Summary
Okta's fiscal 2025 third quarter, ended October 31, 2024, produced total revenue of $665 million, up 13.9% from the prior-year quarter. Year-to-date revenue was $1.93 billion, up 16.3%, with subscription revenue at 98% of the nine-month total. Backlog expanded too: remaining performance obligations reached $3.659 billion, up 19%, and current RPO, the portion expected to be recognized over the next 12 months, was $2.062 billion, up 13%. Current deferred revenue was $1.415 billion, up 12.7%.
Customer metrics came in mixed. Okta finished the period with more than 19,450 customers, and 4,705 of them carried annual contract value above $100,000. The dollar-based net retention rate for the trailing 12 months slipped to 108% from 115% a year earlier. Management tied the decline to the macroeconomic environment, with annual contract value from existing customers growing more slowly. That metric carries weight because expansion inside the installed base drives a large part of new revenue. Longer sales cycles, which the company says it has experienced, could delay deal closings and create near-term headwinds for cash flow, RPO and billings growth.
Profitability improved sharply. Gross profit was $508 million, up 15.7%, and gross margin was 76.4%, up 1.2 percentage points. GAAP operating loss narrowed to $16 million, and operating margin improved 16.6 percentage points to -2.4%. GAAP net income was $16 million, a swing to a profit, and diluted earnings per share were $0.00. On a non-GAAP basis, operating income was $138 million, or 21% of revenue, and non-GAAP diluted net income per share was $0.67.
Cash generation held steady. Operating cash flow was $159 million, up 1.9% from the prior-year quarter, and free cash flow was $154 million, or 23% of revenue. Capital expenditures were $1 million, down 66.7%. For the nine months, operating cash flow was $464 million, up 37.3%. Cash, cash equivalents and short-term investments totaled $2.248 billion on October 31, 2024. During the quarter Okta repurchased $42 million principal amount of the convertible senior notes due in 2025 and $215 million principal amount of the notes due in 2026, booking a $16 million gain on early extinguishment of debt. The 2025 notes sit in current liabilities ahead of their September 1, 2025 maturity.
Guidance points to slower growth. For the fourth quarter of fiscal 2025, management guided total revenue growth of 10% to 11% and current RPO growth of 9%. Non-GAAP operating income is guided to $154 million to $156 million, a 23% non-GAAP operating margin, with non-GAAP diluted net income per share of $0.73 to $0.74 on roughly 182 million diluted shares and a 26% non-GAAP tax rate. Non-GAAP free cash flow margin is guided to approximately 32% for the quarter. For the full fiscal year 2025, the company now expects total revenue growth of 15%, non-GAAP operating income of $573 million to $575 million at a 22% margin, non-GAAP diluted net income per share of $2.75 to $2.76, and a non-GAAP free cash flow margin of approximately 25%. The outlook, management said, factors in a challenging macro environment.
The risk list has not changed much. Okta still points to the January 2022 and October 2023 cybersecurity incidents as events that harmed its reputation, hurt customer relations and could create additional liabilities. It keeps a full valuation allowance against its U.S. deferred tax assets, so any future release would lower income tax expense, though the timing is uncertain. Sales and marketing remains the largest operating expense category, and management expects that line to shrink as a share of revenue over time. The bigger tension in the quarter is the retention rate, which keeps sliding even as margins and cash flow improve.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q3 FY2025 | Q2 FY2025 | QoQ | Q3 FY2024 | YoY |
|---|---|---|---|---|---|
| Revenue | $665.0M | $646.0M | +2.9% | $584.0M | +13.9% |
| Gross profit | $508.0M | $491.0M | +3.5% | $439.0M | +15.7% |
| Gross margin | 76.4% | 76.0% | +0.4 pp | 75.2% | +1.2 pp |
| Research & development | $158.0M | $164.0M | -3.7% | $165.0M | -4.2% |
| Sales & marketing | $256.0M | $238.0M | +7.6% | $270.0M | -5.2% |
| General & administrative | $110.0M | $108.0M | +1.9% | $111.0M | -0.9% |
| Total operating expenses | $524.0M | $510.0M | +2.7% | $550.0M | -4.7% |
| Operating income (loss) | -$16.0M | -$19.0M | +15.8% | -$111.0M | +85.6% |
| Operating margin | -2.4% | -2.9% | +0.5 pp | -19.0% | +16.6 pp |
| Net income (loss) | $16.0M | $29.0M | -44.8% | -$81.0M | +119.8% |
| Net margin | 2.4% | 4.5% | -2.1 pp | -13.9% | +16.3 pp |
| Diluted EPS | $0.00 | $0.15 | -$0.15 | -$0.49 | +$0.49 |
| Customers | 19,450 | 19,300 | +0.8% | 18,800 | +3.5% |
| Net retention rate | 108.0% | 110.0% | -2.0 pp | 115.0% | -7.0 pp |
Risks
Adverse general economic, market and industry conditions and reductions in workforce identity and customer identity spending may reduce demand. MD&A attributes the Dollar-Based Net Retention Rate decreasing to 108% as of October 31, 2024 from 115% as of October 31, 2023 primarily to the macroeconomic environment, with overall ACV from existing customers increasing at a slower rate.
Okta has experienced cybersecurity incidents, including the January 2022 third-party service provider compromise and the October 2023 unauthorized access to its third-party customer support system, which harmed reputation and customer relations. MD&A states these incidents may create additional liabilities and adversely affect future financial performance.
MD&A states future growth may be impacted by longer sales cycles, which the company has experienced, and this could delay deal closings and create near-term headwinds for cash flow, RPO and billings growth. Risk factors note sales cycles are lengthening and becoming less predictable as Okta focuses on larger organizations.
The company depends on customer renewals and expansion, and its Dollar-Based Net Retention Rate for the trailing 12 months ended October 31, 2024 was 108%, down from 115% a year earlier. Customer growth has slowed in recent periods and could fall below analyst or investor expectations.
Okta faces intense competition from larger, well-established companies, with Microsoft named as its principal competitor. Larger competitors may use broader product offerings, product bundling or zero or negative margin pricing to gain business.
The company depends on executive officers and key employees, and risk factors disclose that Okta's former Chief Operating Officer did not return as an employee following his recent sabbatical, though he continues as a director and Vice Chairman. Competition for highly skilled personnel is intense.
Okta has convertible notes due in 2025 and 2026, with the 2025 Notes classified as current liabilities as of October 31, 2024 due to their upcoming September 1, 2025 maturity. Servicing or refinancing this debt may require significant cash and could dilute stockholders.
Okta announced separate worldwide restructuring plans in the first quarter of fiscal 2024 and fiscal 2025 that reduced its workforce by approximately 300 and 400 full-time employees, respectively. Execution challenges, including attrition beyond intended reductions, could impair business initiatives and financial results.
SaaS KPIs
All quarters →Number of Customers
Customers with ACV Above $100,000
Summary, forecast, risks and KPIs are extracted from Okta, Inc.'s SEC filings for Q3 FY2025 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 1, 2026.