Good foundation, but now it's all about the next steps

Update from 07.06.2026

For a long time, the market criticized Todd McKinnon because Okta, despite having an excellent technical solution, failed to become profitable. With the Q1 FY2027 results, that discussion appears to be over.

The question is no longer whether Okta can become profitable. The new question is whether Todd can unlock the next market: Identity and Access Management (IAM) for AI Agents.

The strong share price reaction following the quarterly results suggests that investors are beginning to price in exactly this possibility. If every organization manages not only employees but also thousands of AI Agents in the future, Okta’s addressable market could become significantly larger than investors currently assume.

So what exactly was in the quarterly report?

“Okta is off to a strong start to the new fiscal year, highlighted by cRPO strength, robust free cash flow, and the return of capital to shareholders,” said Brett Tighe, Chief Financial Officer of Okta. “Last year’s go-to-market specialization is driving tangible results, including continued strength with large enterprises and increased sales productivity. The success of our new product portfolio, particularly Okta Identity Governance, validates that Okta’s unified identity platform is resonating with customers.”

Brett Tighe is communicating two important messages here.

First, the sales organization has been restructured. Instead of relying on generalists, Okta now employs specialists focused on specific customer segments and product categories. In a market that is already largely allocated, this is a necessary step to continue gaining market share and improving sales productivity.

Second, the engineering organization delivered. Okta successfully expanded its product portfolio with Okta Identity Governance (OIG). Enterprises define complex sets of permissions and access rights based on employee responsibilities and organizational roles. OIG allows companies to automate, govern, review, and secure these permissions across the organization. This not only increases customer value but also creates higher-margin revenue streams. The positive impact on profitability can already be seen in management’s outlook.

But what caused investors to reassess the company and drive the stock higher?

In my opinion, it was this sentence:

“AI agents are rapidly becoming a new workforce inside every organization, creating a wave of identities that must be secured and governed alongside human users,” said Todd McKinnon

Suddenly, the Total Addressable Market (TAM) becomes much larger.

The most attractive aspect is that this market is still largely unclaimed.

Today, identity incidents are primarily managed for human users. In the future, every employee may be accompanied by multiple AI Agents performing tasks, accessing systems, requesting information, and interacting with business applications.

Each of these agents requires an identity.

Each identity requires authentication.

Each authentication requires governance.

This creates an entirely new layer of demand and potentially a significant new source of revenue.

That is why the market reacted positively.

However, for this enthusiasm not to turn into frustration, investors will eventually need proof that this opportunity is becoming reality.

At some point, I want to read the following sentence in an Okta quarterly report:

“We now manage 100 million Agent Identities.”

That would be a meaningful milestone.

What about my previous statement: “the next step is the most difficult”?

Looking back, I would revise it.

Todd McKinnon has already achieved the hardest operational objective: profitability.

Today, I would replace “most difficult” with “most important.”

The next challenge is monetization.

Currently, Okta primarily operates a licensing model. In the long run, an incident-based model may be more attractive.

Mastercard does not focus on selling cards. It monetizes transactions.

Intuitive Surgical does not focus on selling robots. It focuses on procedures.

CrowdStrike increasingly highlights how many endpoints it protects.

Okta could eventually move in a similar direction.

Instead of focusing on the number of licensed users, the company could focus on the number of identity events, authentications, authorizations, and governance actions processed through its platform.

In such a world, every identity verification becomes an economic event.

The more human identities, machine identities, and AI Agent identities that exist, the larger the opportunity becomes.

Therefore, my biggest expectation for the coming quarters is not simply revenue growth.

I hope to see new operating metrics emerge.

I hope to learn how many Human, Machine, and AI Agent identities are being managed.

Because that is where the next chapter of the Okta story will be written.

Valuation

The actual price (07.06.26) is 118USD.

Based on (next 5 years):

• Revenue Growth: 10,5%
• Profit Margin: 21%
• Future PE: 35x

I calculate a share price 2031 of 216$.

Based on that a calculate the annual performance of the investment with 12.9%. So even after the postive market reaction, Okta is still a good investment.