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 cybersecurity. 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 cloud-based identity and access management platform that enables organizations to securely connect people to technology. Revenue comes primarily from subscription-based software services that help enterprises manage user authentication, access, and security across cloud and on-premises applications. OKTA’s business is divided into two main segments: Subscription Revenue and Professional Services & Other Revenue, with the vast majority of income from recurring SaaS subscriptions.

Revenue Breakdown

• Total Revenue (Q2 2025): $728.0M (+12.7% YoY)
  • Subscription Revenue: $711.0M (97.7% of total)
  • Professional Services & Other Revenue: $17.0M (2.3% of total)
  • Growth is powered by expanding enterprise adoption of cloud identity solutions and strong customer retention.

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-based business model and high proportion of recurring subscription revenue.
• Most costs come from cloud infrastructure, customer support, and implementation services.

Operating Income and Expenses

• Operating Income: $41.0M (+0.0% 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 features.
  • SG&A: $359.0M (+3.8% YoY, 49.3% of revenue) — Includes sales, marketing, and administrative costs to drive customer acquisition and support global operations.
  • OKTA continues to prioritize innovation and invest in growth while maintaining operational efficiency.

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 significant portion of sales into profit due to its high-margin SaaS model and disciplined expense management.

What Drives OKTA's Money Machine?

• Subscription Revenue: 97.7% of revenue, driven by multi-year enterprise contracts and high renewal rates.
• Dollar-Based Net Retention Rate: Reflects strong upsell/cross-sell to existing customers (specific rate not disclosed in Q2 2025, but historically above 120%).
• Investment in R&D: $160.0M in Q2 2025, supporting continuous product innovation and platform security.
• Future growth areas: Expansion into adjacent security markets and international regions, though these segments are not yet major profit contributors.

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 recurring subscription revenue for cloud identity solutions.
• High gross and improving net margins illustrate the power of OKTA's scalable SaaS business model.
• Heavy investment in R&D, balanced by efficiency in operating costs.
• Ongoing growth is driven by enterprise cloud adoption, product innovation, and international expansion.

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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 services. Professional services and other revenue make up a small portion of the total.

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 significant profitability improvement driven by high gross margins and disciplined expense growth.

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, as OKTA prioritizes platform innovation and global sales expansion.

4. Why does [segment/division] operate at a loss?

[Professional Services & Other Revenue], despite generating $17.0M in revenue, likely operates at a loss due to strategic investments in customer onboarding and support, which are intended to drive long-term subscription 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. Historically, the company’s tax rate has been influenced by stock-based compensation and international operations, often resulting in a moderate effective rate.