Despite recent stock volatility and intense competition, Okta, a leader in identity and access management, is strategically positioning itself for future growth. CEO Todd McKinnon’s three key cybersecurity bets – consolidating identity solutions, establishing a comprehensive identity security fabric, and championing AI education – aim to address evolving digital threats and solidify Okta’s long-term investment narrative as essential infrastructure in an AI-driven world.
In the dynamic cybersecurity landscape, Okta (NASDAQ: OKTA), a pivotal player in identity and access management, has experienced a mixed financial journey. While its stock recently saw a roughly 10% decline over the past month, attributed largely to economic uncertainties such as tariffs, the company’s year-to-date performance still shows a robust increase of nearly 30%. This volatility, coupled with strong first-quarter earnings that surpassed analyst expectations, sets an intriguing stage for investors keen on understanding Okta’s long-term trajectory. Amidst these market fluctuations, Okta CEO Todd McKinnon has laid out a clear strategic roadmap, highlighting three core cybersecurity bets he believes will define the company’s future by 2026.
Navigating the Market’s Crosscurrents: Okta’s Recent Journey
Okta’s financial health, as evidenced by its Q1 performance, remains solid. The company reported a 12% year-over-year (Y-o-Y) revenue increase to $688 million, exceeding its own forecast. Subscription revenue also climbed 12% to $673 million, and adjusted EPS jumped 24% Y-o-Y to $0.86. Notably, Okta generated a positive free cash flow of $238 million for the quarter, an 11% increase from the previous year. While the net dollar retention rate saw a modest dip to 106% from 111% a year ago, Okta demonstrated growth in its high-value customer segments. Customers with annual contract values (ACVs) above $100K increased by 7% to 4,870, and those with ACVs over $1 million rose by an impressive 20% Y-o-Y.
Looking ahead, Okta maintains its fiscal 2026 revenue forecast of $2.85 billion to $2.86 billion, representing 9-10% growth, while increasing its adjusted EPS outlook to $3.23-$3.28. For Q2, the company guided for 10% revenue growth to $710-$712 million, with adjusted EPS of $0.83-$0.84. These figures suggest a shift from rapid expansion to a more sustainable growth phase, with an emphasis on improving profitability.
The broader cybersecurity market is projected for significant expansion, with investments expected to exceed $298 billion annually by 2028. Okta’s identity management platform is central to securing access across increasingly cloud-based solutions, positioning it well within this growing market. Management has also noted strong demand for newer products, such as identity governance and privileged access, and is actively addressing rising security risks associated with AI agents and non-human identities.
Okta CEO Todd McKinnon’s Three Pillars for 2026
During Dreamforce 2025 in San Francisco, Okta CEO Todd McKinnon articulated his vision for the company’s future, centered on three critical cybersecurity bets aimed at solidifying its market position and addressing the evolving threat landscape. McKinnon’s insights, shared on the Opening Bid Unfiltered podcast, underscore a proactive approach to an increasingly complex digital world.
Bet 1: Identity Consolidation
McKinnon’s first bet addresses a common pain point for enterprises: the proliferation of identity vendors. He argued that businesses often manage too many disparate identity solutions, leading to unnecessary costs, operational inefficiencies, and fragmented security. By advocating for “consolidating on identity” onto a single, unified platform, Okta aims to help companies streamline their security operations, reduce expenses, and accelerate the deployment of new tools. This strategy reinforces Okta’s long-standing value proposition as a comprehensive identity provider, urging organizations to move away from siloed customer identity and access management (CIAM) and privileged access management (PAM) solutions.
Bet 2: Hardening Cybersecurity with an Identity Security Fabric
The second pillar focuses on enhancing overall cybersecurity by creating a robust “identity security fabric.” McKinnon highlighted that identity-based breaches remain a top enterprise risk, often exploited through “gaps or crevices” created by fragmented security systems. A unified identity security fabric, as envisioned by Okta, would provide comprehensive coverage, extending protection beyond the most secure applications to every part of an organization’s digital footprint. This approach promises a faster, more coordinated threat response and is bolstered by Okta’s recent product innovations, including the introduction of its Identity Security Fabric, Cross App Access (XAA), and the acquisition of Axiom Security for its privileged access management tools. These advancements are crucial for securing high-risk credentials across cloud, SaaS, and database environments, particularly in an age demanding AI-enabled identity protection.
Bet 3: Training the Next Generation in Agentic AI
McKinnon’s third bet underscores the importance of education and adaptability in the face of emerging technologies, specifically agentic AI. Reflecting on Salesforce CEO Marc Benioff’s $39 million pledge to integrate AI tools into education, McKinnon expressed strong support for training young people in AI. He noted that students, unburdened by preconceived notions, find it easier to adapt to new technologies. For older workers, the challenge lies in adjusting and remaining flexible, embracing new ideas, and questioning established paradigms. This bet aligns with the broader industry trend of “service as software,” where AI agents are expected to transform traditional SaaS models by digitizing human-executed services, from sales processes to bug hunting and security assessments, leading to agent-based cyber security that consumes and builds context to break down complex tasks into manageable chunks. The path to AI and agent-based cybersecurity is clear, with 2025 beginning the era of centralizing cyber data to improve security operations.
For more on Salesforce’s commitment to AI education, you can refer to Salesforce Investor Relations.
The AI Revolution and Okta’s Strategic Alignment
Okta’s strategic bets are deeply intertwined with the burgeoning artificial intelligence revolution. The company has made significant strides in securing AI agents and enhancing its identity fabric through new platform capabilities and integrations. This focus is critical as businesses increasingly adopt AI, leading to novel security risks, particularly those related to non-human identities and AI-enabled fraud.
The concept of “agentic cybersecurity,” where autonomous AI agents learn, perceive data, and break down complex tasks, is gaining traction. Okta’s introduction of tamper-proof verifiable digital credentials directly addresses the challenge of AI-enabled fraud and facilitates secure onboarding, which could be a significant catalyst for new adoption among large enterprises. By centralizing, normalizing, and deduplicating unstructured data across endpoint, cloud, application, identity, data, and security operations, Okta is laying the foundation for AI- and agent-based cyber security, aiming to improve the day-to-day life of security operations teams by enabling faster threat discovery and remediation.
Investor Outlook: Opportunities and Challenges
For investors, Okta presents a compelling, albeit complex, case. The company’s improving profitability and the steady demand for identity security are sources of optimism. Analysts see opportunities for Okta to benefit from enterprise clients consolidating multiple vendors into a single platform, an area where Okta already boasts strong recognition. Its proactive investments in AI-driven security and platform expansion, exemplified by its latest product launches and acquisitions, suggest a credible path for sustained compounding growth.
However, challenges persist. Okta’s growth has slowed, and competition has intensified, particularly from larger players like Microsoft and Palo Alto Networks, which continue to bundle identity services. Valuation remains a point of consideration; with a market cap of $17 billion and a price-to-sales (P/S) ratio of about 6x based on analysts’ fiscal 2026 revenue estimates, Okta appears reasonably valued compared to some cybersecurity peers. Yet, priced at 25 times trailing free cash flow, its stock appears somewhat expensive given its low-teens sales and free cash flow growth.
Analyst price targets for Okta vary, with an average target of $120/share, suggesting roughly 31% upside from its current trading price near $92/share. Forecasts range from a high of ~$142/share to a low of ~$75/share, indicating a split conviction among experts. The consensus reflects moderate upside, with improving margins scaling for some, while others anticipate continued growth deceleration. The “Simply Wall St community” fair value estimates for October 2025 also show a wide range, from $94.96 to $147.87 per share. Okta’s financial outlook points to revenue growth of about 10% annually through early 2028, with operating margins expected to reach 26%, which could lead to a valuation of approximately $112/share by January 2028, representing about 9% annualized returns.
This suggests that while Okta offers a balanced setup with moderate but consistent return potential, its recovery hinges on consistent execution in a crowded market. Any stumble in progress or slower adoption of new products could prolong its recovery, making it a rebound candidate rather than a guaranteed winner.
The Road Ahead: Investing in Identity’s Future
Okta stands at a critical juncture, with its CEO’s strategic bets aligning with the pressing needs of the cybersecurity market and the transformative power of AI. The company’s robust Q1 performance and its proactive stance on AI agent governance and identity consolidation underscore its potential. However, investors must weigh these opportunities against valuation concerns and the intensifying competitive landscape. The journey to 2026 will test Okta’s ability to execute its vision, but for those seeking exposure to a foundational cybersecurity player adapting to the future of digital identity, Okta’s narrative offers a compelling, long-term investment case.
