Okta Trades at 56 Times Earnings Before AI Cash Arrives
Okta closed Monday at $218.29, up $6.80, or 3.22%. That price is about 56 times the midpoint of the fiscal 2027 adjusted earnings guide of $3.90 to $3.94 a share. Free cash flow for the year is guided at $910 million to $930 million. The AI security work inside the multiple is still too small to move this year’s revenue, and the dividend is zero.
Cash is real and the payout is zero
Second quarter revenue was $805 million, up 11% from a year earlier. Software revenue was $793 million, up 12%, and made up 99% of sales. Free cash flow was $227 million, a 28% margin, about $62 million above the top of a $155 million to $165 million target.
The full year guide is now $3.216 billion to $3.226 billion, growth of 10% to 11%. The prior range was $3.185 billion to $3.205 billion, so the midpoint rose by about $26 million.
Okta returns cash by buying stock. The second quarter repurchase was 1,542,442 shares at an average of $81.06, roughly $125 million. About $555 million remains on a $1 billion authorization from January. Shares bought at $81 cost about 37% of Monday’s close. The same dollars at $218 retire far fewer shares. On a market value near $38 billion, guided free cash flow is about 2.4% a year. Okta pays no dividend, so holders receive that cash only if they sell.
Agent deals have not lifted the growth rate
The multiple is a bet on identity tools for AI agents. Okta closed dozens of those deals in the second quarter, some larger than $1 million, and early contracts carried a 50% to 60% uplift in value. Customers above $1 million of annual contract value now number more than 600, after growth of more than 20%.
Management has been direct about timing. AI stays too small to move fiscal 2027 revenue. A meaningful contribution is a fiscal 2028 item, and the dollars so far are small next to a base near $3.2 billion. Revenue due within a year rose 14% to $2.585 billion, and total backlog rose 17% to $4.858 billion. Net retention on existing customers was 107%.
Pricing limits the upside. Okta bills per user, and the user is a person. A worker running many agents can stay one seat if the contract counts humans. Gartner expects Fortune 500 companies to run more than 150,000 AI agents by 2028, up from fewer than 15 in 2025. More agents raise the invoice only if the contract changes. The $26 million guide raise still describes a business growing near 10%, with about one percentage point of that rate coming from services work moved to partners.
Short interest rose off a low base
OKTA short interest on September 15 was 8,205,342 shares, or 4.95% of the float. That was 514,354 shares above the August 31 count, up about 6.7%. Closing it would take about 2.2 days of volume. The position is too small to force a scramble to cover.
The crowded shorts are elsewhere. A Monday look at mid cap and large cap stocks found 39 names with short interest above 20% of shares outstanding. Ondas ONDS was at 41.56%, SoundHound AI SOUN at 40.11%, Recursion Pharmaceuticals RXRX at 33.39%, Strive ASST at 31.65%, and CleanSpark CLSK at 30.60%. Biotech, AI software, and crypto mining fill most of the list.
Monday’s close also sits far above the $81 buyback and above a prior trading band near $105 to $145. Fiscal 2027 revenue growth is still guided near 10%, with agent revenue pushed to the next year.
Hormuz stays closed with Brent near $100
Energy dividends still depend on the Strait of Hormuz. On Sunday, Iran said the strait stays closed until the US meets seven conditions from a June interim agreement. Qatar has carried the messages. Tehran has not released a numbered list. Public descriptions include an end to the naval blockade, permission for Iranian oil exports, release of frozen assets, removal of sanctions, and a stop to military action against Iran and its regional allies. A seven day sequence is on the table. The US has not accepted the conditions up front.
Brent settled Monday at $100.32 a barrel, down 1.9%. WTI settled at $89.43, down about 1.8%. Early Tuesday Brent was near $100.60 and WTI near $89.70. The G7 plans to release 100 million barrels of diesel and crude from emergency reserves. In late September some Gulf export days ran above levels from before the war, while Iranian barrels stayed blocked.
Brent is roughly 40% above a February baseline near $72. Before the war, about 20% of world oil moved through Hormuz. Producers can fund dividends at $100. A reopening would pressure that price. Fresh attacks would lift it. Seven political conditions are a weak anchor for a payout that assumes the barrel stays put.
What this means for income investors
Okta’s buyback already retired cheaper shares near $81, and the remaining $555 million buys much less stock at $218. Waiting on fiscal 2028 agent revenue pays a zero dividend.
Energy payouts look covered only while Brent holds near $100.32. That level leans on a closed strait plus a 100 million barrel G7 release. A deal that reopens the waterway can cut the commodity behind those dividends, so crisis oil deserves a smaller weight than a normal barrel.
Ondas, SoundHound, Recursion, Strive, and CleanSpark each carry short interest above 30% of shares outstanding. That is a dispute about the business. Apple will replace a small batch of iPhone 18 Pro Max phones that lost AT&T calls, texts, and mobile data. Software does not restore a phone that has already failed. iOS 27.0.1 is meant to prevent new cases. The fault has appeared only on that model and only on AT&T. US models of the phone use a Qualcomm Snapdragon X80 modem. The bill is a free hardware swap. The dividend does not move.