Episode Details

Okta (OKTA) Q2 FY2027 — Shares jumped 28.6% to $172.91 the next session, then eased to $166.23. Reported operating income more than doubled to $107M - but 64% of that gain is stock compensation and purchase amortisation shrinking, and the adjusted operating margin did not move. THE CALL: AVOID (3/5, MODERATE) — base-case value ~$135 vs ~$166 today. KEY METRICS: - Revenue $805M, +10.6% YoY; subscription revenue $793M, +11.5% - GAAP operating income $107M vs $41M, but 64% of the $66M gain is non-cash - Stock compensation fell $144M to $114M; purchase amortisation $17M to $3M - Non-GAAP operating margin 28.1% vs 27.7%; across H1 it FELL, 26.6% vs 27.3% - Cash opex ex-stock +9.5% vs revenue +10.6%; cash sales and marketing +14.2% - Free cash flow $227M, 28.2% of revenue, up from 22.3% a year ago - cRPO $2.585B, +14% against an +11% guide; total RPO $4.858B, +17% - FY27 guide raised: revenue $3,216-3,226M, free cash flow $910-930M - But the guided cash margin is DOWN: 28.6% vs 31.0% delivered in FY2026 - Our fair value ~$135 vs the $166.23 close; Street median $190, low $143 What to watch: adjusted operating margin above 30% for two straight quarters would break our thesis Also on YouTube: @ChargedAlpha DISCLAIMER: For informational and educational purposes only. Not financial advice. Do your own research before any investment decision.