How OKTA (Okta) Makes Money in 2025: A Deep-Dive With Income Statement

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Understanding how a cloud identity and access management leader like OKTA makes money is essential for investors and anyone interested in the business of enterprise security software. In this post, we break down OKTA's quarterly income statement (Q2 2025) using a Sankey chart to visualize the financial flows — what comes in, where it goes, and what's left as profit.

Quick OKTA Overview

OKTA operates a subscription-based platform providing secure identity management, authentication, and access solutions for enterprises. Its main products include workforce identity, customer identity, and cloud-based security integrations.
Revenue comes primarily from recurring subscription fees for its cloud software, with a small portion from professional services and implementation support.
OKTA’s business segments are: - Subscription Revenue (core SaaS platform) - Professional Services & Other Revenue (consulting, implementation, support)

Revenue Breakdown

• Total Revenue (Q2 2025): $728.0M (+12.7% YoY)
  • Subscription Revenue: $711.0M (97.7% of total, +12.5% YoY)
  • Professional Services & Other Revenue: $17.0M (2.3% of total, +21.4% YoY)
• Growth is powered by expanding enterprise adoption, upselling existing customers, and strong retention rates.

Gross Profit and Margins

• Gross Profit: $560.0M (76.9% gross margin)
  • Cost of Revenue: $168.0M (+8.4% YoY)
  • OKTA maintains robust margins due to its scalable cloud business model and high recurring revenue.
• Most costs come from cloud infrastructure, customer support, and professional services delivery.

Operating Income and Expenses

• Operating Income: $41.0M (flat YoY, 5.6% margin)
• Operating Expenses: $519.0M (+1.8% YoY)
  • R&D: $160.0M (-2.4% YoY, 22.0% of revenue) — Focused on platform innovation, security enhancements, and new product development.
  • SG&A: $359.0M (+3.8% YoY, 49.3% of revenue) — Includes sales, marketing, and general administrative costs to drive growth and support global operations.
  • OKTA continues to prioritize innovation and expand operations while maintaining cost discipline.

Net Income

• Pre-Tax Income: $67.0M (+458.3% YoY, 9.2% margin)
• Income Tax: [Not disclosed for Q2 2025]
• Net Income: $67.0M (+131.0% YoY, 9.2% net margin)
• OKTA converts a moderate portion of sales into profit due to its efficient, subscription-based model and operational leverage.

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What Drives OKTA's Money Machine?

• Subscription Revenue: 97.7% of revenue — Recurring SaaS contracts with enterprise clients are the main driver.
• Customer Retention & Expansion: Net retention rates remain high, with existing customers increasing spend.
• R&D Investment: $160.0M in Q2 2025, focused on security, AI-driven identity, and platform features.
• Professional Services: Growing at 21.4% YoY, but still a small share; strategic for onboarding and customer success.
• Future Growth Areas: Customer identity solutions and international expansion, though not yet a major profit contributor.

Visualizing OKTA's Financial Flows

The Sankey chart below visualizes how each dollar flows from gross revenue, through costs and expenses, down to net income. This helps investors spot where value is created, what areas weigh on profits, and how efficiently the company operates.

• Most revenue flows into gross profit, with operating expenses (especially SG&A) taking the largest chunk.
• Even after heavy investment in R&D and sales, 9.2% of revenue drops to the bottom line.

Key Takeaways

• OKTA's money comes overwhelmingly from subscription-based cloud software
• High gross and improving net margins illustrate the power of OKTA's scalable SaaS business model
• Heavy investment in R&D and sales, balanced by efficiency in operating costs
• Ongoing growth is driven by enterprise adoption, upselling, and retention

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FAQ About OKTA's Income Statement

1. What is the main source of OKTA's revenue in 2025?

OKTA generates over 97% of its revenue from subscription-based cloud identity software. Professional services and other revenue contribute a small but growing share.

2. How profitable is OKTA in Q2 2025?

OKTA reported net income of $67.0M in Q2 2025, with a net margin of approximately 9.2%, reflecting moderate profitability driven by recurring revenue and operational efficiency.

3. What are the largest expense categories for OKTA?

The biggest expenses on OKTA's income statement are operating expenses, particularly Research & Development (R&D) at $160.0M and Sales, General & Administrative (SG&A) at $359.0M in Q2 2025. R&D investment focuses on platform innovation and security.

4. Why does Professional Services operate at a loss?

Professional Services, despite generating $17.0M in revenue, often posts an operating loss due to OKTA's aggressive investment in customer onboarding and support, aiming to drive long-term growth—even if the division is unprofitable today.

5. How does OKTA's effective tax rate compare to previous years?

OKTA's effective tax rate for Q2 2025 was not disclosed in the latest filing. Historically, OKTA has benefited from tax advantages related to share-based compensation and international structuring, resulting in a moderate effective tax rate.