Okta joins the tracked set the day after it reported the quarter ended 31 July 2026. The print beat, eight brokers raised their price targets before Thursday's open, and the shares moved up roughly 27% from the previous close of $134.42. The Rule of 40 card reads 38.8 — below the bar, and lower than four of the previous five quarters.
Both things are true at once, and the reason is in the two columns.
Ten quarters, and only one of them is moving
| Quarter | Period end | Revenue | YoY | FCF | FCF margin | R40 |
|---|---|---|---|---|---|---|
| 2024 Q2 | 2024-04-30 | $617M | +19.1% | $214M | +34.7% | +53.8 |
| 2024 Q3 | 2024-07-31 | $646M | +16.2% | $78M | +12.1% | +28.3 |
| 2024 Q4 | 2024-10-31 | $665M | +13.9% | $154M | +23.2% | +37.0 |
| 2025 Q1 | 2025-01-31 | $682M | +12.7% | $284M | +41.6% | +54.4 |
| 2025 Q2 | 2025-04-30 | $688M | +11.5% | $238M | +34.6% | +46.1 |
| 2025 Q3 | 2025-07-31 | $728M | +12.7% | $162M | +22.3% | +34.9 |
| 2025 Q4 | 2025-10-31 | $742M | +11.6% | $211M | +28.4% | +40.0 |
| 2026 Q1 | 2026-01-31 | $761M | +11.6% | $252M | +33.1% | +44.7 |
| 2026 Q2 | 2026-04-30 | $765M | +11.2% | $271M | +35.4% | +46.6 |
| 2026 Q3 | 2026-07-31 | $805M | +10.6% | $227M | +28.2% | +38.8 |
The growth column goes 19.1, 16.2, 13.9, 12.7, 11.5, 12.7, 11.6, 11.6, 11.2, 10.6. In ten quarters it has never risen more than 1.2 points and has fallen 8.5 points net. The free cash-flow column has no trend at all — it oscillates between 12% and 42% on Okta's collection seasonality, and it is the only reason the score has held a median of 42.4 over the period.
Take the same fiscal quarter each year and the deceleration is clean: the April quarter went +19.1% → +11.5% → +11.2%, the July quarter +16.2% → +12.7% → +10.6%.
Nothing about this is a bad business. Gross margin hit a series-record 79.6% this quarter, GAAP operating income tripled to $107 million, and this was the seventh consecutive quarter of positive GAAP EPS after years of losses. It is simply a company that has finished converting growth into margin and now needs the growth back.
What the market bought
The bull case in the release is not revenue. It is cRPO — subscription backlog due in the next twelve months — which grew 14%, faster than the 10.6% of recognised revenue, and accelerated from the prior quarter. Total RPO grew 17% to $4.858 billion. Todd McKinnon spent the quarter selling AI-agent identity: discovering agents, governing what they can reach, and revoking them, the product line he launched at Okta Showcase in May.
If cRPO is the leading indicator, revenue growth turns up in two or three quarters and the R40 score follows. That is the trade the tape made on Thursday.
Okta's own guidance says otherwise for one more quarter
The company guided the October quarter to $813 million to $817 million of revenue — about +9.8% at the midpoint, another step down — and $175 million to $185 million of non-GAAP free cash flow, a 21% to 23% margin.
Add them. Okta's own guidance implies a Rule of 40 score of roughly 32 next quarter, in a range of 31.1 to 32.8. For the full year it guided revenue of $3.216 billion to $3.226 billion, +10.3% at the midpoint, and flagged about a one-point revenue headwind from moving professional services to partners.
So the score gets worse before it gets better, on management's own numbers. The question the next print answers is whether cRPO at +14% was the turn, or whether it is backlog that converts into the same low-ten-percent revenue line.
A note on the figures
Okta's fiscal year ends 31 January, so the quarter labels on this site follow the calendar quarter each period ends in: the quarter ended 31 July 2026 is Okta's fiscal 2027 Q2 and appears here as 2026 Q3. Revenue and diluted EPS are GAAP as filed. Free cash flow is operating cash flow less purchases of property and equipment and capitalised internal-use software — Okta's own definition, and it reproduces the company's reported $227 million for this quarter and $162 million for the year-ago quarter exactly.
