Financial Analysis

Business Combinations On September 4, 2025, the Company acquired all of the outstanding equity of Axiom Security Ltd (Axiom), a privately held company specializing in privileged access management solutions. The acquisition of Axiom is expected to broaden the Company's privileged access management capabilities. The acquisition date fair value of purchase consideration of $54 million was paid in cash. The Axiom acquisition was accounted for as a business combination. The Company preliminarily recorded $16 million for developed technology intangible assets with an estimated useful life of 3 years and preliminarily recorded $40 million of goodwill which is primarily attributed to the assembled workforce as well as the integration of Axioms technology and the Companys technology. None of the goodwill is expected to be deductible for U.S. federal income tax purposes. The Company may continue to adjust the preliminary purchase price allocation after obtaining more information regarding asset valuations, liabilities assumed and revisions of preliminary estimates through the measurement period. This acquisition did not have a material impact on the Companys condensed consolidated financial statements; therefore, historical and pro forma disclosures have not been presented. …

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Commitments and Contingencies Letters of Credit In conjunction with the execution of certain office space operating leases, letters of credit in the aggregate amount of $5 million and $6 million were issued and outstanding as of October 31, 2025 and January 31, 2025, respectively. No draws have been made under such letters of credit. Legal Matters From time to time in the normal course of business, the Company may be subject to various legal matters such as threatened or pending claims or proceedings. On May 20, 2022, a purported shareholder filed a putative class action lawsuit in the United States District Court for the Northern District of California against the Company and certain of its executive officers, captioned In re Okta, Inc. Securities Litigation , No. 3:22-cv-02990. The lawsuit asserted claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, alleging that the defendants made false or misleading statements or omissions concerning the Companys cybersecurity controls, vulnerability to data breaches and the Companys integration of Auth0, Inc. (Auth0). The lawsuit sought an order certifying the lawsuit as a class action and unspecified damages. The defendants moved to dismiss the amended complaint. On March 31, 2023, the court dismissed in full the claims based on the plaintiffs allegations related to the Companys cybersecurity controls and vulnerability to data breaches, and dismissed in part and denied in part the claims based on allegations r …

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Convertible Senior Notes, Net Convertible Senior Notes The 2025 convertible senior notes (2025 Notes) and the 2026 convertible senior notes (2026 Notes and together with the 2025 Notes, the Notes) are recorded at face value less unamortized debt issuance costs. As of October 31, 2025, the 2026 Notes are classified as current liabilities due to their upcoming maturity on June 15, 2026. The 2025 Notes matured on September 1, 2025, and the Company settled the full remaining $510 million principal amount outstanding in cash. Fair Value Measurements As of October 31, 2025, the estimated fair value of the 2026 Notes, which are not recorded at fair value on the condensed consolidated balance sheets, was $341 million. The estimated fair value of the 2026 Notes, which are Level 2 financial instruments, was determined based on the quoted bid prices of the 2026 Notes in an over-the-counter market on the last available trading day of the reporting period. …

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Employee Incentive Plans The Companys equity incentive plans provide for granting stock options, restricted stock units (RSUs), restricted stock awards (RSAs) to employees, consultants, officers and directors and RSUs with market-based vesting conditions to certain executives. In addition, the Company offers an Employee Stock Purchase Plan (ESPP) to eligible employees. Stock-based compensation expense was recorded in the following cost and expense categories in the Companys condensed consolidated statements of operations: Three Months Ended October 31, Nine Months Ended October 31, 2025 2024 2025 2024 (dollars in millions) Cost of revenue Subscription $ 19 $ 20 $ 57 $ 61 Professional services and other 3 3 8 9 Research and development 49 49 147 168 Sales and marketing 33 33 100 99 General and administrative 34 30 98 97 Total $ 138 $ 135 $ 410 $ 434 The following table presents total unrecognized stock-based compensation expense related to outstanding equity awards as of October 31, 2025: Unrecognized Stock-based Compensation Expense (in millions) Weighted-average remaining period (in years) Unvested RSUs $ 664 1.8 years Unvested RSAs 22 2.1 years ESPP 3 0.3 years Total $ 689 Market-based Restricted Stock Units In March 2025, the Company granted market-based RSUs to certain members of management. The target number of market-based RSUs granted was 322,599. One-third of these market-based RSUs vest over each of a one-, two- and three-year performance period, each starting on Feb …

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Income Taxes For the three and nine months ended October 31, 2025, the Company recorded a provision for income taxes of $7 million and $13 million on pretax income of $50 million and $185 million, respectively. The effective tax rate for the three and nine months ended October 31, 2025 was approximately 14.0% and 7.1%, respectively. The effective tax rate differs from the statutory rate primarily as a result of a full valuation allowance against the U.S. deferred tax assets, the favorable tax impact of the One Big Beautiful Bill Act (the Act), the tax effect of foreign operations, and U.S. federal and state taxes. The Act was enacted on July 4, 2025. The Act, among other provisions, maintains the U.S. federal 21% corporate tax rate, makes permanent the immediate expensing of domestic research and development expenditures, allows for 100% bonus depreciation for qualified assets, and modifies the U.S. taxation of profits derived from foreign operations. The provisions of the Act have staggered effective dates beginning in 2025 and continuing through 2027. The Company revised its estimated annual effective tax rate upon enactment of the changes in the Act. For the three and nine months ended October 31, 2024, the Company recorded a provision for income taxes of $9 million and $10 million on a pretax income of $25 million and $15 million, respectively. The effective tax rate for the three and nine months ended October 31, 2024 was approximately 40.4% and 69.6%, respectively. The …

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In December 2023, the FASB issued guidance to provide disaggregated income tax disclosures on the rate reconciliation and income taxes paid. This guidance is effective for annual periods beginning after December 15, 2024, with early adoption permitted. The Company intends to adopt this guidance in its Annual Report on Form 10-K for the year ended January 31, 2026 and expects the adoption of the updated guidance to result in disclosure of additional disaggregated tax information. In November 2024, the FASB issued guidance requiring the disclosure, in the notes to financial statements, of specified disaggregated income statement expense information. This guidance is effective for annual periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027, with early adoption permitted. The Company is currently evaluating the impact of this guidance. In September 2025, the FASB issued guidance to modernize the accounting for internal-use software costs to current development practices, clarifying when to begin capitalizing costs, and enhancing disclosure requirements. This guidance is effective for annual periods beginning after December 15, 2027, and interim reporting periods within those annual periods, with early adoption permitted. Entities can adopt the new standard using a prospective, modified, or retrospective transition approach. The Company is currently evaluating the impact of adopting this guidance, including the timing of adopti …

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Deferred Commissions Sales commissions capitalized as contract costs totaled $58 million and $37 million for the three months ended October 31, 2025 and 2024, respectively, and $138 million and $97 million for the nine months ended October 31, 2025 and 2024, respectively. Amortization of contract costs totaled $41 million and $33 million for the three months ended October 31, 2025 and 2024, respectively, and $117 million and $95 million for the nine months ended October 31, 2025 and 2024, respectively. Deferred Revenue and Performance Obligations Deferred Revenue Deferred revenue, which is a contract liability, consists primarily of payments received and accounts receivable recorded in advance of revenue recognition under the Companys contracts with customers and is recognized as the revenue recognition criteria are met. Subscription revenue recognized during the three months ended October 31, 2025 and 2024 that was included in the deferred revenue balances at the beginning of the respective periods was $665 million and $597 million, respectively, and $1,495 million and $1,312 million in the nine months ended October 31, 2025 and 2024, respectively. Transaction Price Allocated to the Remaining Performance Obligations Transaction price allocated to the remaining performance obligations (RPO) represents all future, non-cancelable contracted revenue that has not yet been recognized, inclusive of deferred revenue that has been invoiced and non-cancelable amounts that will be invo …

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Accounting Standards and Significant Accounting Policies Significant Accounting Policies For a summary of the Companys significant accounting policies refer to Note 2. Summary of Significant Accounting Policies of its Annual Report on Form 10-K for the fiscal year ended January 31, 2025. Recent Accounting Pronouncements Not Yet Adopted In December 2023, the FASB issued guidance to provide disaggregated income tax disclosures on the rate reconciliation and income taxes paid. This guidance is effective for annual periods beginning after December 15, 2024, with early adoption permitted. The Company intends to adopt this guidance in its Annual Report on Form 10-K for the year ended January 31, 2026 and expects the adoption of the updated guidance to result in disclosure of additional disaggregated tax information. In November 2024, the FASB issued guidance requiring the disclosure, in the notes to financial statements, of specified disaggregated income statement expense information. This guidance is effective for annual periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027, with early adoption permitted. The Company is currently evaluating the impact of this guidance. In September 2025, the FASB issued guidance to modernize the accounting for internal-use software costs to current development practices, clarifying when to begin capitalizing costs, and enhancing disclosure requirements. This guidance is effective for annual peri …

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