The Deal Director
Cloud/Data/AI Infrastructure Research, Cybersecurity/Developer Tools, Adviser to Octane
Okta is being run like Cisco, for low growth, profitability and buybacks, rather than as a high-growth tech company trying to win, after three years of layoffs. Its AI thesis is generic and soft, and beyond customer inertia there is no strong answer for why it wins in five years. Its model rests on switching costs, yet net retention keeps declining, and outsourcing implementation to GSIs gives up the proprietary deployment knowledge that could deepen its moat. x.com
Okta has lost conviction in its core differentiation, so the agentic AI upside will likely go to an acquirer rather than shareholders. Management treats agentic identity as additive, and breadth over depth leaves it facing SailPoint and CyberArk. Its moat rests on switching costs, yet net retention keeps declining, and outsourcing implementation gives up deployment knowledge. Okta will likely be acquired within three years by Microsoft, Salesforce or a large integrator at a modest premium. x.com
Okta is unlikely to sustain mid-teens growth, and valued on free cash flow including stock-based compensation it trades above 40x. Workforce identity grew 11%, and although cRPO rose 14%, it is at risk from layoffs, whether AI-driven to free up token budgets or efficiency cuts. Whether margins flatline in the high 20s is still to be seen. x.com x.com
Okta's risk/reward is no longer attractive after doubling in three months, at 10 times FY27 sales and over 50 times earnings. Even if agentic AI products reach half of its 20,000 enterprise customers within two years with a 40% contract-value uplift, implying 13-15% annual sales growth, it is not cheap; a 50-60% uplift and 17-20% growth still isn't. Agentic AI is exponential, so the growth duration may be underestimated, but two-thirds of the position has been sold. x.com
Okta's backlog reaccelerated, with booked demand now outrunning recognized revenue. RPO rose 17% to $4.86B and current RPO 14% to $2.59B, both above 11% revenue growth. Identity is the lowest-hanging AI value layer: whoever wins at building AI, every agent will need a trusted identity and controls over what it can access, as Okta's founder says. x.com x.com
Okta's valuation is not justifiable at a P/E of 114 with only 10% revenue growth; it is speculation at its finest. x.com
Okta's valuation is hard to justify at over 100x trailing GAAP earnings for a company growing about 11%. It has $296M of trailing GAAP net income against a $30B market cap, so its bottom line must outgrow revenue for years just to support today's price, which already prices that in. x.com
Okta should capture durable value from agentic AI because every agent touching enterprise data needs authentication, authorization and auditability, making identity infrastructure. Okta is the only independent identity platform with real enterprise distribution, a launched non-human identity product, and early signs of contract-value expansion. It trades far below its historical multiple despite 27% FCF margins, priced as if Microsoft consolidates identity, unlikely in multi-cloud firms. x.com … Show more
Okta is losing in identity security even though the category should grow in 2026. Microsoft Entra and CrowdStrike are eating its enterprise business, AI-native Opal and Astrix are building what Okta should have built three years ago, and net retention is falling. After 18 months of repositioning the market stopped listening, and the Lapsus$ breach still hurts. It is not cheap enough to price this in and looks like a value trap, though a buyout rumor or less-bad quarter could squeeze shorts. … Show more
Okta, Salesforce and Atlassian look insanely expensive at nine times forward revenue against roughly 10% year-over-year growth. Many SaaS firms also have high sales and marketing costs. A commenter flags inference spending, which SaaS investors worry could compress margins; if free cash flow, growth, retention or gross margins weaken, their price-to-sales multiples could collapse. x.com x.com x.com x.com
Okta and SailPoint should benefit as AI agent traffic explodes, because agents generate vast numbers of requests for tiny files, which favors identity security rather than bandwidth plays. At about 8-9x sales they are not superficially cheap, but with change spanning orders of magnitude and business models that scale well, they could trade around 15x today and return about 300% over time. Cloudflare, by comparison, trades near 40x. The long-avoided theme is about to light up. x.com
Okta looks expensive against its cash earnings at $150.77. The identity company trades at 90 times cash earnings and 77 times next year's, while software companies usually get 30 times. Thirty times next year's cash earnings implies fair value of $58.47–74.42, leaving the stock 103% above the high end. x.com
