Cloud Migration And AI Security Will Reshape Identity Markets

Key Takeaways

• Okta benefits from growing demand for unified cloud identity platforms and rising security needs amid complex digital transformations, driving durable revenue and larger contracts.
  
• Expansion into AI-driven security and broadening platform offerings increases cross-sell opportunities, supporting margin improvement and long-term profitability.
  
• Intensifying competition, integration risks, limited new customer growth, selective international focus, and evolving technologies threaten Okta's revenue growth, pricing power, and long-term margins.

Catalysts

Operates as an identity partner in the United States and internationally.

• Okta is positioned to capture expanding demand as enterprises globally accelerate cloud migration and digital transformation, with increasing complexity and fragmentation in identity systems driving large organizations to consolidate onto a unified, cloud-native platform-supporting multi-year revenue growth and larger average contract values (ACV).
  
• The proliferation of AI agents and nonhuman identities is creating new, urgent security use cases that require sophisticated identity governance, privileged access management, and policy controls-areas where Okta is innovating (Cross App Access, Auth0 for AI Agents, Axiom acquisition), opening incremental growth avenues and potential margin expansion through higher value and differentiated products.
  
• The rising frequency and sophistication of cyberattacks, combined with tightening regulatory mandates (especially in the public sector and large enterprises), are establishing identity as a mission-critical, recurring investment category; this aligns with Okta's increased penetration in federal and enterprise verticals, which enhances revenue durability and long-term earnings visibility.
  
• Okta's expanding platform breadth beyond workforce IAM-including customer identity, security posture management, threat protection, and suites-improves cross-sell and upsell opportunities, supporting top-line acceleration and leveraging existing sales channels for improved operating leverage and net margin improvement as specialization in go-to-market teams boosts sales productivity.
  
• Global adoption of Zero Trust security frameworks and the movement toward SaaS-native security stacks favor independent, extensible platforms with broad integration ecosystems, allowing Okta's neutral, open approach to capture wallet share as customers seek to avoid vendor lock-in from larger, bundled security suites-sustaining long-term revenue growth and profitability.

Okta Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Okta's revenue will grow by 9.5% annually over the next 3 years.
• Analysts assume that profit margins will increase from 6.1% today to 11.4% in 3 years time.
• Analysts expect earnings to reach $414.2 million (and earnings per share of $2.51) by about September 2028, up from $168.0 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting $592.1 million in earnings, and the most bearish expecting $34 million.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 74.3x on those 2028 earnings, down from 94.2x today. This future PE is greater than the current PE for the US IT industry at 32.4x.
• Analysts expect the number of shares outstanding to grow by 3.78% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 8.89%, as per the Simply Wall St company report.

Okta Future Earnings Per Share Growth

Risks

• The ongoing consolidation of the cybersecurity and identity markets-exemplified by platform companies like Palo Alto entering the space-could pressure Okta's market share and negotiating leverage, especially if large enterprises increasingly prefer integrated multi-function security suites over independent identity specialists; this trend risks long-term revenue growth and may impact Okta's ability to maintain pricing power.
  
• Okta's strategy of frequent product expansion (e.g., acquisition of Axiom Security and rapid feature rollout) introduces elevated product integration and execution risk; difficulties integrating new technologies and teams or falling behind in essential innovations (such as passwordless authentication or AI agent management) could erode Okta's competitive differentiation, putting downward pressure on revenue growth and gross margins.
  
• The continued focus on upsell and cross-sell to existing large enterprise and public sector customers, rather than driving robust new customer growth, may signal potential limitations in Okta's addressable market expansion; if new customer pipeline falters or churn increases due to past breaches or competitive switching, recurring revenue and long-term earnings durability could be negatively affected.
  
• International market expansion is being prioritized only in select top-10 countries to avoid spreading resources too thin; however, if Okta encounters increased regulatory complexity, data localization requirements, or stiffer competition from local or global players (especially with tightening global privacy laws), international growth may underperform, constraining total revenue and operating margin expansion opportunities.
  
• The rise of decentralized identity technologies (such as blockchain-based identity) and the growing commoditization of identity and access management tools via open-source or low-cost solutions could increase price-based competition and reduce Okta's revenue per customer; failure to differentiate sufficiently in this evolving landscape may suppress average contract values and compress net margins over time.

Valuation

• The analysts have a consensus price target of $120.917 for Okta based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $142.0, and the most bearish reporting a price target of just $75.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $3.6 billion, earnings will come to $414.2 million, and it would be trading on a PE ratio of 74.3x, assuming you use a discount rate of 8.9%.
• Given the current share price of $89.82, the analyst price target of $120.92 is 25.7% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.