Okta is no longer selling a story about surviving the post-growth reset. The San Francisco identity vendor has already completed the profitability turn, retired the last convertible notes in cash, and started buying back stock. What the second quarter actually tests is whether an independent identity platform can reaccelerate contracted backlog while reported revenue still crawls at a low-double-digit pace. Todd McKinnon is pitching Okta as the control plane for human users, machines, and AI agents. The equity is already priced as if that pitch is working.
Current remaining performance obligations, the subscription backlog due to be recognized over the next year, grew 14%. That is a step up from the 12% prints that defined the prior two quarters. New products, led by Okta Identity Governance, accounted for about 30% of bookings, and deals that included those products carried a roughly 40% annual-contract-value lift. The revenue line is lagging the contract engine, and that lag is the entire investment debate. Reported revenue still rose only 11%, which is the gap the market is being asked to look through.
The cash engine is not the debate. Free cash flow converted at a 28% margin. The company retired the remaining $350 million of convertible notes in cash during the quarter. Large accounts above $1 million of annual contract value grew 22%. That cohort now numbers 605 logos. The question the next two quarters resolve is whether backlog growth holds near the second-quarter rate or snaps back to the more cautious band management put on the third-quarter guide.