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Shares of Okta (OKTA -1.76%) soared in August, gaining 21.9%, according to data supplied by S&P Global Market Intelligence. That's more than eight times the 2.6% gains of the S&P 500 during the same period.

It turns out the threat of artificial intelligence (AI) to the cybersecurity sector wasn't as bad as some feared.

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What SaaSpocalypse? Earlier this year, software-as-a-service (SaaS) stocks took a beating, thanks to fears that some investors called the "SaaSpocalypse." The crux of the popular narrative was that AI agents would take over many of the jobs currently handled by SaaS offerings, rendering them obsolete. The ensuing frenzy took down a broad range of cybersecurity stocks, and Okta wasn't spared, losing 27% of its value between early January and early April.

While the jury was still out, patient investors kept their heads, which was a profitable decision. For its fiscal 2027 second quarter (ended July 31), Okta reported results that confirmed what astute investors already knew. Revenue of $805 million rose 11% year over year, driven higher by subscription revenue of $793 million, up 12%. The company's adjusted gross margin held steady at 82%, and adjusted earnings per share (EPS) of $1.05 rose 15%. This was well ahead of analysts' consensus estimates of revenue of $793 million and adjusted EPS of $0.97.

Okta turned a greater percentage of profits into greenbacks. Operating cash flow of $234 million jumped 40%, while free cash flow of $227 million also increased 40%.

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Other metrics were equally robust. Okta's remaining performance obligation (RPO) -- or contractually obligated revenue that hasn't yet been recognized -- climbed 17% to $4.86 billion, while current RPO (which will be recognized within 12 months) jumped 14% to $2.59 million. This was far from the SaaSpocalypse-related rout investors had anticipated.

CEO Todd McKinnon explained, "As AI agents transform every layer of technology, every agent needs a trusted identity and clear controls over what it can access and do." Far from being displaced by AI, Okta is becoming an integral part of the process.

Management's forecast also gave investors confidence, as Okta's outlook called for revenue of $815 million and adjusted EPS of $0.93, up 10% and 13%, respectively. The company is also guiding for current RPO of roughly $2.6 billion, up nearly 12% year over year. It's generally a positive sign when RPO growth outpaces revenue, as it indicates the company is building a solid foundation for future growth.

Okta's recovery has caused a commensurate rebound in its valuation. The stock now sells for 53 times forward earnings and 38 times next year's expected earnings -- so it isn't exactly cheap. However, with the SaaSpocalypse seemingly put to rest, the future looks bright for Okta.

Okta and CrowdStrike both crushed earnings, but one stock is surging nearly twice as hard as the other despite posting slower growth and a troubling dip in a key bookings metric.

Cybersecurity stocks are outrunning the broad market Thursday after twin fiscal Q2 2027 earnings beats from Okta and CrowdStrike reported Wednesday after the close. The First Trust NASDAQ Cybersecurity ETF (NASDAQ:CIBR) is up 3% to $96.20 in early Thursday trading. The SPDR S&P 500 ETF Trust (NYSEARCA:SPY) is up 0.3% to $768.17, a fraction of the sector’s move.

Okta (NASDAQ:OKTA | OKTA Price Prediction) stock is surging 22% to $163.98 after fiscal Q2 2027 results reframed the identity leader as the security layer for AI agents. Meanwhile, CrowdStrike Holdings (NASDAQ:CRWD) stock is climbing 13% to $213.70 following its own beat-and-raise report. Okta stock was up 55% year to date through Wednesday’s close, and CrowdStrike stock was up 61% over the same period.

Peers Palo Alto Networks (NASDAQ:PANW) and Fortinet (NASDAQ:FTNT) are riding the read-through as the platform trade in cybersecurity gets fresh validation. Palo Alto Networks stock is up 5% to $356.17, and Fortinet stock is up 1% to $159.51. Both names sit among CIBR’s largest disclosed cybersecurity-focused positions alongside CrowdStrike.

Twin Beat and Raise Reports Drive the Rally Okta reported revenue of $805 million, up 11% year over year, and adjusted EPS of $1.05 topped consensus. CEO Todd McKinnon stated, “As AI agents transform every layer of technology, every agent needs a trusted identity and clear controls over what it can access and do.”

CrowdStrike posted revenue of $1.47 billion, up 26% year over year, with adjusted EPS of $0.31 clearing estimates. CrowdStrike raised its full-year net new ARR growth outlook by 630 basis points, and CEO George Kurtz declared, “Q2 was the best quarter in CrowdStrike’s history. Delivering record Falcon Flex results, record net new ARR, and accelerating growth, the Falcon is soaring.”

Why Okta Is Moving Twice as Hard CrowdStrike posted the faster growth and larger guidance raise, yet Okta stock is climbing nearly twice as much Thursday morning. Okta had lagged the group heading into the report, slipping 2% over the trailing month through Wednesday’s close, while CrowdStrike stock had gained 5% over that same stretch. That setup created a sharper snapback when the identity thesis received fresh AI-agent fuel.

The re-rating reflects growing appreciation for the agentic identity category McKinnon has been building. Speaking with CNBC, McKinnon added, “Network is the biggest cyber category now, but if you look out five or 10 years, with millions of agents running around, it’s definitely going to be identity.” Okta also closed its purchase of threat detection startup Permiso Security in a deal worth around $200 million.

CrowdStrike was already priced for excellence entering the report, carrying a market cap near $188.7 billion versus Okta’s $22.9 billion. Wall Street’s average price target sits at $210.53 for CrowdStrike and $146.34 for Okta, meaning both stocks are pushing past those consensus levels Thursday morning. That valuation gap helps explain why the same beat-and-raise pattern is producing very different reactions.

The blemish worth naming: Okta’s billings came in at $681.2 million, down 5.4% year over year, a gap between headline strength and underlying bookings that will draw questions on the call. Okta’s raised full-year revenue range still implies growth in the low double digits, well under CrowdStrike’s revenue pace and net new ARR trajectory.

What to Watch Investors can watch for whether Okta stock holds Thursday’s rally into next week, as the billings soft spot will bump up against the AI-agent narrative in follow-up analyst notes. Traders could look for signs that the read-through extends to Palo Alto Networks and Fortinet as the cybersecurity platform trade absorbs the twin reports.

CrowdStrike generated free cash flow of $377.4 million in the quarter, and Okta produced $227 million in free cash flow versus $162 million a year earlier. Both companies are pairing accelerating fundamentals with expanding cash generation, which keeps the cybersecurity platform trade a favored destination for growth capital.

The cybersecurity ETF was up 31% year to date through Wednesday’s close, well ahead of the SPDR S&P 500 ETF’s 12% year-to-date gain. Investors should size their positions with that stretch in mind, since much of the beat-and-raise setup is now reflected in prices. Even the bulls may want to leave room for guidance revisions and follow-on analyst commentary to drive the next leg.

Contact [email protected] for any questions or corrections.

Key Takeaways Okta expects Q2 revenues of $790-$794 million, up 9% year over year. New products drove about 25% of Q1 bookings, with deals showing about a 40% ACV uplift. Okta's RPO growth supports subscription revenue visibility despite competition and longer sales cycles. Okta (OKTA - Free Report) is set to release second-quarter fiscal 2027 results on Aug. 26.

For the second quarter of fiscal 2027, Okta expects revenues in the range of $790-$794 million, implying 9% year-over-year growth. The company expects non-GAAP net income per share between 95 cents and 97 cents.

The Zacks Consensus Estimate for earnings has remained steady at 96 cents per share over the past 30 days, indicating a 5.49% year-over-year increase. The consensus mark for revenues is pegged at $792.14 million, indicating an 8.81% increase over the year-ago quarter’s reported figure.

Okta’s earnings beat the Zacks Consensus Estimate in all the trailing four quarters, with the average earnings surprise being 7.65%.

Let’s see how things have shaped up for Okta prior to this announcement:

Factors to Note for OktaOkta’s second-quarter fiscal 2027 performance is expected to have benefited from an expanding portfolio across governance, privileged access, device access, authorization, posture management and AI-driven threat protection, which continues to support customer wins and cross-sell.

In the first quarter of fiscal 2027, customers with more than $100K in annual contract value (ACV) increased 6% year over year to 5,180. Remaining Performance Obligations (RPOs) were $4.719 billion, up 16% year over year, and current RPO was $2.499 billion, up 12%. For the second quarter of fiscal 2027, management expects current RPO between $2.505 billion and $2.515 billion, implying 11% year-over-year growth and supporting forward subscription revenue visibility.

A major driver for Okta’s anticipated growth is the rapid adoption of its new and innovative products, particularly those focused on AI security. Products such as Okta Identity Governance, Okta Privileged Access and the newly introduced Auth0 for AI Agents and Okta for AI Agents have seen strong early demand. The company highlighted that new products represented about 25% of fiscal first-quarter 2027 bookings and that deals including new products have shown about a 40% ACV uplift, reinforcing the long-term cross-sell potential as agent deployments scale. This is expected to have driven significant value for customers in the to-be-reported quarter.

Expanding partnerships and integrations are expected to have driven Okta’s top-line growth. Okta has formed alliances with major technology providers such as ServiceNow, Google, Amazon, OpenAI and Anthropic. These partnerships extend Okta’s reach into new AI-driven workflows and reinforce its position as an independent identity platform. The integration with ServiceNow’s AI Control Tower and Amazon Bedrock Agent core enables Okta to provide identity governance for agents across multiple platforms, meeting customer demands for flexibility and security in a rapidly evolving AI landscape.

However, the company is facing competitive pressure from large platform vendors, and specialists remain intense; sales cycles can stay elongated in a cautious IT spend environment, and past security incidents still weigh on customer confidence, upsell momentum, and retention.

What Our Model SaysPer the Zacks model, the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy), or 3 (Hold) increases the odds of an earnings beat. But that is not the case here.

Okta has an Earnings ESP of 0.00% and a Zacks Rank #2. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks to ConsiderHere are some companies worth considering, as our model shows that these have the right combination of elements to beat on earnings in their upcoming releases:

Dell Technologies (DELL - Free Report) has an Earnings ESP of +6.42% and carries a Zacks Rank #2 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Dell Technologies shares have surged 251.2% in the year-to-date period. Dell Technologies is slated to report second-quarter fiscal 2027 results on Sept. 1.

Hewlett Packard (HPE - Free Report) has an Earnings ESP of +9.96% and carries a Zacks Rank #2 at present.

Hewlett Packard shares have surged 122.5% in the year-to-date period. Hewlett Packard is set to report third-quarter fiscal 2026 results on Sept. 2.

Intuit (INTU - Free Report) has an Earnings ESP of +0.08% and carries a Zacks Rank #3 at present.

Intuit shares have plunged 44.6% in the year-to-date period. Intuit is set to report fourth-quarter fiscal 2026 results on Aug. 25.

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The most useful thing said about cybersecurity this week came from Abhijit Dubey, the global CEO of NTT DATA, who told CNBC that “the frontier AI effectively has changed the cybersecurity equation” because attacks are now exponentially more sophisticated, the surface area has grown, and everything is happening at machine speed. His conclusion follows directly: “when you have attacks that are operating on machine speed, you cannot have defense. That is human speed.”

Dubey announced an expanded partnership with Palo Alto Networks (NASDAQ:PANW | PANW Price Prediction) covering both AI for security and security for AI.

The interesting question for investors is which US-listed vendors are positioned for the shift he describes. The money is quietly moving toward whoever can govern autonomous agents, and away from whoever built a business selling vulnerability detection and patching. That reframes the sector from a cost center to a prerequisite for AI adoption.

Why Detection And Patching Is the Losing Side Dubey put the legacy problem this way: “Most cybersecurity postures and enterprises effectively are vulnerability detection oriented” at a moment when attackers are exploitation-driven. Nikesh Arora made the same point on PANW’s June earnings call, saying that frontier models can weaponize a vulnerability “in mere minutes,” whereas it used to take months.

Jay Chaudhry at Zscaler told investors that “you will never be done patching” and that hiding applications and eliminating lateral movement matters more than trying to close every hole. That is the same argument, phrased architecturally.

Vendors whose growth came from selling scanners, dashboards, and remediation queues find themselves in an awkward spot. Their pitch assumes a human has time to look at the alert. The vendors positioned for what comes next sell in-line enforcement, identity, and platform-level context.

Palo Alto Networks Is the Named Partner for a Reason PANW’s most recent quarter had revenue of $3 billion, up 31% year over year, and Next-Generation Security ARR reaching $8.13 billion, up 60%, disclosed in the company’s Q3 FY26 8-K. Arora described a Prisma AIRS deal with a global consulting customer running more than 2 trillion tokens per month on the platform.

PANW trades at a forward P/E of 91x with the stock up 89.77% year to date through August 20. That is not a cheap valuation, and platformization stories have disappointed on margin before.

What PANW has that most rivals do not is IDERA, its identity platform stitched together with the CyberArk acquisition, aimed at what Arora called the “primary attack vector of the future”: agentic identities. That is the layer Dubey said matters.

The risk is straightforward. Stock-based compensation was 17% of revenue in the quarter, and integrating CyberArk without hurting growth remains a priority.

Identity Is What the Market Has Not Priced Todd McKinnon at Okta framed the customer problem cleanly in May, saying “91% of enterprises deploy AI agents, but only 22% have a way to identify them.” That gap is the entire investable idea.

Okta (NASDAQ:OKTA) trades at a forward P/E of 38x, a meaningful discount to PANW because growth is slower, with FY27 revenue guided to 9-10%. McKinnon said Okta’s pipeline for AI agent products was “bigger than anything we’ve ever seen”, and neutrality across hyperscalers is real leverage for a customer choosing an identity control plane.

CrowdStrike (NASDAQ:CRWD) has taken the endpoint franchise into agent governance through AIDR, with ARR reportedly growing “more than 250% sequentially” off a small base. George Kurtz argued that AIDR could exceed EDR in size because every agent needs a host and an identity. The identity layer has a shorter path to becoming non-optional than the platform layer, because agent identity is essential to governance.

Caveats Worth Weighing Zscaler (NASDAQ:ZS) is the interesting counter-case, down 22.22% year to date despite ARR reaching $3.5 billion. Its Symmetry Systems acquisition bets on the access-graph problem rather than issuing agent identity itself, which is defensible.

Fortinet (NASDAQ:FTNT) benefits from a firewall refresh cycle with product revenue up 52% last quarter. That is a real cash-generating business, but closer to infrastructure than to agent governance.

Platform consolidation has been sold to investors before, and margin expansion has been uneven. This cycle differs because Dubey’s framing removes the buyer’s option to wait. His line makes the point: “You have to do it securely from the beginning.” A customer who wants the AI cannot defer the security purchase, which is the first time in a while that has been true.

Contact [email protected] for any questions or corrections.

Thus far, the artificial intelligence boom rewarded the companies supplying the necessary computing power. Semiconductors, servers, networking equipment and data centers became the market’s primary focus as technology companies raced to build AI infrastructure.

The next phase may reward the companies responsible for protecting it.

In an increasingly digital economy, cybersecurity has become a foundational piece of modern business infrastructure. These companies often benefit from recurring revenue, attractive margins and powerful secular growth drivers. AI is now adding another catalyst by creating more data, applications, cloud workloads and digital identities that must be secured.

Yet a strong industry does not always produce strong stock returns. The post-pandemic software boom pulled years of expected growth forward, as aggressive spending, easy financial conditions and enthusiastic positioning pushed valuations to unsustainable levels. When growth normalized and interest rates rose, those multiples compressed sharply.

The damage was especially severe for Okta ((OKTA - Free Report) ) and SentinelOne ((S - Free Report) ), both of which remain well below their prior-cycle highs. Fortinet ((FTNT - Free Report) ), by comparison, has traded much better and already demonstrated that it can compound through a difficult software environment.

Now, the investment setup appears to be improving. AI is strengthening the industry’s long-term demand outlook, valuations have moved closer to historical norms and earnings estimates are rising. Fortinet currently carries a Zacks Rank #1 (Strong Buy), while SentinelOne and Okta each hold a Zacks Rank #2 (Buy), indicating positive earnings-estimate momentum across three very different areas of cybersecurity.

Image Source: Zacks Investment Research

Why Cybersecurity Could Be AI’s Next Major Investment ThemeAI creates a powerful two-sided catalyst for the cybersecurity industry.

On one side, enterprise adoption is expanding the attack surface. Every new AI application can introduce additional models, cloud workloads, databases, devices and connections that must be monitored and protected. The growth of autonomous AI agents could be particularly important, as businesses will need to control which systems, applications and sensitive information those agents are permitted to access.

On the other side, AI is making cyberattacks more scalable. The same tools that improve the productivity of software developers and security teams can help criminals automate phishing campaigns, identify vulnerabilities and execute increasingly sophisticated attacks. Fortinet has already described the threat environment as becoming more complex and intensified by AI, while its research has identified agentic AI as an emerging enabler of large-scale data theft.

Cybersecurity spending is also more durable than many other areas of enterprise software. Companies can postpone discretionary technology projects during periods of uncertainty, but they cannot simply ignore a major security vulnerability. As AI becomes more deeply integrated into business operations, security should increasingly be treated as an essential cost of adoption.

Fortinet: The Proven Cybersecurity LeaderFortinet is the highest-quality and most established selection of the three. The company built its leadership position in network firewalls but has expanded into a much broader platform spanning secure networking, operational technology, security operations and secure access service edge, or SASE.

Its integrated hardware-and-software model provides meaningful differentiation. Fortinet designs specialized processors and operates its products through a common operating system, allowing customers to consolidate security functions without stitching together numerous independent products.

AI should increase demand across the platform. Expanding data center infrastructure, heavier network traffic and rising connectivity requirements all create a need for greater throughput, segmentation and protection. Fortinet reported that several recent product deployments were directly related to customers securing AI infrastructure. AI-driven security operations billings increased 23% during the latest quarter.

The underlying financial momentum is already strong. First-quarter revenue increased 20%, billings grew 31% and non-GAAP earnings advanced 41%. Fortinet also raised its full-year revenue-growth outlook to 15%.

FTNT trades at 51x forward earnings,compared with its ten-year median of 63.8x. While that is not necessarily cheap, the valuation is supported by high margins, strong cash generation and demonstrated execution.

Fortinet is the steadier compounder and potentially the lower-risk way to participate in the theme. The primary drawback is that the stock has already performed well, leaving less room for execution errors than the beaten-down alternatives.

Image Source: Zacks Investment Research

SentinelOne: The AI-Native TurnaroundSentinelOne represents the highest-risk, highest-potential-return selection.

Its Singularity platform uses automation and machine learning to identify and respond to threats across endpoints, cloud workloads, identities and data. That architecture gives SentinelOne a natural connection to the AI theme: as attacks become faster and more automated, companies increasingly need defensive systems capable of responding at machine speed.

The stock remains deeply below its prior cycle high after slowing growth and investor skepticism toward unprofitable software companies crushed its valuation. The current bullish case, however, does not depend on returning to pandemic-era multiples. SentinelOne must instead demonstrate durable growth alongside improving profitability.

That process is underway. First-quarter revenue increased 21%, while annualized recurring revenue grew 23% to $1.16 billion. Non-GAAP operating margin improved to 4% from negative 2%, and management raised its full-year operating-income outlook.

S trades at 54.8x forward earnings, with long-term EPS projected to grow 46.9% annually, giving it a PEG ratio just over 1.

Competition remains intense, and SentinelOne still needs to prove that it can deliver consistent profitability. But if growth stabilizes and operating leverage continues to improve, the stock could undergo a meaningful revaluation.

Image Source: TradingView

Okta: Securing the AI WorkforceIdentity may become one of the most important security layers of the AI economy.

Every employee, customer, application and AI agent requires a verified identity and clearly defined access privileges. As businesses deploy autonomous agents, the number of non-human identities and access decisions could rise dramatically. Okta is positioned directly within that identity-management layer.

Like SentinelOne, OKTA remains far below its 2021 high following the collapse of software valuations and several company-specific execution issues. But the business has become substantially more profitable, and recent results suggest that demand is stabilizing.

First-quarter revenue increased 11%, while remaining performance obligations grew 16%. Okta generated a 35% free-cash-flow margin and a 25% non-GAAP operating margin, demonstrating that the company no longer needs extraordinary revenue growth to produce attractive economics. Management has also identified AI agents as a rapidly emerging workforce that must be secured alongside human users.

OKTA trades at 39x forward earnings, compared with its historical median of ~80x.

Competition from Microsoft and other platform providers remains a major risk. Still, Okta’s independent identity platform, improving profitability and exposure to agentic AI make it a compelling second-act recovery story.

Image Source: TradingView

Cybersecurity Stocks’ Resurgence The first phase of the AI boom was about building the infrastructure. The next phase will increasingly be about protecting the data, networks and identities running through it.

Fortinet offers proven execution and profitable growth. SentinelOne provides the most speculative turnaround opportunity, while Okta offers direct exposure to the growing importance of identity in an agent-driven economy.

With earnings estimates moving higher and valuations far below their previous extremes, cybersecurity may be one of the most compelling areas emerging from the software reset.