Okta (OKTA) Q3 2025 Earnings Name Transcript

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Ahead-looking statements contain identified and unknown dangers and uncertainties that will trigger our precise outcomes, efficiency, or achievements to be materially totally different from these expressed or implied by the forward-looking statements. Ahead-looking statements symbolize our administration’s beliefs and assumptions solely as of the date made. Info on elements that would have an effect on our monetary outcomes is included in our filings with the SEC from time-to-time, together with the part titled threat elements in our beforehand filed Kind 10-Q. As well as, throughout at the moment’s assembly, we’ll talk about non-GAAP monetary measures.

Although we could not state it explicitly through the assembly, all references to profitability are non-GAAP. These non-GAAP monetary measures are along with and never an alternative choice to or superior to measures of monetary efficiency ready in accordance with GAAP. A reconciliation between GAAP and non-GAAP monetary measures and a dialogue of the restrictions of utilizing non-GAAP measures versus their closest GAAP equivalents can be found in our earnings launch. You may also discover extra detailed info in our supplemental monetary supplies, which embody trended monetary statements and key metrics posted on our investor relations web site.

In at the moment’s assembly, we’ll quote various numeric or development modifications as we talk about our monetary efficiency. And except in any other case famous, every such reference represents a year-over-year comparability. And now, I might like to show the assembly over to Todd McKinnon. Todd?

Todd McKinnon — Co-Founder and Chief Government Officer

Thanks, Dave, and thanks, everybody, for becoming a member of us this afternoon. Our strong Q3 outcomes have been as soon as once more highlighted by power with massive prospects and robust profitability and money movement pushed by continued spend efficiencies. Whereas the macro setting stays constant, we’re inspired by some optimistic knowledge factors in Q3. I will contact on a few of these after which get into different highlights from the quarter earlier than turning over to Brett.

I’ve talked about beforehand that deepening our relationship with our companion ecosystem is certainly one of our major priorities. We’re already seeing good progress as all of our high 10 offers within the third quarter contain companions. These 10 offers have been throughout $1 million in annual contract worth and, in combination, represented roughly $20 million in ACV. This underscores the worth of investing in our companion ecosystem.

The general public sector additionally continues to be an space of power. In truth, half of the highest 10 offers that I simply talked about have been within the U.S. federal vertical. We have made nice progress with our presence within the public sector and consider we have now an incredible quantity of runway forward of us.

Our largest prospects stay an space of power. The cohort of $1 million plus ACV prospects continues to be our fastest-growing cohort. In complete, this cohort now represents roughly 1 billion in ACV. We have been additionally happy with the upsell and cross-sell exercise in Q3.

Particularly, we skilled robust development of workforce buyer shopping for extra workforce merchandise, in addition to workforce prospects shopping for buyer identification. Okta’s expanded product portfolio is permitting us to equip our prospects with extra industry-leading identification options to help them of their purpose to function extra effectively and securely. The risk setting has by no means been extra hostile. Organizations are consistently beneath assault, and identification has grow to be a major assault vector.

Okta’s expertise has grow to be extra necessary than ever in serving to to forestall and mitigate these assaults. We’re advancing our imaginative and prescient to free everybody to soundly use any expertise with the growth of our unmatched portfolio of identification options by way of nice product innovation. We’re additionally accelerating our investments within the Okta Safe Identification Dedication, which is resonating with prospects and prospects. We just lately showcased that innovation at Oktane, our greatest buyer and companion occasion of the yr.

The power on the occasion was terrific as in-person attendance was up over 25% versus final yr and represented a whole bunch of hundreds of thousands of {dollars} of pipeline. Attendees heard about the way forward for identification safety and the way Okta is responding to the evolving risk panorama. We highlighted greater than 30 merchandise, options, and capabilities throughout our workforce and buyer identification clouds that may deepen our prospects’ safety and assist them create distinctive buyer experiences, whereas enabling us to reignite our development with a centered method. It is also nice to obtain validation on our technique and imaginative and prescient from third events.

Okta was just lately acknowledged as a frontrunner within the 2024 Gartner Magic Quadrant for Entry Administration for the eighth consecutive yr. Okta achieves the very best and furthest total place for its capacity to execute and completeness of imaginative and prescient on this analysis. We have now a number of optimism concerning the course of the enterprise. One of many issues we’re enthusiastic about is go-to-market specialization.

In Q1 this yr, we launched a layer of specialization within the go-to-market staff with a hunter-farmer mannequin for the Americas’ SMB market. As we plan for FY ’26, we’re planning for additional specialization in our international go-to-market technique to raised align with the distinct identification shopping for facilities of IT safety and builders. Doing so will enable us to satisfy evolving market calls for, assist reignite development, and create a win-win state of affairs that advantages each our prospects and Okta, in the end driving higher enterprise outcomes. To wrap issues up, we stay hyper-focused on our high priorities of safety, development, and scale.

Identification is safety, and we’re taking the suitable steps to advance our place as a frontrunner within the identification market whereas remaining centered on investing for development and driving spend efficiencies and money movement. Now, this is Brett to cowl the monetary commentary and speak about how we’re positioned for long run worthwhile development.

Brett Tighe — Chief Monetary Officer

Thanks, Todd, and thanks, everybody, for becoming a member of us at the moment. We proceed to construct on the effectivity initiatives that we have been implementing over the previous two years. Our Q3 monetary efficiency was highlighted by continued robust money movement and working profitability, together with GAAP profitability. I will be aware that much like the prior three quarters, as we have now analyzed our key metrics, we couldn’t attribute a quantifiable impression from the October 2023 safety incident on our Q3 outcomes.

And whereas not quantifiable, the occasion probably had some stage of impression. Our view on the macro setting is that it stays in line with what we have skilled for the previous few quarters. Organizations are scrutinizing budgets and rationalizing their software program spend, leading to decrease assumptions for seats in our workforce identification enterprise and MAUs in our buyer identification enterprise. These decrease seat and MAU assumptions have put our internet retention fee beneath stress over the previous few quarters whereas gross retention has remained robust.

Serving to to partially offset the seat MAU headwind is the success we have been having in promoting extra merchandise to each our new and current prospects. Our relentless deal with innovation has been resonating with our prospects, as roughly 15% of Q3 bookings have been from new merchandise. Okta identification governance continues to symbolize roughly one third of the contract worth when bought in a workforce deal. Along with OIG, we’re additionally promoting new merchandise like Okta privileged entry, gadget entry, effective grained authorization, identification risk safety, and Identification Safety Posture Administration.

Our knowledge tells us that prospects that undertake extra merchandise have the very best retention charges, so we’re excited concerning the tendencies right here within the long-term contributions to the enterprise. Now, let’s flip to our enterprise outlook for This fall and FY ’25. As all the time, we take a prudent method to ahead steerage. We’re factoring in a macro setting in line with what we skilled in Q3.

We’re not incorporating extra conservatism into our outlook associated to the potential impacts from final yr’s safety incident. For the fourth quarter of FY ’25, we count on complete income development of 10% to 11%, present RPO development of 9%, non-GAAP working margin of 23%, and free money movement margin of roughly 32%. We’re elevating our outlook throughout the board for the complete yr FY ’25. We now count on complete income development of 15%, non-GAAP working margin of twenty-two%, and a free money movement margin of roughly 25%.

Whereas we’re nonetheless within the early phases of monetary planning, we wish to present a preliminary view of FY ’26. We’re offering this preliminary outlook forward of closing our greatest quarter of the yr. We’ll present formal FY ’26 steerage on our nextearnings name which is able to think about our precise This fall efficiency. We stay centered on worthwhile development and proceed to prudently think about a macro setting that’s in line with what we have skilled over the previous few quarters.

As such, we’re anticipating a non-GAAP working margin of at the very least 22%. We’re concentrating on a free money movement margin of at the very least 24%. From a income perspective, we estimate complete income to be $2.77 billion to $2.78 billion, representing development of roughly 7%. We consider these numbers are achievable whereas sustaining an applicable measure of conservatism.

To wrap issues up, we’re happy with the progress we have made to drive operational efficiencies. We have demonstrated distinctive leverage in our mannequin over the previous two years, and we stay centered on delivering worthwhile development for years to return. With that, I will flip it again to Dave for Q&A. Dave?

David Gennarelli — Senior Vice President, Investor Relations

Thanks, Brett. We have now a number of fingers raised up already. We’ll take them within the order that they’re in. And when you’ve got follow-on questions you will get again within the queue, so attempt to restrict your self to 1 query.

With that, we’ll kick it off with John DiFucci at Guggenheim. John?

John Difucci — Analyst

Thanks, Dave. My query I feel has to do with one thing Brett simply mentioned. Brett, you mentioned you are not incorporating extra conservatism within the steerage because of the incident from final October. And that is smart, by the best way, now.

However your steerage for subsequent yr, I simply wish to type of perceive it is an preliminary steerage for subsequent yr. What’s — you realize, ought to we give it some thought — hear, yeah, I feel you guys do a fairly good job if you information. However on the identical time, I am simply attempting to consider it like final yr, you had lots occurring the final — two years earlier than that. Ought to we take into consideration — ought to we return to these years and sort of take into consideration your method that’d be much like these years? Simply attempting to get my head round it.

Todd McKinnon — Co-Founder and Chief Government Officer

Yeah, John. Hey, earlier than you bounce in, Brett, I wish to simply set the context at a excessive stage. The Q3 was a strong quarter. And as we go into This fall and take into consideration subsequent yr, Brett can discuss concerning the specifics on steerage, however we’re, I feel, being fairly balanced between optimistic concerning the future and all this new product momentum and all this huge buyer momentum, but in addition wish to make certain we have now the suitable stage of prudence in our steerage.

So, it is all the time a balancing act, however I do not need the steerage query to sort of overshadow the momentum we see within the enterprise and the optimism we see there.

John Difucci — Analyst

Yeah, and, Brett — or, Todd, I apologize. I very not often say this initially, however it was a extremely strong quarter. It actually was greater than strong. It was actually good, and your entire staff ought to really feel actually good about it.

Todd McKinnon — Co-Founder and Chief Government Officer

No, It is one step. It is one step. We have now a number of work to do, however thanks for saying that.

Brett Tighe — Chief Monetary Officer

Yeah, by way of your query, John, concerning the steerage, I might say, you realize, in case you look again — let’s return a yr in the past, proper? And a yr in the past, we had the safety incident. We’re proper on the heels of it. And we received a ten% at that time, proper? From a income development perspective for FY ’25. We now assume FY ’25 goes to be 15%.

You’ll be able to work out the delta of 15 minus 10. I might not count on that stage of delta sooner or later simply because we’re taking out the safety incident, proper? There was a fairly large unknown at that time and a fairly large unknown till actually this quarter the place we have not seen any impression quantitatively from the safety incidents. So, that is how I might give it some thought, John. Hopefully, that is —

John Difucci — Analyst

OK. And — however once I return to the 5 — two years earlier than that, they’re — you exceeded your unique steerage by like over 5 share factors. That is why I type of — I get it, although. Lower than final yr, although.

Brett Tighe — Chief Monetary Officer

Yeah, and I feel the opposite factor is like in case you return a few years, we have been a a lot smaller firm —

John Difucci — Analyst

Yeah.

Brett Tighe — Chief Monetary Officer

Rising at a sooner clip. So, I feel simply the pure maturation of the enterprise, I would not return that far as to sort of —

John Difucci — Analyst

Yeah. That is proper.

Todd McKinnon — Co-Founder and Chief Government Officer

The opposite factor about it, too, is that This fall with slower development in these years versus 5 years in the past, This fall issues much more. So, given this steerage on the finish of — on the Q3 name, we have now extra — This fall issues extra by way of seeing the place we’ll be, in order that’s why the Q1 look is so illustrative.

John Difucci — Analyst

OK, thanks lots, guys. Good job.

David Gennarelli — Senior Vice President, Investor Relations

Nice. Let’s go to Eric Heath at KeyBanc.

Eric Heath — Analyst

Thanks, Dave, and congrats on the quarter, Brett and Todd. Todd, we have been listening to from a few of your GSI companions extra about RFPs for consolidated identification platform providing. So, I am curious if that is one thing you guys are seeing or measuring — possibly measuring in your pipeline, or, Todd, even arising extra in buyer conversations? As a result of it does appear to be resonating within the subject with a few of your companions.

Todd McKinnon — Co-Founder and Chief Government Officer

Effectively, I do know, on the GSI subject, we have now actually, actually made a number of progress with GSIs in final yr. I am actually, actually enthusiastic about this as a result of these — identification, as the parents on this name know Okta very well, it’s generally fairly complicated to do a complete change out of identification. In truth, it’s all the time complicated, far more complicated than different varieties of expertise, particularly within the cyber ecosystem. So, that has, you realize, positives and negatives.

The negatives are generally it takes longer to get a deal accomplished, generally it takes longer to do upsells. That is the excellent news — or that is the dangerous information. The excellent news is that after you get a dedicated cohort of shoppers and a dedicated cohort of methods integrators to assist a buyer on that journey, it is vitally invaluable to the shopper and really invaluable to the companion for a really very long time. So, you realize, the plus facet is that we’re going to be offering worth in these relationships, and everybody goes to be benefiting for years and years and years.

We had a extremely strong win of one of many largest expertise firms in North America in Q3 that was practically a $5 million ARR deal. And for that firm, it is simply the primary section of a multi-part — multi-phase deal to exchange their identification throughout their entire firm. This particular initiative in Q3 was pushed by zero belief transformation. So, even among the greatest expertise firms are comparatively early of their zero belief journey, and we labored with one of many largest SIs to scope that deal and convey that deal over after which extra — much more thrilling about it’s the offers which can be queued as much as comply with that as we get this preliminary deal deployed and a few stage of success after which transfer on to the following phases.

So, that is thrilling state of affairs there. And that is true on various offers within the quarter. I discussed in my ready feedback that of the highest 10 offers in 1 / 4 that was actually robust for large offers, all of them had companion participation. So, we’re doing a great job constructing that ecosystem, working with the companions, constructing belief and people companions.

And all of the — particularly that is true of the worldwide SIs. They’re seeing not a number of decisions on the market by way of scaled identification gamers. And notably, after we speak about a scaled identification participant that is independent-neutral and would not wrap that buyer into one stack, we’re unmatched. So, they’re seeing that — they usually’re seeing the panorama and our distinctive worth there, they usually’re aligning themselves with us, which I feel goes to learn everybody.

Brett Tighe — Chief Monetary Officer

I feel, additionally, the fascinating half concerning the high 10 offers that Todd was simply speaking about having all companions — the nice a part of it’s it was a number of several types of companions. You have heard us speak about GSI as being essential, however it was GSIs, it was ISVs, it was marketplaces, it was the normal VARs. I imply, it was a combination of all of them. So, that is why we proceed to wish to spend money on every certainly one of these areas as a result of we’re seeing success like this in Q3.

David Gennarelli — Senior Vice President, Investor Relations

Nice. Subsequent up, let’s go to Grey Powell at BTIG.

Grey Powell — Analyst

All proper. Nice. Thanks very a lot. Earlier than I ask my query, I simply received to say, I actually admire the ten minutes of ready remarks.

And actually, Brett, I feel your part was most likely shorter than DiFucci’s query. So, once more, congrats on conserving it tight. So —

Todd McKinnon — Co-Founder and Chief Government Officer

We do what we will, Grey. We do what we will.

Grey Powell — Analyst

Thanks. So, for my query, it has been a fairly uneven earnings season up to now throughout our safety protection. And it is simply — I assume it is simply good to see your numbers inflect increased. So, is there any means you possibly can sort of speak about what stood out most this quarter versus Q2? Identical to what modified probably the most? After which, how do you are feeling concerning the sustainability of that efficiency and simply the ahead execution?

Todd McKinnon — Co-Founder and Chief Government Officer

It was fairly totally different than Q2 by way of our — simply our execution within the quarter, bringing offers throughout the road. We did — Q2 was OK, Q3 was very strong. And I feel that’s possibly — I feel what’s lining as much as be to seem like the truth is that the yr is wanting extra back-end loaded than what we could have thought within the first quarter or the second quarter, which I feel is just not — you realize, with — within the historical past of the corporate, that is not — it is not — it is pretty frequent for that to be the case. However I feel this yr, it is turning out to be a bit of greater than possibly we anticipated, which suggests This fall is an enormous quarter.

And, you realize, the pipeline is there, and it’s as much as us and the staff to execute on that. And we’re actually aligned and motivated and perceive how necessary it’s as a staff that we have to do this, and we’re all set to make {that a} actuality. There’s a number of stuff to construct on. We have talked about a few the examples already, the big offers, the brand new merchandise.

So, 15% of bookings within the quarter have been from these new merchandise, which, you realize, we want it was a better share, however there may be a number of new merchandise which can be beginning to blossom and have the potential to be vital contributors on their very own. Governance now’s a 3rd of the worth of offers that’s included wherein is — or 30% of the worth, it is lower than a 3rd. Okta Privileged Entry is beginning to get momentum. We had a pleasant win there for a U.S.

division of an Asian financial institution, which purchased the entire suite, entry administration, governance, and privileged entry, which we predict goes to be a typical shopping for sample. And the motive force there, I discussed the big expertise firm earlier than, the motive force in that instance is zero belief. They’re attempting to go to a zero belief structure and identification is necessary. For this U.S.

division of this Asian financial institution, it’s all about compliance. So, they wanted to have regulatory compliance for the auditors round not solely purposes and monetary purposes, however servers, which privilege entry gave them that entry to. So, we’re seeing new merchandise, massive offers. We see good companion involvement.

However, you realize, we’re nonetheless — we nonetheless assume we will develop sooner. We talked concerning the information for subsequent yr and the way we’re eager about that. However we proceed, as we all the time have, I feel this can be a large alternative, and it is certainly one of — you realize, our second highest precedence after safety. And our safe identification dedication is development and reaccelerating development.

So, you realize, we’re happy, however we’re not happy. We have now a number of work to do, and this staff is fired as much as make it occur, and we will go on the market and do it.

Grey Powell — Analyst

All proper. Thanks —

Brett Tighe — Chief Monetary Officer

I might add a few issues, Grey, that truly could not have modified, however are positives for us usually. One is contract length continues to be wholesome for us. You’ll be able to see that within the complete RPO development, proper? That is now 6 factors increased than present RPO development. The opposite factor I might add is U.S.

federal, finish of their fiscal yr, we had a extremely strong near that. So, that was — you realize, what you heard earlier, is an efficient portion of these high 10 offers, and I feel that is only a continuation of our success in public sector. Consider public sector is definitely certainly one of our first forays into specialization, proper? We have actually centered on it. We have put a number of effort on it.

We have accomplished a number of stuff from an R&D perspective. And so, that continues to additionally achieve success for us in Q3 and helps the outcomes we see right here at the moment.

Grey Powell — Analyst

Understood. Thanks.

David Gennarelli — Senior Vice President, Investor Relations

Subsequent, we have now Gabriela Borges at Goldman.

Gabriela Borges — Analyst

Hey, good afternoon. Thanks for taking the query, and congrats on a strong quarter. Todd and Brett, I needed to select up the place they only left off on the 15% of bookings which can be coming from rising merchandise. Remind us how that quantity compares to historical past.

And, Brett, you talked about with the web retention charges, there are two dynamics impacting that. You have received the stress on MAUs and seat rely and then you definitely’ve received the tailwind from cross-sell. Discuss to us a bit of bit about if you assume rising can offset the headwind in MAUs and seat rely, and it is a good distance of asking if you assume internet retention would possibly trough? Thanks.

Todd McKinnon — Co-Founder and Chief Government Officer

On the brand new product combine, I do not know the precise numbers, however with out going again and looking out on the knowledge, my sense being fairly near the gross sales course of, particularly on the brand new merchandise, that is increased than it has been prior to now. And it is, you realize, sort of led by governance, identification governance. And it is — for second place, the place it is sort of a — it is a fairly shut competitors between privileged entry, identification risk safety, which is — for probably the most security-conscious prospects, it is a actually massive addition to their suite. Identification risk safety, it is — the best way to consider it’s it is sort of just like the superior model of superior multi-factor.

And the massive factor it does is it displays safety dangers all through the session. So, multifactor and superior multifactor do phishing-resistance proper if you log in. Identification risk safety repeatedly displays threat alerts, change of IP addresses, CrowdStrike, SentinelOne, detecting any sort of situation, and shutting down the session so it is proactive monitoring. So, that is an enormous contributor.

After which, we have now — on the shopper identification facet, we have now effective grained authorization that had an honest quarter, and we even have extremely regulated identification. So, you’re seeing all these sort of seeds which can be beginning to develop that are, frankly, extra thrilling than the 15% since you see this 15% contributed by a number of seeds which can be going into probably contributors. It is fairly thrilling for the long run.

Brett Tighe — Chief Monetary Officer

Yeah, Gabriela, I might truly simply add, the share is up year-over-year as a result of, principally, final yr was simply governance. And Todd simply listed out like six merchandise which can be doing very well proper out of the gate. So, it is fairly straightforward to see that the share goes up and to the suitable, which is basically thrilling for us for all the explanations that Todd has mentioned simply in his final reply and what he mentioned earlier on the ready remarks. When it comes to the NRR and what are the consequences on it, it is the identical results we have talked about prior to now, proper, license counts, and MAUs are being scrutinized like we have talked about prior to now.

That is macro-oriented simply usually. After which, there may be additionally cohorts prior to now which can be feeling stress. You understand, older buyer cohorts which can be feeling stress from the COVID period. When it comes to what we anticipated to do for the subsequent quarter — that is as a result of that is the one forecast I’ve proper now.

I haven’t got it all through FY ’26. However for This fall, we predict it — we predict it ticks down a bit of bit in This fall based mostly on these elements. It is on high of wholesome gross retention, however these elements stay the identical by way of what we have mentioned prior to now. And so, that is what we’re seeing for now.

When it comes to what we count on in FY ’26, allow us to get by way of This fall first after which see how that actualizes. And we have got to finalize our fiscal yr 2026 plan, and we’ll go from there and have the ability to offer you a bit of bit extra insights on what NRR will do all through FY ’26.

Gabriela Borges — Analyst

That each one sounds good. Thanks for the decision.

David Gennarelli — Senior Vice President, Investor Relations

Subsequent up, we have now Hamza Fodderwala at Morgan Stanley.

Hamza Fodderwala — Analyst

All proper. Good night. Thanks for taking my query. Todd, I needed to ask you about SEC just lately launched an investigation or reportedly seeking to launch an investigation on Microsoft and the way they’re bundling a few of their safety providers.

I am curious when you’ve got any touch upon that and possibly simply what you inform prospects about among the dangers round vendor lock-in. Thanks.

Todd McKinnon — Co-Founder and Chief Government Officer

Yeah, it is a actually necessary query. I can not — I am not shut sufficient to know the authorized arguments or the regulatory arguments, however they do bundle. And the pitch is, “Hey, purchase it off from us, and will probably be cheaper.” And I feel what I inform prospects is, “To start with, you are foreclosing your possibility to decide on various things.” And what’s not all the time apparent to prospects is how necessary identification is in that gatekeeper function. And there is a cause strategically that — and it is Microsoft now, however I feel each massive expertise firm that is attempting to promote a number of layers in a platform, whether or not that is collaboration or enterprise purposes or infrastructure, goes to be tempted to take — as a result of all of them must construct identification.

Every little thing wants a login for itself. They’ll be tempted to take that identification service and use that for basic identification and basic login as a result of it’s — it has a really highly effective lock-in impact. If you will get somebody to make use of your identification, they will be extra probably to make use of extra issues from you. So, it is — in that sense, it may be a loss chief.

And our argument is, to start with, to inform those that. We are saying, “Hey, do not make the long-term alternative that is going to lock you in and take away alternative and adaptability. Everyone knows that if you take away alternative and adaptability, it is not simply that you just pay extra ultimately, you truly worsen outcomes as a result of you possibly can’t choose the suitable expertise.” And that is notably necessary within the safety world as a result of — as we additionally all know that safety is adversarial, and the attackers are coming from many alternative instructions. And eight out of 10 instances, these safety breaches are brought on by compromised identification.

So, if you’re locked into one stack from a safety instruments perspective and from an identification perspective, you are not going to have pretty much as good as safety outcomes. So, that is the pitch I make to prospects, and it is resonating. They perceive. I imply, for some prospects, it would not work.

Some prospects, it would not work. They’re simply — they do not view expertise that strategically or they do not — it is simply reduce prices it doesn’t matter what, they usually go for the bundle. However an increasing number of prospects, I discussed one of many largest tech firms in North America, they realized that identification actually issues, and having an unbiased impartial identification platform actually issues. And, you realize, a greenback they spend with Okta goes to pay again 5 or tenfold by way of the safety outcomes they get and the flexibleness and the power to onboard totally different expertise.

So, it is beginning to resonate. And we’re doing — and the staff is aware of this. We’re doing one thing that is by no means been accomplished earlier than. We’re constructing a scaled-out identification platform throughout a number of use circumstances, buyer and workforce and privilege and governance.

And we’re the one one which has this basis to construct from, and we’re unbiased impartial. We’re not attempting to promote the rest. We expect our identification suite works higher collectively, however that is the place it ends. We’re not attempting to promote different elements of the safety stack.

We’re not attempting to promote different purposes. We depart that as much as the purchasers to decide on one of the best consequence for them.

David Gennarelli — Senior Vice President, Investor Relations

OK, let’s go to Matt Hedberg at RBC.

Matt Hedberg — Analyst

Nice. Thanks, Dave. Todd, I needed to circle again on the governance facet of it. It was an fascinating statistic you gave.

And I assume if you have a look at the success you’ve got had attaching governance to workforce offers, are you able to discuss concerning the aggressive panorama? And are there key parts of success this yr that you just assume may parlay to subsequent yr? Perhaps it is elevated companion affect, possibly some extra gross sales incentives to drive even additional new product connect subsequent yr?

Todd McKinnon — Co-Founder and Chief Government Officer

Yeah. I feel the dynamic is in lots of of those governance situations, there isn’t any resolution, notably — I imply, I am speaking concerning the buyer would not have an answer, notably in areas that aren’t conventional on-premise ERP legacy expertise. So, a number of instances that there’s a governance resolution, it is carried out round that legacy on-prem, you realize, simply massive SAP, for instance, or massive Oracle, for instance. And we’ll are available they usually’ll use us for an app that is not that.

It is possibly their SaaS purposes, they usually do governance for that. They usually understand that these SaaS purposes have gotten extra necessary for compliance and extra necessary for simply basic safety and ensuring the entry is managed from a safety perspective. And we do a extremely good job of that. It is fairly uncommon for somebody to take Okta governance and exchange a deployed in-production legacy governance resolution round an on-premise software.

And I feel that will likely be — that may proceed to be uncommon simply because it really works. You understand, it is prefer it’s checking all of the compliance containers. It is most likely not price altering, and there is a chance to simply do the use circumstances round that. One factor that’s fascinating is there’s a number of — and I’ve discovered within the governance market in the previous couple of years is there’s a number of software program.

And so, it is most likely not a market the place you need to have 25 years of options to win as a result of there’s a number of software program available in the market. I bear in mind, that is going again a very long time now, however once I was working at Salesforce, once I first received to Salesforce and I regarded on the product capabilities, it was extremely easy, particularly in comparison with Siebel. It was — it most likely had, you realize, one out of 10 of the options, however it simply ran the desk as a result of nobody used all these options in Siebel. And I feel the governance market is like that.

There’s a number of software program, a number of the stuff is just not carried out. In our product, which could be very strongly built-in to entry administration, or entry administration, it’s extremely fast to implement. Folks get super worth out of it quick. It is effectively built-in to many SaaS purposes.

And an increasing number of, it is built-in to even on-prem purposes as we innovate there. And it is quick time to worth. And I feel that, on this case, is the successful formulation, and we’re seeing it play out available in the market.

Matt Hedberg — Analyst

Thanks, Todd.

David Gennarelli — Senior Vice President, Investor Relations

And subsequent up, we’ll go to Josh Tilton at Wolfe.

Joshua Tilton — Analyst

Thanks, Dave. Brett, possibly one for you. The continued seat and MAU pressures that you just guys are seeing this yr, how does that, if in any respect, change your visibility into subsequent yr? And the way are you sort of accounting for that within the information that you just gave at the moment?

Brett Tighe — Chief Monetary Officer

Yeah, that is all accounted for within the information at the moment. It is a good query, Josh. When it comes to the — you realize, there’s two various factors that we’re speaking about, proper? There’s the macro simply total firms are simply not shopping for as many licenses. They’re scrutinizing licenses.

After I say licenses, I imply licenses or MAUs, simply depends upon what facet of the enterprise. After which, there may be the older buyer cohorts. That older buyer cohort, we predict, materially is completed by the tip of the primary half of fiscal yr ’26. However — so, that is all — by the best way, that is all captured within the information.

So, hopefully, that helps there, Josh.

David Gennarelli — Senior Vice President, Investor Relations

Nice. Subsequent up, we have now Jonathan Ho at William Blair.

Jonathan Ho — Analyst

Good afternoon, and congrats on the robust quarter. Simply questioning in case you may give us some extra on the go-to-market specialization alternative that you’ve got referenced and possibly assist us perceive why you see the necessity to do that now. Or, you realize, what’s possibly the impetus driving that?

Todd McKinnon — Co-Founder and Chief Government Officer

Yeah. Talked to lots of people and dealing with Okta and go-to-market fashions the final 5 – 6 years, there’s principally two spectrums of go-to-market. There’s one finish of the — or sorry, two ends of the identical spectrum. One finish of the spectrum is all the things is basic.

And each rep sells all the things. There is no overlays. There is no specialists that — simply basic lease mannequin. On the opposite finish of the spectrum is all the things specialised.

Each product has its personal rep and each — you realize, there’s simply complete specialization. And the trade-offs are roughly, you realize, you get extra most likely productiveness and gross sales efficiency out of the utterly specialised mannequin, however you additionally get much more prices. So, the train is how do you — because the group grows and the product portfolio grows and the market evolves and the aggressive dynamic evolves, how do you place your group in the suitable spot on that spectrum to maximise development and profitability. And so, the easy reply to your query is, we predict that there is a possibility for extra development right here than we’re seeing now.

So, a part of the initiative to speed up development as we wish to do extra specialization. And I feel there’s some potential for, at the very least within the short-term, some elevated prices, however we predict it will be far outweighed by the rise in development. And by the best way, we’re very dedicated and really centered on profitability as effectively. However I feel we have now sufficient room within the enterprise and based mostly on all our effectivity work and among the effectiveness, investments we have made the place we will make the specialization funding and nonetheless run on the profitability ranges we have outlined and are snug with and nonetheless accelerating development.

So, that is the excessive stage. Extra particularly, I feel it is necessary to grasp sort of extra particularly what we’re saying right here. So, what this implies is that we will have as an alternative of gross sales reps at Okta promoting each product, they will be extra specialised to merchandise. Particularly, there may be going to be devoted Auth0 reps after which devoted Okta reps.

And the Okta reps are going to be — we’d like them as a result of the product is getting fairly broad. It’s extremely, very difficult to promote governance and privileged entry and entry administration and buyer identification. And they will be specialised to promote the suite of entry administration, privileged entry, governance, ITP, that suite. After which the Auth0 reps are going to be centered on Auth0.

So, it is builders. It is ensuring that each self-service buyer that begins to improve will get upgraded into full enterprise deployment as a result of a number of these small firms develop into a few of our greatest prospects. You all learn about our presence within the AI world and the way we have now very vital prospects there that began off a self-service trial. So, merchandise are getting extra succesful.

It’s extremely robust for one salesperson to cowl all of them. We see a development alternative, and we’re going to verify we take it.

Brett Tighe — Chief Monetary Officer

Yeah, I might simply add to that. If you concentrate on it, Jonathan, it is actually about productiveness, proper? If we simply boil all the way down to a easy metric, it is AI productiveness, and we have seen good good points this yr in AI productiveness. We expect we will make these good points go even additional by making this variation in a portion of the group, which fits again to Todd’s level is we have constructed all these efficiencies into the group. So, you possibly can steadiness with attempting to go for extra development whereas additionally being healthily worthwhile as we’re and count on to be in FY ’25 and FY ’26.

Jonathan Ho — Analyst

Nice. Thanks.

David Gennarelli — Senior Vice President, Investor Relations

Subsequent up, we have now Joe Gallo at Jefferies.

Joseph Gallo — Analyst

Hey, guys. Thanks for the questions. Are you able to simply discuss by way of buyer identification, its efficiency this quarter, and the way you are eager about that market development fee? After which, simply given all of the conversations round specialization, how ought to we take into consideration the maturity of the channel and its capacity to promote that product?

Todd McKinnon — Co-Founder and Chief Government Officer

Sure. Buyer identification had a strong quarter. I feel the — we’re very excited. It is over $1 billion enterprise now.

So, we have now the workforce enterprise, which is effectively over $1 billion, clearly, after which the shopper identification enterprise, which is over $1 billion as effectively. I feel that the drivers in that market are considerably safety, however they’re a bit of bit totally different on the workforce facet. It is much less pushed by safety and, many instances, simply pushed by buyer expertise. There’s a big European on-line retailer that signed up for buyer identification quarter in Q3 — buyer identification in Q3, and also you assume, oh, it will need to have been, you realize, some safety or one thing driving the acquisition, however it was simply comfort.

Their net expertise and cell app had a number of logins and a number of IDs, they usually’re attempting to consolidate that. So, it is an necessary a part of our enterprise. It is rising robust. And as I simply talked about, we predict we will develop it even sooner with extra deal with this developer persona, which, you realize, we have seen prior to now that it’s extremely — the alternatives are enormous when the developer — when the use circumstances begin bottoms up, one thing new is constructed, begins to develop, comes into the self-service funnel upgrades to enterprise.

It may be fairly vital, and we wish to guarantee that we make the most of that chance.

Joseph Gallo — Analyst

Thanks.

David Gennarelli — Senior Vice President, Investor Relations

Let’s go to Mike Cikos at Needham.

Mike Cikos — Analyst

Nice. Thanks, Dave, and thanks for taking the questions, guys. Simply needed to faucet into the specialization remark, too. Are you able to both level to public sector the place you guys arguably pushed among the specialization of Americas SMB.

I am positive you guys have your personal inside knowledge factors you are watching. However what would you level us to, to assist us get larger confidence that this specialization is the suitable method? As a result of, clearly, that is informing your resolution, however it will be useful to get it for us outsiders right here. Thanks.

Todd McKinnon — Co-Founder and Chief Government Officer

Sure. It is — there is a bunch of information factors. You talked about a few them. The hunter-farmer within the Americas SMB is there’s optimistic knowledge factors out of that.

It is — I might say that is a comparatively small a part of the enterprise. I feel the general public sector and the main focus there and the — actually talking the identical language as that purchaser is a much bigger knowledge set and pattern measurement and long run, pattern measurement that we’re assured on. After which, a part of it, too, is simply watching the gross sales cycles and sitting by way of the conversations and seeing the potential on this developer-facing market and seeing how a lot extra development we simply instinctually assume we will see by focus and by devoted sources on that. After which, eager about what is the — like I mentioned earlier than, there’s all the time a trade-off, proper? The trade-off is transition prices.

Like, what’s the value to make the modifications required to get to that mannequin? After which, what’s the — you realize, how is the ramp in development going to, you realize, measure in opposition to the rise of value of gross sales protection. And we predict that, on this case, based mostly on all our modeling and all our previous expertise, that the expansion advantages are going to outweigh the prices.

David Gennarelli — Senior Vice President, Investor Relations

All proper. Subsequent up, we have now Madeline Brooks of BofA.

Madeline Brooks — Analyst

Good afternoon. So, you realize, I feel total, we will all agree that this can be a actually robust quarter for you guys. So, I feel then once I take a step again and have a look at the market, I actually wish to sort of hone in on the 7% information for subsequent yr, and if I simply sort of extrapolate what new bookings was for this quarter, we will sort of get to an assumption that possibly the core workforce and SIEM markets are rising roughly 5%. And so, I first wish to make clear, that 7%, does that embody any upside from new bookings or new bookings from — sorry, from new merchandise? Or are new merchandise already baked into that information? After which, only one follow-up query after that.

Brett Tighe — Chief Monetary Officer

Yeah. All of the merchandise we have now at the moment are already baked in there, if that is what you are asking. I feel the one which’s probably the most materials by far is governance. Like we have talked about earlier than, we’re hopeful that a few of these merchandise that we have been describing right here at the moment proceed to ramp like they’ve been within the final quarter or two and grow to be extra materials.

However frankly, the largest new product in there can be governance. Hopefully, it helps there, Madeline.

Madeline Brooks — Analyst

Yeah. After which, so for my follow-up, I assume, if I have a look at the identification market, each workforce and SIEM, each rising sooner than that 5%. I imply, sort of if we analyze efficiency right here, is there something that Okta can do higher to try to simply reinvigorate the expansion in these core markets the place the market is rising sooner and that 5% development fee would recommend just a few share loss there. And that is it.

Thanks.

Todd McKinnon — Co-Founder and Chief Government Officer

Yeah. It is an necessary query we take into consideration lots as a result of, as I mentioned, our No. 2 precedence is development, and I will consult with the No. 1 precedence, which is safety.

And I feel having — not having any safety points goes to be an enormous deal. And we have invested aggressively each by way of cash and by way of simply execution on ensuring we have now actually carried out effectively on our safe identification dedication, which has 4 pillars. And we will discuss concerning the 4, however the massive a part of it’s hardening in our personal company infrastructure. And we’re — like I mentioned, we have invested a ton.

We have made a ton of progress there. And as I discuss to main tech firms and CISOs and different CEOs, our posture, our inside safety posture has made a ton of progress. And I feel after we discuss concerning the accomplishments of this quarter, I feel probably the most issues I am happy with this yr at Okta is our enchancment there. We nonetheless have extra work to do.

It is a endless funding stage to verify we’re probably the most safe firms on this planet. However that is one thing we’re very dedicated to and ensuring we proceed to execute on. And I feel one of many — you realize, I will get again to your query concerning the development charges and the market development, however I feel what we’re seeing now’s that, that work, that inside work is basically beginning to translate out into prospect and buyer momentum as a result of they’re seeing an organization that is sort of been by way of the hearth and used and discovered lots and sharing that with the market now and serving to the entire {industry} defend in opposition to identity-based assaults. And our personal merchandise are very related from — I discussed ITP earlier, to not point out privileged entry and governance, and we use these as we lock down our personal infrastructure, and prospects can study from that.

And in order that’s — I feel, having a robust safety efficiency by way of breaches and points, that is one a part of it that may assist us acquire share available in the market and beat these estimates we have put on the market probably. That is one factor. Second factor is that I feel if we do all that and proceed to execute effectively, and we have now our — we talked about specialization and talked about some issues we’re doing to speed up development within the go-to-market facet, and we — if we do not develop sooner than the market, I might say that the market forecast turned out to be improper. As a result of if we do all these issues, we’re not going to lose share.

We’re not going to develop slower than the market. and we will be simply effective. As a result of in case you simply discuss to prospects and you concentrate on — in case you ask them about their issues and the way related identification is and if they’ve solved all their identification challenges, there’s nonetheless a number of work to do on the market, and there is nonetheless a number of issues to resolve and nonetheless a number of worth to be delivered to prospects. And we’re going to verify we’re there to ship that for them.

David Gennarelli — Senior Vice President, Investor Relations

Nice. Subsequent up, we have now Shrenik Kotharia at Baird.

Shrenik Kotharia — Analyst

Yeah. Nice. Thanks for taking my questions, and congrats on the strong execution. So, the federal vertical you guys talked about stays, after all, a key development driver.

Half of your high 10 offers have been within the sector, which aligns with the year-end, first, your certifications and partnerships and the DC-based groups that is translating to match benefit. My query is, how are you viewing the structural shifts like, maybe, by way of budgets and reallocations that you just foresee post-elections beginning subsequent yr? How do you propose to navigate these — once more, it is nonetheless hypothetical. However simply any potential disruptions that you just could be foreseeing and tied to adversary modifications? And — yep.

Todd McKinnon — Co-Founder and Chief Government Officer

Yeah. I feel one of many — one of many wins — we talked about the highest 10 offers, and 5 of them are within the U.S. federal vertical. One among them was very thrilling win on the DOD.

And we talked about just a few quarters in the past, we had our first massive DOD win. We adopted that up with one other vital one this quarter, which is basically — it is actually a great optimistic signal of issues to return along with outcomes for the quarter. We additionally closed the deal, a major deal within the high 10 on the largest healthcare supplier for the federal authorities. So, there may be a number of momentum there.

I feel it is identification and safety and modernizing among the identification and the main focus that the federal authorities has had on cyber is sort of apolitical as a lot as something may be apolitical. However it’s actually — you realize, everybody needs to be safer and everybody is aware of that nation states have an curiosity in attacking the federal authorities, and identification might help defend in opposition to that. They usually must modernize these items. Plenty of the stuff they’re operating is kind of outdated, fairly legacy.

And I feel one of many causes we’re seeing a number of momentum is it is just like the two-part formulation of deal with cyber and, in lots of circumstances, a long-overdue initiative to modernize among the tech. And we’re benefiting from each of these within the federal vertical.

David Gennarelli — Senior Vice President, Investor Relations

Nice. Subsequent up, we have now Rudy Kessinger at D.A. Davidson.

Rudy Kessinger — Analyst

OK, nice. Thanks for taking my query. I wish to return to John’s first query on the decision, Brett, nearly eradicating this extra conservatism within the steerage for the breach. I assume, if we have a look at a few of, you realize, the magnitude beats in some figures the final couple of quarters, cRPOs, particularly, you’ve got been beating 3 to 4 factors each quarter.

I assume, are you able to quantify like the place — was there 1 to 2 factors of conservatism for the breach in your cRPO information in the previous couple of quarters? Or simply how ought to we take into consideration, you realize, that This fall CRPO information, particularly, going ahead the extent of conservatism in it versus previous quarters?

Brett Tighe — Chief Monetary Officer

Yeah, I might say the extent of conservatism is each present RPO and the income, simply so we’re on the identical web page, in addition to op margin. It is sort of all flows collectively, proper? After I say op margin, I imply each op margin and free money movement. I haven’t got a precise quantification for you, Rudy, however like I mentioned earlier, I simply do not — it is not going to be 10 to fifteen like we did — that instance I gave earlier, which was 10 presently of the yr. Now it is 15 for income development in FY ’25.

I simply do not — I do not think about us seeing that given what we will see at the moment. And take note, that is additionally simply the pure maturation of the corporate. We’re simply getting greater; development is slowing down a bit of bit. So, it is also, you realize, a safety incident, but in addition simply the sheer measurement of our firm at this level.

David Gennarelli — Senior Vice President, Investor Relations

Let’s go to Saket Kalia at Barclays.

Saket Kalia — Analyst

OK, nice. Thanks for taking my query right here. Good to be on the decision. Brett, possibly for you.

Can we simply discuss a bit of bit about new emblem enterprise within the quarter? I imply, I feel we have been all ready for what was going to occur to internet income retention. But it surely looks as if the brand new emblem a part of the enterprise stabilized this quarter. Are you able to simply speak about what drove that and whether or not that pattern is one thing that may proceed going into subsequent yr?

Brett Tighe — Chief Monetary Officer

Yeah. I imply, frankly, we would like the brand new emblem numbers to be increased. I imply, it was 150 quarter over quarter. You understand, one of many issues that we have been clearly engaged on is the hunter-farmer mannequin to attempt to enhance that.

That is one piece of the formulation, proper? Hunter-farmer is each new logos and likewise upsells as effectively. However, yeah, we predict we will do higher than the place we’re. And albeit, the excellent news is have a look at our strong outcomes we will produce when actually primarily promoting cross-sells, proper, in case you have a look at the present RPO development of 13%, complete RPO development of 19%. You understand, there’s a number of alternative contained in the buyer base at this level.

I imply, Todd talked about it earlier with 15% of the bookings coming from these newer merchandise. However in the end, that is simply scratching the floor. We have now a ton of alternative contained in the buyer base. However to be clear, we wish to have the ability to develop the emblem rely sooner than this.

Like I mentioned, the excellent news is we have accomplished lots with the bigger prospects and likewise created 100K, the million-dollar cohort, so we have undoubtedly have helped ourselves. However we sit up for producing, frankly, higher than this.

Saket Kalia — Analyst

Very useful. Thanks.

Brett Tighe — Chief Monetary Officer

No drawback.

David Gennarelli — Senior Vice President, Investor Relations

Subsequent up, we have now Patrick Colville at Scotiabank.

Patrick Colville — Analyst

All proper. Thanks a lot for taking my query. I assume, Brett and Todd, I imply, if I look again at this yr, 2024, to me, the standout success has been Okta’s quickly enhancing profitability. This time final yr, you set the preliminary information margins in fiscal ’25 at 17%.

Within the press launch, it is now as much as 22%. So, I assume a 5-point beat. How ought to we take into consideration Okta’s capacity to outperform your preliminary information of twenty-two% subsequent yr? After which, additionally, simply, I assume, give us some colour on the way you’re eager about hiring as a result of it seems like hiring has sort of picked up the final couple of quarters. All proper.

Thanks.

Brett Tighe — Chief Monetary Officer

Yeah. From a profitability perspective, one of many issues that we have talked about a bit of bit on this name is we actually wish to lean extra into development. If you concentrate on the rule of 40, proper, it is the lens we handle the corporate by way of for years now. We wish to lean extra into the expansion facet of the equation.

And so, I would not essentially count on a bunch of upside. I imply, we undoubtedly set the steerage the place we predict it is achievable. However we do wish to make investments into the chance as a result of we do see it on the market. You have heard Todd’s feedback all through this whole name of optimism of how we will go and get extra of the market.

And so, we do not wish to sit right here and say, hey, the profitability goes to be means increased than what we have already guided to you as a result of we wish to go after that massive market alternative. And we’re making, clearly, all these modifications and these investments. Take into consideration safety Todd talked about earlier. The product innovation coming off the road has been actually good, and we predict we will count on extra of that, you realize, the specialization subjects we have talked about at the moment, investing extra in companions.

These are all development drivers. We actually wish to get after development. And we’re snug with the steerage we have given you right here at the moment, each high and backside line.

Patrick Colville — Analyst

Thanks a lot.

Brett Tighe — Chief Monetary Officer

No drawback.

David Gennarelli — Senior Vice President, Investor Relations

Subsequent up is Rob Owens at Piper.

Rob Owens — Analyst

Nice. Thanks, Dave, and good afternoon. Todd, I wish to construct on among the feedback that you just made earlier, and admire sort of the overview of the place we’re by way of identification. And I feel Brett mentioned we needs to be doing higher from a brand new buyer perspective.

And albeit, I might agree. So, the place is the market simply by way of being dynamic round prospects wanting to change at this level? You understand, we proceed to listen to identities damaged is the explanation that almost all of those breaches happen within the first place. So, why is not that extra dynamic? And you’ve got put this hunter-farmer mannequin in 9 months in the past, and I understand these items take time. However I might count on that 150 sort of quarter-over-quarter quantity to begin to enhance right here.

So, the place is the governing think about that, particularly relative to I feel your broader feedback of the place identification is true now? Thanks.

Todd McKinnon — Co-Founder and Chief Government Officer

Yeah. I feel the shopper rely quantity is a bit of bit — it exhibits extra concerning the SMB market as a result of that — clearly, the logos are — you realize, extra logos down there versus in case you have a look at the shopper rely rising in 100K plus. It is, you realize, up 8% versus a smaller quantity under 100K. So, that is one quantitative factor.

However I feel one fascinating factor about your query is simply I used to be at a dinner final week, I used to be in Australia touring, visiting a bunch of shoppers and prospects down there. And I used to be a dinner of a bunch of companions, a bunch of methods integrators of ours and speaking to them about how issues are going. And I used to be asking them about identification in comparison with different elements of cyber and what is the dynamic. They usually mentioned additionally the identical factor, which is these are individuals within the trenches doing these offers with prospects, rolling out merchandise.

After they go searching they usually see what is the best to alter, it is — different issues are simpler to alter generally. It is simpler to place one thing on the endpoint. It’s simpler to alter out your firewall. Identification is tougher to alter.

However the upside of adjusting it’s fairly necessary, particularly when you think about eight out of 10 breaches are brought on by identification. So, I feel in some circumstances, it will be slower, however we simply must be affected person as a result of we have now, by far, one of the best merchandise. We have now — we’re on this very distinctive place the place by way of scale and trendy expertise and product suite and independence and neutrality, there isn’t any one else on the market. And so, we have got to simply maintain executing, maintain working arduous, maintain innovating, maintain assembly prospects the place they’re, and we’ll be simply effective with the plans and the methods and the efficiencies we’re demonstrating.

David Gennarelli — Senior Vice President, Investor Relations

Subsequent, we’ll go to Peter Levine at Evercore.

Peter Levine — Analyst

Thanks, guys, for placing me in. Todd, you have been speaking about AI, however you are beginning to see considerably of an explosion of like nonidentities, nonemployee identities, the machine identities, bots. Are you able to possibly discuss to us about what you are seeing throughout your prospects by way of, A, just like the utilization round AI and people identities which can be popping out to their community. After which, B, out of your perspective, like, how do you monetize that, proper? If there’s extra identities to guard nonemployee identities, like, what are your plans over the subsequent, name it, 12, 18 months by way of monetizing a few of, you realize, the adoption or the preliminary adoption of AI?

Todd McKinnon — Co-Founder and Chief Government Officer

Yeah, it is — I might say there’s 4 issues. And two of them you’ve got most likely heard me speak about, and two of them, you most likely have not. The primary two are — the obvious factor is there’s a entire new era of apps and SaaS apps and improvements that individuals have to log into. And we are the identification layer from a buyer identification perspective and among the greatest on this planet and a number of smaller ones that, you realize, you have not heard of but, however you’ll hear of.

And this — which is why, by the best way, the developer focus is so necessary as a result of that entire era of tech is being constructed. Second factor is that we have now Okta AI, which, you realize, we talked lots about a few years in the past, and we proceed to work on that. And it is actually beginning to assist these new merchandise like identification risk safety with Okta AI. The mannequin inside identification risk safety and the way that works is AI is an enormous a part of the product performance.

So, these two, you most likely heard me speak about earlier than. Some actually fascinating new areas are we have now one thing we talked about an Oktane referred to as Auth for Gen AI, which is principally authentication platform for brokers. Everybody could be very enthusiastic about brokers as they need to be. I imply, we used to name them bots, proper? 4, 5 years in the past, they’re referred to as bots.

Now, they’re referred to as brokers. Like, what is the massive deal? How totally different is it? Effectively, you possibly can work together with them pure languages, they usually can — they will do much more with these fashions. So, now, it is like bots are actual in actual time. However the issue is all of those bots and all of those platforms to construct bots, they’ve the equal of the monitor sticky notes with passwords on them.

They’ve the equal of that contained in the bot. So, there isn’t any protocol for single sign-on for bots. They’ve like saved passwords within the bot. And if that bot will get hacked, guess what? You signed up for that bot and it has entry to your calendar and has entry to your journey reserving and has entry to your organization e mail and your organization knowledge, that is gone as a result of the hacker goes to get all these passwords on the market.

So, Auth for Gen AI automates that and be sure to can have a safe protocol to construct a bot round. And so, that is a extremely fascinating space. It’s extremely new. We simply introduced it.

And all these agent frameworks and so forth are new. However I feel it goes again to this concept the place there may be a number of profound innovation and new purposes and providers within the AI revolution. However a number of it’s only a magnification of the identical issues, whether or not it is extra apps we have to safe higher buyer experiences, extra built-in, we have to construct, not having passwords on our displays, having single sign-on within the case of individuals and within the case of bots. We’re related in all these issues, and, you realize, it is fairly thrilling to observe it occur and see — you realize, frankly, it’s a number of potential proper now by way of our enterprise, however the potential is massive.

Peter Levine — Analyst

You by no means simply share simply the monetization. How do you propose on charging for that and if you’re charging at the moment, however simply actually like —

Todd McKinnon — Co-Founder and Chief Government Officer

Yeah.

Peter Levine — Analyst

To carry out just like the necessary elements —

Todd McKinnon — Co-Founder and Chief Government Officer

There’s totally different like, clearly — yeah, monetization. There’s clearly — like identification risk safety as a product. So, we promote that, and it is an upsell. Auth for GenAI, it is principally like — give it some thought as per-machine authentication.

So, each time — we have now this function referred to as machine-to-machine, which does the same factor at the moment, and also you pay principally by the month-to-month energetic machine.

Peter Levine — Analyst

Thanks.

Todd McKinnon — Co-Founder and Chief Government Officer

Yeah.

David Gennarelli — Senior Vice President, Investor Relations

We’re on the high of the hour, however we will attempt to take just a few extra right here. Let’s go to Trevor at JMP.

Trevor Walsh — Analyst

Nice. Thanks, Dave. Thanks for taking the query. Todd, possibly for you, only a clarification after which a query.

You made some feedback earlier across the context of OIG, and it seemed like possibly for the privileged entry product to round simply the aggressive panorama. And that you just weren’t essentially operating into possibly what I might have anticipated as type of the usual set of rivals or suspects there. So, curious if that is since you’re simply not essentially going after these displacements as aggressively sort of within the subject as a result of we all know your sort of merchandise have been sort of — you’ve got mentioned your self sort of 1.0 or not seeking to essentially do this. And if that is the case, sort of as you progress into subsequent yr and past, and that is going to be a, you realize, stimulant for development, what do you need to — will you simply begin sort of flipping the swap and going after them extra aggressively vis-a-vis rivals? Or is there a have to get sort of —

Todd McKinnon — Co-Founder and Chief Government Officer

I do not assume — we do not have to exchange SailPoint on-prem for SAP to have a big enterprise. So, possibly just a bit little bit of the small print there. However I do not assume that for us to win we have now to take out SailPoint on-premise. It is simply not sensible.

Folks, once they get a system put in and built-in they usually spend three years, these items are arduous to get put in and built-in. And once they spend three years doing it, they are not going to take it out. It is simply — it is like I might — in case you simply wish to spend money on SailPoint as a long run, it is not going to be an enormous development story, however it will be a great enterprise for a very long time simply because they’ve a great put in base, and we’re not going to take that out. But it surely’s additionally not a really massive firm.

And we predict that the marketplace for governance because the — an increasing number of of it strikes to cloud and there is higher merchandise like ours which can be simpler to make use of and extra built-in, I feel the market’s finally 5 or 10 instances greater than what it’s now, we will have an enormous share of that. So, that is sort of what I am attempting to say. I feel it is a bit of bit nuanced. It might be simpler to consider it if it was like, you realize, Okta takes out all SailPoint’s enterprise, however it’s simply not practical.

And by the best way, we do not have to. We are able to cowl these new use circumstances, that are going to — which, by the best way, is sort of the story of Okta. Like after we began Okta, individuals mentioned, you need to — you possibly can’t begin an entry administration firm within the cloud. There’s not sufficient within the cloud.

You need to do, you realize, on-prem and you need to like take possibly some software program and host it. And we mentioned, “No, we’re going to construct a contemporary factor that is pre-integrated and really versatile and quick to get worth from.” And that is the place the world is headed, and that is the place we will be. So, we have taken the identical tact with each privilege and governance. And I feel — if you concentrate on the aggressive panorama and the technique of it, what’s the suitable place to be in? Would you fairly be ranging from governance and ranging from privilege on-premise and going out to attempt to construct a full suite? Or would you begin from our nearly 20,000 prospects and constructing a few of these new capabilities round that.

I might argue we’re in a greater place, however I am positive these different distributors most likely have their very own opinions, and we’ll see who wins.

David Gennarelli — Senior Vice President, Investor Relations

Subsequent, we have now Brian Essex at JPMorgan.

Brian Essex — Analyst

Good afternoon. Thanks for taking the query. Yeah, I wish to dig into the brand new merchandise. It is nice to see the traction there; 15% of the bookings is a good end result.

I wish to see if we may peel again one other layer. What share got here from new versus current? And the way do you concentrate on increasing into — you realize, increasing with new merchandise into current prospects versus bigger lands with new merchandise into new logos. The place is the larger alternative? And, you realize, how will we take into consideration the momentum there?

Todd McKinnon — Co-Founder and Chief Government Officer

Yeah. I feel — I do not know the precise numbers, however I might — based mostly on my work with the sector and dealing in offers, I might estimate that it was a majority of it was upsells, however there have been some vital new logos. I discussed the big expertise firm that had an almost $5 million deal. That was all a brand new buyer.

That was a number of merchandise within the suite. So, there are some — particularly within the bigger offers, there’s greater firms. And I feel what — and it is sort of like micro — a great instance of a number of issues we have been speaking about, which is bigger firms are — have their finances set. They’ve their initiatives, they’ve their initiatives.

Even when they’re possibly long run, they’re executing on them, they’re extra prone to do a strategic factor like identification that may have a longer-term payback than a faster, possibly one other initiative that could be faster payback or not take as a lot work to get it going. And they’re additionally — the suite we’re providing the place you will get entry and governance and privilege from a single vendor is interesting as a result of they understand that they will — they most likely have, you realize, a bunch of various little distributors, doing area of interest issues they usually can have extra value financial savings of consolidating. After which, the opposite factor, too, is that they perceive the worth of neutrality. They usually perceive the worth of expertise and the way not being locked in generally is a massive benefit.

So, I feel that is why you are seeing the enterprise naturally gravitate towards greater firms. And, you realize, the $1 million-plus cohort now for Okta is $1 billion of income, which, you realize, is nice. However I additionally assume we have now a ton of alternative there as a result of a number of these offers are — you realize, I discussed the massive expertise firm. It is prefer it’s a $5 million deal, and that is actually like a 3rd of their state.

We have now a number of alternative simply in that account. So, it’s thrilling.

Brian Essex — Analyst

So, this sounds nonetheless like extra of a, you realize, farmer versus hunter alternative however hunter getting some traction?

Todd McKinnon — Co-Founder and Chief Government Officer

Yeah. I feel that is most likely proper, yeah.

Brett Tighe — Chief Monetary Officer

Yeah, I might agree with that, Brian. I might say that, yeah, the mathematics does recommend it is extra upsell than new enterprise. However I feel what’s fascinating is because the merchandise mature, then you definitely’re going to have the ability to add extra new prospects with them. So, it is principally what we have accomplished in each different product class that we have entered.

So, we began out with one thing that is, you realize, I do not wish to say fundamental, however like, you realize —

Todd McKinnon — Co-Founder and Chief Government Officer

Somebody referred to as it 1.0 earlier.

Brett Tighe — Chief Monetary Officer

There you go. That is good.

Brian Essex — Analyst

There you go.

Brett Tighe — Chief Monetary Officer

And it received higher over time, and also you began touchdown with it. We have accomplished it with a number of merchandise now. We will proceed to try this with these newer merchandise, and we’re enthusiastic about it going ahead.

Brian Essex — Analyst

Nice. It does make sense. Thanks.

David Gennarelli — Senior Vice President, Investor Relations

Let’s go to [Inaudible] at Truist.

Unknown speaker — Truist Securities — Analyst

Nice. Thanks for taking my query. You talked about the governance resolution representing round a 3rd of the contract worth and bought in a workforce deal. How ought to we take into consideration pricing uplift with a few of your newer options like privileged entry and risk safety and others?

Todd McKinnon — Co-Founder and Chief Government Officer

I feel the — on privileged entry, we’re — it is earlier. We do not have as many shoppers. Governance has — is near a thousand prospects. So, it is — we have now way more knowledge on that.

However privileged entry seems like it will be in the identical zone by way of — it might be a — if there isn’t any governance or privilege in a deal, and also you add privilege, it might be, you realize, 30% of the worth. After which, identification risk safety might be the furthest alongside after that, and it is a comparable sort of uplift to advance multifactor. So, it is a vital, you realize, sort uplift on the deal.

David Gennarelli — Senior Vice President, Investor Relations

Nice. Subsequent, we’ll go to Adam Borg at Stifel.

Adam Borg — Analyst

Superior. Thanks for becoming me in. Perhaps for Todd, simply on the rising merchandise entrance, you realize, it is nice to see the inexperienced shoots and the upcoming specialization that we talked about on the decision. As we take into consideration fiscal ’26, how will we take into consideration the packaging and pricing facet? Any modifications there given these newer options to coincide with the brand new specializations that you just’re speaking about? Thanks lots.

Todd McKinnon — Co-Founder and Chief Government Officer

We have now a bunch of issues we’re modeling out and experiments we’re doing. I feel the primary concept is our pricing proper now’s fairly a la carte, and we’re taking a look at extra sort of additions or simplified pricing. We’re seeing good patterns of how individuals purchase, good, higher, greatest, and we’re taking a look at some concepts on how one can make that simpler for purchasers to eat, not a lot take each possibility in each particular product one after the other.

Adam Borg — Analyst

Nice. Thanks a lot.

Todd McKinnon — Co-Founder and Chief Government Officer

Yeah.

David Gennarelli — Senior Vice President, Investor Relations

OK. We’ll go to Fatima Boolani at Citi.

Fatima Boolani — Analyst

Thanks a lot for taking my questions. Todd, I needed to ask you concerning the worldwide enterprise. Look, the North American enterprise has gotten a number of TLC with respect to among the modifications you’ve got constructed from a go-to-market perspective, i.e., the hunter-farmer bifurcation that you just talked about earlier within the yr. However in case you can sort of give us a way within the juxtaposition of why the worldwide enterprise slowed down.

I feel I’ve some concepts. However in case you can type of touch upon what you are seeing by way of enterprise and demand dynamics. After which, Brett, something you possibly can share on, you realize, among the metrics that we see throughout the enterprise? Are they higher or worse from an operational perspective when simply wanting on the worldwide ones? Thanks.

Todd McKinnon — Co-Founder and Chief Government Officer

It is an necessary a part of our enterprise that I am spending personally time worldwide. I discussed I used to be in Australia and Asia simply final week. I feel I am very pleased with the groups there. We have had a brand new chief in Europe now for arising on — this would be the third quarter, I consider.

And Europe, I feel, is — has a bit of little bit of a harder financial state of affairs than North America. So, a few of that — you realize, the macro is — as we talked about earlier than, the macro has been constant, however I might say during the last three or 4 quarters, macro Europe has been constantly harder than North America. And so — after which — however by way of like the chance and the push for safety and the best way the options resonate, it’s fairly common. So, I feel possibly the — by way of like staff efficiency and product portfolio and capabilities and focus, I feel we have now a major development alternative in worldwide.

And we’re set as much as execute on it over the subsequent few quarters.

Brett Tighe — Chief Monetary Officer

Yeah, I might simply add, it’s an space that we’re actually additionally centered on from a companion perspective, proper? You have heard concerning the MSPs. You have heard about GSIs, all these totally different — and even the normal VARs, I imply, there’s a number of alternative in worldwide that we have to faucet into by way of these partnership channels. When it comes to the metrics, if they appear any totally different, they don’t seem to be wildly totally different sufficient to speak about aside from what Todd simply mentioned, which is, from a macro perspective, it does appear to be a bit of bit tougher. And that is as a lot as I’ve received.

Fatima Boolani — Analyst

Thanks.

David Gennarelli — Senior Vice President, Investor Relations

OK. We’ll spherical this out with the final query from Peter Weed at Bernstein.

Peter Weed — Analyst

Hey. Thanks a lot. I admire you going over time and really all of the questions you’ve got taken. You understand, I feel one of many thrilling issues that you’ve got highlighted is you sort of see the sunshine on the finish of the tunnel for sort of the height of the, you realize, backlog in individuals downgrading and most of these issues sort of in midyear 2026.

Clearly, that is not like a cliff the place like identical to it turns off all of sudden however fairly sort of will likely be a gradual factor over time. You understand, as we’re sort of eager about our fashions, I imply, is that this one thing the place we must always take into consideration the sort of the curves over 12 to 18 months the place that sort of slowly degrades and, you realize, clearly, we should not be taking as the premise, the larger than 120% NRR that was on the market earlier than as, you realize, possibly the place it may get again to. However, you realize, is the diploma of headwind that finally ends up going away, is that 300, 500 foundation factors of headwind over that sort of 12 to 18 months? So, like assist us dimensionalize a few of that in order that we sort of take into consideration the timing and the place that ought to have impression.

Brett Tighe — Chief Monetary Officer

Yeah. I might say that is a great level about it is not a cliff. It simply will get lessened. So, thanks for saying that, Peter.

So, hopefully, all people heard that. However by way of the NRR expectations all through FY ’26, allow us to get by way of This fall, greatest quarter of the yr for us, after which allow us to end our monetary plan, after which I will have the ability to let you know extra about NRR for FY ’26 as a result of we’ll simply have an entire lot extra info than we do proper now, so —

Peter Weed — Analyst

We’re excited for it. Thanks.

Brett Tighe — Chief Monetary Officer

Thanks.

David Gennarelli — Senior Vice President, Investor Relations

Nice. Effectively, thanks, all people, for sticking with us for the decision. Earlier than we go, I simply wish to let you realize that along with internet hosting a number of on-site and digital bus excursions, by way of December and January, we’ll be attending the Scotiabank World Tech Convention in San Francisco on December tenth. So, we hope to see you at a type of occasions.

Thanks.

Todd McKinnon — Co-Founder and Chief Government Officer

Bye, everybody.

Brett Tighe — Chief Monetary Officer

Thanks, everybody.

Period: 0 minutes

Name members:

David Gennarelli — Senior Vice President, Investor Relations

Todd McKinnon — Co-Founder and Chief Government Officer

Brett Tighe — Chief Monetary Officer

Dave Gennarelli — Senior Vice President, Investor Relations

John Difucci — Analyst

John DiFucci — Analyst

Eric Heath — Analyst

Grey Powell — Analyst

Gabriela Borges — Analyst

Hamza Fodderwala — Analyst

Matt Hedberg — Analyst

Joshua Tilton — Analyst

Jonathan Ho — Analyst

Joseph Gallo — Analyst

Joe Gallo — Analyst

Mike Cikos — Analyst

Madeline Brooks — Analyst

Shrenik Kotharia — Analyst

Rudy Kessinger — Analyst

Saket Kalia — Analyst

Patrick Colville — Analyst

Rob Owens — Analyst

Peter Levine — Analyst

Trevor Walsh — Analyst

Brian Essex — Analyst

Unknown speaker — Truist Securities — Analyst

Adam Borg — Analyst

Fatima Boolani — Analyst

Peter Weed — Analyst

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