Shares of Okta Inc. (NASDAQ: OKTA) soared 20.9% in premarket trading on Thursday, August 27, 2026, reaching $162.50, after the identity-security company reported a quarterly backlog figure that significantly exceeded Wall Street expectations and raised its full-year revenue outlook. The surge added approximately $4.9 billion to the company's market capitalization, which stood at $23.57 billion as of Wednesday's close.
Okta's current remaining performance obligations (cRPO), a key metric representing contracted subscription revenue expected to be recognized over the next 12 months, totaled $2.585 billion for the fiscal second quarter. This marked a 14% year-over-year increase and surpassed consensus estimates of $2.510 billion by $75 million, a 3% outperformance. The strong backlog signals robust demand for Okta's identity and access management solutions despite a cautious macroeconomic environment.
Financial Highlights and Operating Performance
Total revenue for the quarter climbed 11% year-over-year to $805 million, with subscription revenue up 12% to $793 million, accounting for 98.5% of total sales. Adjusted earnings per share came in at $1.05, beating the analyst consensus of 97 cents by 8.2%. The company also reported a 40% surge in free cash flow to $227 million, up from $162 million in the same period last year. Free cash flow margin expanded to 28.1% from 22.3%, demonstrating improved operating leverage and cash conversion efficiency.
Operating leverage was evident in the GAAP numbers as well. GAAP operating income jumped to $107 million from $41 million a year ago, with the operating margin widening to 13% from 6%. This improvement reflects disciplined cost management and scaling of the business.
Guidance and Outlook
Management lifted its fiscal 2027 revenue guidance to a range of $3.216 billion to $3.226 billion, compared to the previous forecast of $3.19 billion to $3.21 billion. The midpoint of the new guidance, $3.221 billion, represents an increase of only $21 million, or 0.7%, relative to the prior midpoint, which some analysts viewed as conservative given the strong backlog momentum. For the third quarter, Okta projects revenue between $813 million and $817 million, with a midpoint of $815 million, which is 0.9% higher than the FactSet consensus of $808.1 million.
The company also guided for cRPO growth of 11% to 12% in the third quarter, a deceleration from the 14% growth recorded in the second quarter. This guidance suggests a more moderate pace of new contract signings, but the company remains confident in its ability to convert backlog into revenue.
Customer Metrics and Segment Strength
Chief Financial Officer Brett Tighe noted that annual contract value (ACV) was rising in both the workforce and customer identity segments, driven by new offerings such as Okta Identity Governance. The number of customers with ACV above $100,000 increased by 6% to 5,255, indicating continued expansion among enterprise clients. Dollar-based net retention remained steady at 107%, up one point from the prior year, reflecting solid upsell and cross-sell activity.
The company's performance was powered by its core business rather than future product expectations, according to the earnings release. This is a positive signal for investors, as it suggests sustainable demand for Okta's existing solutions.
Market Reaction and Valuation
The premarket surge of 20.9% pushed Okta's shares well above the average analyst target of $146.34, which was 11% below the premarket price. This valuation gap raises questions about whether the stock has run ahead of fundamentals. As of Wednesday, Okta shares were up 55.45% in 2026, compared to a 12.13% gain for the S&P 500, indicating significant outperformance.
However, there are risks to the upside. Early premarket increases may be partially eroded once regular trading begins and liquidity improves. Additionally, the company maintains its outlook for full-year revenue growth of just 10% to 11%, and the outsourcing of professional services is expected to reduce reported growth by approximately one percentage point.
Conclusion
Okta's second-quarter results underscore a more limited but positive takeaway: contracted subscription demand is picking up, and cash margins are improving. For the higher valuation to be sustained, cRPO growth must continue to outpace revenue growth while maintaining strong renewal rates. The modest guidance raise, despite the backlog beat, suggests management is taking a prudent approach, but investors will be watching closely to see if the momentum can be maintained.
