OKTA • 10-Q • Q4 2025 • Positive

Okta Shows Accelerating Profitability with 11.6% YoY Revenue Growth and Margin Expansion

December 03, 2025 • 1 min read

TL;DR

Okta demonstrated strong execution in Q4 with revenue growing 11.6% YoY to $742M while achieving meaningful profitability improvements. Operating income turned positive at $23M compared to a $16M loss last year, driven by operational efficiency and scale benefits. Subscription revenue now represents 97.6% of total revenue, indicating high recurring revenue quality. The company's improved cash position and debt reduction signal strengthening fundamentals, though growth has moderated from historic

Financial Performance Overview: Revenue grew 11.6% YoY to $742M, with subscription revenue increasing 11.2% to $724M. Gross margin expanded 130bps YoY to 77.1%, while operating margin improved significantly from -2.4% to 3.1%. Net income reached $43M, up from $16M YoY, demonstrating successful execution of profitability initiatives. Cash and investments remain strong at $2.46B, though down from $2.52B in January 2025, reflecting strategic debt reduction.
Strategic Initiatives and Operational Changes: Management has prioritized operational efficiency while maintaining growth investments, evidenced by flat R&D spend at $160M despite revenue growth. The reduction in convertible notes from $858M to $350M shows commitment to strengthening the balance sheet. Deferred commission growth of 10.7% YoY suggests continued sales momentum, while reduced operating lease commitments indicate successful cost optimization efforts.
Market Position and Competitive Dynamics: Okta maintains strong market position in identity and access management, with subscription revenue comprising 97.6% of total revenue indicating high customer stickiness. Professional services growth of 28.6% YoY suggests healthy new customer implementations. Increased allowance for doubtful accounts from $4M to $6M may indicate some customer stress, though remains manageable at 1.3% of receivables.
Operational Efficiency and Profitability: Operating expenses grew just 4.8% YoY while revenue increased 11.6%, demonstrating significant operating leverage. Sales and marketing efficiency improved with expenses growing 5.9% YoY versus revenue growth of 11.6%. Gross margin expansion of 130bps to 77.1% reflects improved scale and pricing power. These trends suggest sustainable profitability improvements rather than temporary cost cuts.
Growth Catalysts and Material Risks: Key growth drivers include international expansion (evidenced by goodwill increase) and upsell opportunities within existing customers. Primary risks include intensifying competition, potential customer budget constraints, and cybersecurity threats. The company's strong cash position provides buffer against macro uncertainties, while high subscription revenue mix suggests resilient recurring revenue base.

Revenue

$742M ( YoY, QoQ) with subscription mix

↑ +11.6%

Rd Spend

$160M (flat YoY) at of revenue

↑ 21.6%

Net Income

$43M ( YoY) with net margin

↑ +168.8%

Gross Margin

(+130bps YoY)

↑ 77.1%

Free Cash Flow

Not directly disclosed in filing

Operating Margin

3.1% (+550bps YoY)

Growth Indicators

$1.59B indicating strong future visibility

Accounts Receivable ↓$463M (-25.4% from January 2025)

Professional Services ↑$18M (+28.6% YoY) showing new customer momentum

Key Risks

Intensifying competition in identity management market
Customer budget constraints in uncertain macro environment
Cybersecurity threats to platform and operations
High subscription revenue concentration risk

Key Opportunities

International expansion evidenced by strategic investments
Operating leverage potential from efficiency initiatives
Upsell opportunities within existing customer base
Strategic M&A enabled by strong cash position

Bottom Line

Okta's Q4 results demonstrate successful execution of balanced growth and profitability strategy, with notable improvements in operating margins while maintaining strategic investments. The combination of high subscription revenue mix, expanding margins, and strong cash position provides resilience against macro uncertainties. Key metrics to watch include customer acquisition costs, churn rates, and competitive pricing pressure. The company appears well-positioned for sustainable growth, though execution excellence remains critical in an evolving competitive landscape.