacts of these circumstances, the broader implications of these macroeconomic and political events on our business, results of operations and overall financial position remain uncertain. See the section titled “Risk Factors'' included under Part II, Item 1A below for further discussion of the possible impact of these factors and other risks on our business.

Current wording

Worldwide economic and political uncertainties and negative trends, including financial and credit market fluctuations, tariffs and increasing trade protectionism, changes in government spending levels, uncertainty in the banking sector, changing interest rates, inflation and other impacts from the macroeconomic environment have, and could continue to, adversely affect our business operations or financial results. As we continue to monitor the direct and indirect impacts of these circumstances, the broader implications of these macroeconomic and political events on our business, results of operations and overall financial position remain uncertain. See the section titled “Risk Factors'' included under Part II, Item 1A below for further discussion of the possible impact of these factors and other risks on our business.

Previous 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.

Current 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.

Previous wording

Comparison of the Three and Six Months Ended July 31, 2025 and 2024

Current wording

Comparison of the Three and Nine Months Ended October 31, 2025 and 2024

Previous 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.

Current wording

For the three and nine months ended October 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 October 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 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 wording

For the three and nine months ended October 31, 2025, the increase in professional services and other revenue was due to higher bookings associated with professional services.

Previous 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.

Current wording

For the three months ended October 31, 2025, cost of subscription revenue increased primarily due to an increase in labor costs of $4 million and hosting fees of $3 million.

Previous 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.

Current wording

Our gross margin for professional services and other revenue improved to (22)% for the three months ended October 31, 2025 compared to (23)% for the three months ended October 31, 2024 due to an increase in professional services and other revenue.

Previous wording

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 wording

For the nine months ended October 31, 2025, cost of subscription revenue increased primarily due to an increase in labor costs of $16 million, hosting fees of $9 million, and software costs of $7 million offset by decreases in consulting costs of $6 million and stock-based compensation expense of $4 million.

Previous wording

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 wording

Our gross margin for subscription revenue improved to 80% for the nine months ended October 31, 2025 compared to 78% for the nine months ended October 31, 2024. The improvement was primarily driven by improved spend efficiency resulting in lower relative cost of subscription revenue.

Previous wording

For the six months ended July 31, 2025, cost of professional services and other revenue increased due to an increase in labor costs.

Current wording

For the nine months ended October 31, 2025, cost of professional services and other revenue increased due to an increase in labor costs.

Previous wording

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 wording

Our gross margin for professional services and other revenue improved to (24)% for the nine months ended October 31, 2025 compared to (26)% for the nine months ended October 31, 2024 due to an increase in professional services and other revenue.

Previous 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.

Current wording

For the nine months ended October 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 $10 million. The decrease in research and development as a percentage of total revenue was primarily driven by improved spend efficiency.

Previous wording

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 wording

For the three months ended October 31, 2025, sales and marketing expenses increased primarily due to increases in labor costs of $8 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.

Previous wording

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 wording

For the nine months ended October 31, 2025, sales and marketing expenses increased primarily due to increases in labor costs of $11 million, travel costs of $6 million and marketing costs of $3 million. The decrease in sales and marketing as a percentage of total revenue was primarily driven by improved spend efficiency.

Previous wording

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.

Current wording

For the three months ended October 31, 2025, general and administrative expenses increased primarily due to an increase in stock-based compensation expense of $4 million and travel costs of $2 million. We expect general and administrative expenses as a percentage of total revenue to decrease as our total revenue grows.

Previous 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.

Current wording

For the nine months ended October 31, 2025, general and administrative expenses decreased primarily due to reductions in consulting costs of $7 million offset by an increase in labor costs of $9 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 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 wording

For the three and nine months ended October 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.

Previous 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.

Current wording

For the three and nine months ended October 31, 2025, our provision for income taxes decreased by $2 million and increased by $3 million, respectively. These changes are related to the proportion of pre-tax income recognized in the three and nine months ended October 31, 2025 relative to the proportion of pre-tax results recognized in the three and nine months ended October 31, 2024.

Previous wording

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 wording

We revised our estimated annual effective tax rate upon enactment of the Act. As a result, income tax expense reported for the periods presented was computed to reflect the effects of the change in the tax law. 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.

Previous 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.

Current wording

The number of customers who have greater than $100,000 in annual contract value ("ACV") with us was 5,030 and 4,705 as of October 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 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.

Current wording

As of October 31, 2025, our principal sources of liquidity were cash, cash equivalents and short-term investments totaling $2,463 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

Recent macroeconomic events, including rising interest rates, global inflation and bank failures, have led to further economic uncertainty in the global economy. To mitigate risk, our cash and cash equivalents are distributed across large financial institutions. In addition, we have policy restrictions in place on the types of securities that can be purchased as part of our available-for-sale securities portfolio. These restrictions take credit quality, liquidity and diversification into consideration among other criteria. We continue to monitor the impacts of this situation; however, there can be no assurances that conditions in the banking sector and in global financial markets will not worsen and/or adversely affect us.

Current wording

Recent macroeconomic events, including changes in interest rates, global inflation and bank failures, have led to further economic uncertainty in the global economy. To mitigate risk, our cash and cash equivalents are distributed across large financial institutions. In addition, we have policy restrictions in place on the types of securities that can be purchased as part of our available-for-sale securities portfolio. These restrictions take credit quality, liquidity and diversification into consideration among other criteria. We continue to monitor the impacts of this situation; however, there can be no assurances that conditions in the banking sector and in global financial markets will not worsen and/or adversely affect us.

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 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.

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. The 2025 Notes matured on September 1, 2025, and we settled in full the principal amount outstanding in cash and the associated remaining outstanding 2025 Capped Calls expired unexercised.

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. 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.

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 nine months ended October 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 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.

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 October 31, 2025, we had deferred revenue of $1,586 million, of which $1,557 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 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.

Current wording

During the nine months ended October 31, 2025, cash provided by operating activities was $626 million, an increase of $162 million compared to the nine months ended October 31, 2024. The increase was primarily attributable to an increase in cash received from customers and improved spend efficiency.

Previous 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.

Current wording

During the nine months ended October 31, 2025, cash provided by investing activities was $223 million compared to cash used in investing activities of $137 million during the nine months ended October 31, 2024. The change was primarily driven by higher proceeds from maturities and redemption of available-for-sale securities and a decrease in purchases of available-for-sale and other securities.

Previous 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.

Current wording

During the nine months ended October 31, 2025, cash used in financing activities was $622 million, an increase of $270 million compared to the nine months ended October 31, 2024. The increase was primarily attributable to an increase in payments upon maturity and repurchase of convertible senior notes and an increase in taxes paid related to net share settlement of equity awards. 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

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.

Current wording

Except for the maturity and cash settlement of the 2025 Notes and the classification of 2026 Notes as a current liability as discussed in Note 6 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 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.

Current wording

There have been no significant changes to our critical accounting estimates for the nine months ended October 31, 2025 from those discussed in our Annual Report on Form 10-K for the fiscal year ended January 31, 2025.