Okta Surges 20% After Q2 Beat and Raised Guidance as AI Security Demand Accelerates

Okta shares skyrocketed roughly 20% on August 27, hitting a year-to-date high, after the identity security company reported fiscal Q2 2027 results that topped Wall Street expectations on both revenue and earnings. Total revenue came in at $805 million for the quarter ended July 31, up 11% year over year from $728 million and ahead of analyst estimates of approximately $794 million, with subscription revenue jumping 12%. The company raised its full-year guidance, now targeting 10-11% revenue growth, a 26% non-GAAP operating margin, and a 28-29% free cash flow margin.

Large enterprise customers now account for 85% of total annual contract value, and net revenue retention stands at 107%, underscoring the stickiness of Okta's platform. Management cited surging enterprise demand for agentic AI security platforms as a key driver, with AI adoption pushing customers to spend more on identity and access tools to manage the expanded threat surface. The quarter set a record for bookings.

Analysts responded with a wave of upgrades and price target increases: BofA Securities upgraded Okta from Underperform to Neutral and more than doubled its price target to $170 from $75, BMO Capital Markets raised its target to $187 from $168 with an Outperform rating, RBC lifted its target to $195, and Citizens moved to $180. Okta's strong print arrived alongside a beat-and-raise quarter from CrowdStrike, which jumped roughly 13-19% on the day, helping lift the broader cybersecurity sector, with the First Trust Nasdaq Cybersecurity ETF rising 3% to $96.