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Okta Inc Earnings - Analysis & Highlights for Q4 2025
Overview
PositivesNegativesOutlook
- Demand for both workforce and customer identity products was strong, and the company's growing portfolio of new products is starting to make an impact.
- The company has made incredible progress on its top priority, the Okta Secure Identity Commitment, and has become a trusted and leading voice for security best practices in discussions with customers and prospects.
- The company held its annual sales kickoff meeting a couple of weeks ago, and its go-to-market team is excited about all the new product innovation.
- Sales productivity reached a multi-year high in Q4, underpinning the company's overall strength.
- The company's relentless focus on product innovation has been resonating with customers, with over 20% of Q4 bookings coming from new products.
- The company is facing headwinds in the new product percentage.
- The company is facing seat-based headwinds due to the macro condition, which has been consistent for a couple of years and is expected to continue.
- The company is facing a slowdown in North America.
- The company is facing a little bit of uncertainty in the first part of the year.
- The company is raising its outlook for FY 2026 across the board.
- The company is focused on reigniting growth and driving spend efficiencies and cash flow.
- The company is positioned to deliver profitable growth for years to come.
- The company expects to go down to a certain range.
Q&A Highlights from Okta Inc Earnings Call Q4 2025
- Analyst asked about the specialized sales model for the current year and the degree of change it entails.
- Todd McKinnon explained that the seasonality of Okta's fiscal years are backend-loaded, with Q1 typically having a lowering of expectation. He also mentioned that the company has been specializing their sales team for a little over a year, and that the transition into that model took a couple of quarters, but paid off in the second half in a strong way. The company is further specializing their sales team to better understand the products they are selling and differentiate themselves from competitors.
- Todd McKinnon explained that the seasonality of Okta's fiscal years are backend-loaded, with Q1 typically having a lowering of expectation. He also mentioned that the company has been specializing their sales team for a little over a year, and that the transition into that model took a couple of quarters, but paid off in the second half in a strong way. The company is further specializing their sales team to better understand the products they are selling and differentiate themselves from competitors.
- Analyst asked about the seat-based headwinds and how they are expected to persist through the first half of next year.
- Todd McKinnon explained that the seat-based headwinds are due to macro conditions that have been consistent for a couple of years, and that the company expects them to persist going forward. However, he also mentioned that the company has seen a change in how contracts are signed, with customers buying less than they did in the past due to a change in the world's economic landscape. He noted that the average contract length is 2.5 years, and as those contracts roll off, they are not being renewed at the same level as before.
- Todd McKinnon explained that the seat-based headwinds are due to macro conditions that have been consistent for a couple of years, and that the company expects them to persist going forward. However, he also mentioned that the company has seen a change in how contracts are signed, with customers buying less than they did in the past due to a change in the world's economic landscape. He noted that the average contract length is 2.5 years, and as those contracts roll off, they are not being renewed at the same level as before.
- Analyst asked about the puts and takes of the business and where the company's head is now, specifically regarding the success in governance and OPA.
- Todd McKinnon explained that the company has seen success in governance and OPA, which has more than offset the seat-based headwinds. He noted that the company's contracts are rolling off from an unsustainable period before, and that the team executed well in new business, upsell, or renewal. He also congratulated the sales team on their excellent execution in Q4.
- Todd McKinnon explained that the company has seen success in governance and OPA, which has more than offset the seat-based headwinds. He noted that the company's contracts are rolling off from an unsustainable period before, and that the team executed well in new business, upsell, or renewal. He also congratulated the sales team on their excellent execution in Q4.
- Analyst asked about the performance of different geographies and verticals in the quarter and the quality of the pipeline entering 2026 compared to 2025.
- Todd McKinnon stated that North America was the strongest geography, exceeding expectations and blowing out the plan. He also mentioned that EMEA and the public sector also had a good quarter. Brett Tighe added that the team executed well and was proud of their effort.
- Todd McKinnon stated that North America was the strongest geography, exceeding expectations and blowing out the plan. He also mentioned that EMEA and the public sector also had a good quarter. Brett Tighe added that the team executed well and was proud of their effort.
- Analyst asked about the potential uplift for customers who upgrade to OIG and how to think about the growth of governance products compared to the rest of the business.
- Todd McKinnon explained that the uplift for customers who upgrade to OIG can be 30% to 40-plus percent, depending on the customer's existing setup. He also mentioned that the opportunity for upgrading customers to include OIG is quite significant, with a run rate of over $100 million for OIG and a total run rate of $400 million. Brett Tighe added that the company is further specializing the field to be able to go deeper into accounts and sell more advanced capabilities, which is a big opportunity for customers.
- Todd McKinnon explained that the uplift for customers who upgrade to OIG can be 30% to 40-plus percent, depending on the customer's existing setup. He also mentioned that the opportunity for upgrading customers to include OIG is quite significant, with a run rate of over $100 million for OIG and a total run rate of $400 million. Brett Tighe added that the company is further specializing the field to be able to go deeper into accounts and sell more advanced capabilities, which is a big opportunity for customers.
- Analyst asked about the company's momentum in Q1 and its progress compared to the previous quarter.
- Todd McKinnon, the CEO of Okta, stated that the company has seen strong productivity in Q1, with a multi-year high in terms of results. He also mentioned that Q1 is usually the company's lowest quarter due to seasonal factors, such as sales kickoff events and account management. He expressed excitement for the quarter and the company's progress.
- Todd McKinnon, the CEO of Okta, stated that the company has seen strong productivity in Q1, with a multi-year high in terms of results. He also mentioned that Q1 is usually the company's lowest quarter due to seasonal factors, such as sales kickoff events and account management. He expressed excitement for the quarter and the company's progress.
- Analyst asked about the ratio of non-human AI agents to employees and the pricing model for these agents.
- Todd McKinnon explained that the industry does not have a standardized way to identify and track agents, and that this is an opportunity for Okta to develop a solution. He mentioned that there is a significant amount of machine-to-machine interactions on the Auth0 and Okta platforms, and that the potential for agents to increase by two orders of magnitude is high.
- Todd McKinnon explained that the industry does not have a standardized way to identify and track agents, and that this is an opportunity for Okta to develop a solution. He mentioned that there is a significant amount of machine-to-machine interactions on the Auth0 and Okta platforms, and that the potential for agents to increase by two orders of magnitude is high.
- Analyst asked about the company's guidance philosophy and why it seems to be more focused on the Workforce business when the Customer Identity business is actually the one with the strongest growth.
- The company's guidance philosophy is to give investors as much information as possible about the company's performance and growth. The company had a blowout quarter, and its guidance reflects that, with revenue growth going up by a significant amount. The company wants to give investors the upside immediately, and it will continue to do so going forward.
- The company's guidance philosophy is to give investors as much information as possible about the company's performance and growth. The company had a blowout quarter, and its guidance reflects that, with revenue growth going up by a significant amount. The company wants to give investors the upside immediately, and it will continue to do so going forward.
- Analyst asked about the opportunity for the Customer Identity-centric solutions, and whether it is a greenfield opportunity.
- The company sees the Customer Identity-centric solutions as a huge market opportunity. The company has seen success in the business, with ACV growth rates faster than the Workforce business. The company is realizing that the Workforce business is also big and important, and it is trying to capture both opportunities.
- The company sees the Customer Identity-centric solutions as a huge market opportunity. The company has seen success in the business, with ACV growth rates faster than the Workforce business. The company is realizing that the Workforce business is also big and important, and it is trying to capture both opportunities.
- Analyst asked about the conversations with enterprises regarding longer term contracts and their incentives, as well as the visibility they provide in terms of cRPO acceleration.
- Todd Tighe explained that the conversations with enterprises are centered around the displacement of multiple identity products, with companies realizing that they need to bet on a vendor that can replace multiple products. This leads to longer term contracts, as enterprises have a multi-year timeframe for their strategic platform.
- Todd Tighe explained that the conversations with enterprises are centered around the displacement of multiple identity products, with companies realizing that they need to bet on a vendor that can replace multiple products. This leads to longer term contracts, as enterprises have a multi-year timeframe for their strategic platform.
- Analyst asked about the potential scale of the agent-based identity management solution and its impact on the number of workers covered.
- Todd McKinnon stated that the solution has the potential to be massive, and that they could potentially monetize it on both sides, meaning people building the agents and people using the agents. He also mentioned that the solution will be pre-integrated, independent, and neutral, which is what customers want.
- Todd McKinnon stated that the solution has the potential to be massive, and that they could potentially monetize it on both sides, meaning people building the agents and people using the agents. He also mentioned that the solution will be pre-integrated, independent, and neutral, which is what customers want.
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