Okta (NASDAQ:OKTA) Surprises With Q2 Sales But Cash Burn Increases

Adam Hejl /
2022/08/31 4:09 pm EDT

Identity management software maker Okta (OKTA) beat analyst expectations in Q2 FY2023 quarter, with revenue up 43.2% year on year to $451.8 million. Guidance for the next quarter came in at $464 million at the midpoint, in line with analyst estimates. Okta made a GAAP loss of $210.4 million, improving on its loss of $276.6 million, in the same quarter last year.

Is now the time to buy Okta? Access our full analysis of the earnings results here, it's free.

Okta (OKTA) Q2 FY2023 Highlights:

  • Revenue: $451.8 million vs analyst estimates of $430.6 million (4.91% beat)
  • EPS (non-GAAP): -$0.10 vs analyst estimates of -$0.30
  • Revenue guidance for Q3 2023 is $464 million at the midpoint, roughly in line with what analysts were expecting
  • The company reconfirmed revenue guidance for the full year, at $1.81 billion at the midpoint
  • Free cash flow was negative $24.1 million, down from positive free cash flow of $11 million in previous quarter
  • Gross Margin (GAAP): 69.5%, up from 67.9% same quarter last year

“Identity has become a critical component of every organization's strategy around zero trust security, digital transformation, and cloud adoption. These three mega trends continue to drive the identity market,” said Todd McKinnon, Chief Executive Officer and co-founder of Okta.

Founded during the aftermath of the financial crisis in 2009, Okta (NASDAQ:OKTA) is a cloud-based software as a service platform that helps companies manage identity for their employees and customers.

As software penetrates corporate life, employees are using more apps every day, on more devices, in more locations. This drives the need for identity and access management software that help companies efficiently manage who has access to what, and ensure that access privileges are secure from cyber criminals.

Sales Growth

As you can see below, Okta's revenue growth has been exceptional over the last year, growing from quarterly revenue of $315.5 million, to $451.8 million.

Okta Total Revenue

And unsurprisingly, this was another great quarter for Okta with revenue up 43.2% year on year. On top of that, revenue increased $36.8 million quarter on quarter, a solid improvement on the $31.9 million increase in Q1 2023, and even a sign of slight acceleration of growth.

Guidance for the next quarter indicates Okta is expecting revenue to grow 32.3% year on year to $464 million, slowing down from the 61.3% year-over-year increase in revenue the company had recorded in the same quarter last year. Ahead of the earnings results the analysts covering the company were estimating sales to grow 30.9% over the next twelve months.

In volatile times like these we look for robust businesses with strong pricing power. Unknown to most investors, this company is one of the highest-quality software companies in the world, and their software products have been the default standard in critical industries for decades. The result is an impressive business that is up an incredible 18,152% since the IPO. You can find it on our platform for free.


What makes the software as a service business so attractive is that once the software is developed, it typically shouldn't cost much to provide it as an ongoing service to customers. Okta's gross profit margin, an important metric measuring how much money there is left after paying for servers, licenses, technical support and other necessary running expenses was at 69.5% in Q2.

Okta Gross Margin (GAAP)

That means that for every $1 in revenue the company had $0.69 left to spend on developing new products, marketing & sales and the general administrative overhead. While it improved significantly from the previous quarter this would still be considered a low gross margin for a SaaS company and we would like to see the improvements continue.

Key Takeaways from Okta's Q2 Results

With a market capitalization of $14.3 billion, more than $2.47 billion in cash and with free cash flow over the last twelve months being positive, the company is in a very strong position to invest in growth.

We were impressed by the exceptional revenue growth Okta delivered this quarter. And we were also excited to see that it outperformed Wall St’s revenue expectations. On the other hand, Okta's revenue guidance for the full year was quite conservative and the cash burn has increased. Overall, this quarter's results still seemed pretty positive and shareholders can feel optimistic. But the market was likely expecting more and the company is down 4.94% on the results and currently trades at $87.01 per share.

Should you invest in Okta right now? It is important that you take into account its valuation and business qualities, as well as what happened in the latest quarter. We look at that in our actionable report which you can read here, it's free.

One way to find opportunities in the market is to watch for generational shifts in the economy. Almost every company is slowly finding itself becoming a technology company and facing cybersecurity risks and as a result, the demand for cloud-native cybersecurity is skyrocketing. This company is leading a massive technological shift in the industry and with revenue growth of 70% year on year and best-in-class SaaS metrics it should definitely be on your radar.

The author has no position in any of the stocks mentioned.