Is Okta (OKTA) the Hidden AI Play in Enterprise Software? Muhammad Ali Thu, October 8, 2026 at 8:50 AM EDT 4 min read OKTA -0.31% ^GSPC -0.22% Trade Okta on Coinbase Trading disclosure Trading disclosure The above button links to Coinbase. Yahoo Finance is not a broker-dealer or investment adviser and does not offer securities or cryptocurrencies for sale or facilitate trading. Coinbase pays us for certain activity generated through this link. Prices displayed are informational.
Okta Inc. (NASDAQ:OKTA) is emerging as an agentic identity multiplier, as more and more enterprises strive to deploy artificial intelligence agents across their workflows. The management aims to make the company a critical identity control layer for these AI agents, which require their own set of credentials, secure digital identity, and access permissions. At Oktane 2026, Okta unveiled additional AI-agent security capabilities, building on Agent SSO, which became generally available in August. As AI reshapes cybersecurity, investors face an important choice: is Okta or Rubrik the better security stock to own?.
With a 144.58% year-to-date return, Okta has been amongst the best performing stocks across the software segment. It was trading at $211.49 by close of play on October 2, stretching its 52-week gains to 125.69%. This compares with 14.58% jump for the broader S&P 500 index during the same period. The company delivered 10.60% year-over-year topline growth during the second quarter fiscal 2027. This brought its total revenue over the previous twelve months to $3.07 billion.
In terms of profitability metrics, there is a notable improvement but the figures are still modest at current scale. Its 4.31% return on equity on trailing twelve-month basis stands low, amid approximately 7.55% trailing twelve-month operating margin and net margin of 9.63%. However, cash flows offer real strength to the business. Okta has generated $987 million in operating cash flows on trailing basis, along with approximately $961 million in trailing twelve-month free cash flow. This reflects on the quality of the underlying subscription-based business model. Market is paying close attention to how Okta's AI portfolio is positioned to generate incremental growth.
Wall Street analysts view Okta as a vendor-neutral control layer, that gives it a structural advantage. Okta has a market capitalization of $35.90 billion, and it is currently valued at a 123.71x trailing P/E multiple. Such a stretched valuation metric might suggest that the stock has run its course. However, the roughly 54x forward multiple reflects adjusted earnings expectations, while the trailing P/E uses GAAP earnings. The two are not directly comparable, and the elevated valuation leaves little margin for error. Income hunters are very curious about a strong track record of dividends for this other tech giant.
Data tracked across 1,000+ hedge funds by Insider Monkey reveals an increasing number of smart money managers invested in the company. As per 13F filing data for Q2 2026, a total of 58 hedge funds held positions in the stock compared to 49 by the end of the first quarter.
As per Yahoo Finance database, BlackRock is the largest institutional investor with 18.7 million shares, representing 11.19% of outstanding shares. Other notable institutional names include FMR and Vanguard Portfolio Management that hold 9.74% and 5.35% of outstanding shares, respectively.
Short interest in the stock does not indicate an alarming bearish positioning. Okta has a short float of 5.49%, which shows modest amount of active bets against the stock. The risk of liquidity squeeze also remains low amid a short ratio of 1.93. The stock's stellar run in 2026 is backed by the management's emphasis on new product offerings and a strong enterprise customer base. The broader AI debate now becomes more relevant for Okta, as the company's AI strategy could augment its existing platform. This AI strategy is being integrated into the company's existing business platforms, instead of being offered as a standalone product. Okta may be an underappreciated AI infrastructure play, but its premium valuation makes the investment case dependent on whether AI-agent adoption can accelerate growth beyond its current trajectory.
While we acknowledge the potential of OKTA as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.
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