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Okta (OKTA +3%) is making a strong move higher following upside Q2 (Jul) results last night. Okta, which is a cybersecurity company focused on identity and access management, grew revenue 12.7% yr/yr to $728 mln. That was nicely above analyst expectations, following more modest upside in Q1. Okta also provided upside revs for Q3 (Oct) and upside EPS/revs for FY26. Investors were disappointed with guidance last time, so it was good to see the more bullish outlook.

• Something that stood out was Okta sounding much more bullish and confident on the Q2 call than it did on the Q1 call. Okta saw particular strength with large customers, Auth0 new products, the public sector and cash flow.
• The guidance / commentary on the Q1 call tripped the stock up in May, which caused a gap down and subsequent pressure in the share price this summer. The caution stemmed from uncertainty in the macro and its federal vertical. However, Okta said on the call last night that those fears never materialized and it has now removed them from its outlook for the remainder of the year.
• While Okta did experience some contract restructuring with civilian agencies and delays in procurement processes, renewals across all of federal were strong. Okta benefitted from multiple new business and upsell deals with DoD and state agencies in Q2. In fact, five of its top 10 deals in Q2 were with the US public sector, including its largest deal of the quarter, which was secured with a DoD agency.
• Okta also addressed some big news in the cybersecurity identity space. On July 30, Palo Alto Networks (PANW) announced it will acquire CyberArk (CYBR), which focuses on Identity Security. Okta noted that it pioneered the modern identity market. As platform companies (PANW) enter the market, Okta believes it underscores Identity's central role in security and the importance of Okta's independence and neutrality.
• To this day, Okta says it remains the only modern, comprehensive cloud native platform built to secure every identity, from employees to customers to non-human machine identities to AI agents. Okta believes the transaction further validates the importance of identity, but will not meaningfully change the competitive landscape.

As we said in our preview, we believed that investors were understandably cautious heading into this Q2 report given the warning signs outlined by Okta on the Q1 call. The key takeaway is that Okta put many of those fears to bed and removed those obstacles from its guidance. Given the good amount of negativity priced into Okta, we are a bit surprised the stock is not even higher on this report and especially the guidance. Perhaps investors wanted to see even stronger upside guidance.