With second-quarter earnings that blew away Wall Street forecasts, Okta Inc. says its already rapid growth is poised to accelerate as enterprises climb aboard the zero-trust security boat in the wake of a pandemic that has obliterated corporate perimeters.

Key to that will be its recent entry into the market for privileged access management or PAM tools, which executives said expands Okta’s total addressable market from $55 billion to $80 billion.

In a call with analysts Wednesday, the identity management firm made it clear that its acquisition of Auth0 Inc. earlier this year puts it in a position to dominate the market for both consumer and business-to-business identity management, becoming effectively a one-stop-shop for everything identity.

Revenues rose 57% year-over-year, to $316 millio, and subscription revenue rose 59%, to $303 million, comprising more than 90% of total sales. The adjusted loss of 11 cents per share was significantly better than the 35-cents-per-share loss analysts had expected.

Growth was helped along by the integration of Auth0, which was completed in May. “These reflect the strong upsell motion we’re seeing as customers expand both purchase units and users,” said interim Chief Financial Officer Brett Tighe.

Bullish outlook

Okta raised guidance for the next quarter and full year and restated a goal of reaching $4 billion in annual revenues by 2026, a mark that would require 35% growth per year. Chief Executive Todd McKinnon repeatedly cited the value of Auth0 to the company’s holistic access management strategy, saying Okta’s intention is to “make identity a key part of users’ business strategies. Part of that is owning the sign-on process. We need to keep the momentum going.”

In an interview with SiliconANGLE, Chief Operating Officer Frederic Kerrest (pictured) said the company addressed concerns some analysts have expressed in the past about Okta’s growth rate by showing 39% growth in its core business, up from 37% the prior quarter.

“The results speak for themselves,” he said. Momentum around zero trust is showing up in the company’s results, he said, noting that its recent “State of Zero Trust Security” report showed that 82% of the Global 2000 have increased initiatives in that area over the last few months.

The new PAM initiative is intended to enable customers to apply fine-grained user- and role-based security policies from a central console to regulate access across not just applications but sensitive infrastructure. That market is currently dominated by a variety of legacy vendors that have built tight integrations into customers’ mission-critical systems that are difficult to uncouple.

Having a complete zero-trust toolset would, in theory, negate the need for PAM and make Okta a one-stop solution. But a recent analysis by David Vellante, chief researcher at SiliconANGLE research affiliate Wikibon, showed that nearly 60% of information technology leaders believe the task of replacing their existing PAM systems with a hybrid of access management and zero trust would be somewhat or extremely difficult.

“Companies have mature stacks and have built connectors to legacy systems over many years,” Vellante wrote. “Processes are wired to these systems and will be very difficult to change.”

Betting on cloud

Okta is betting that its cloud-native platform is better suited for the evolving services and software-as-a-service environment and that the prospect of employing a single console for all access management functions will be compelling enough to encourage enterprises to switch.

“Every organization is responsible for its own security and that’s a problem when there’s a shortage of 300,000 security professionals and universities only graduating 30,000 a year,” Kerrest said. “A lot of Fortune 1000 companies won’t get the headcount they need so we need to help them with that.”

Vellante cited research by Aptiviti Inc.’s Enterprise Technology Research unit that showed that about half of enterprises are already using or plan to evaluate Okta’s identity governance and PAM offerings. “We see this data as positive for Okta because a huge portion of the market will take a look at what Okta’s doing,” he said. “This is goodness for the company.”

Kerrest said Okta’s story is compelling because perimeter-based protections are collapsing amid the move to the cloud. “With everyone running in the cloud, most access has become privileged access,” he said. “It’s not like the firewall, where if you take away the token you’re locked out of the system. Having the keys to the kingdom locked down worked in the old model but not in the new model.”

Okta is clearly positioning its competitors as solutions to yesterday’s problems. “There’s always going to be on-premises software to help with yesteryear’s environment,” Kerrest said, adding that “there will be a lot of add-ons” to his company’s newly introduced PAM offering.

Okta’s stock fell 2.5% immediately following the earnings announcement but had recovered most of the losses early today. The stock price stands nearly exactly where it did at the beginning of the year, although it has bounced up and down. Despite impressive growth, investors have expressed concerns over the size of Okta’s total addressable market, a reservation the company hopes to eliminate with the diversification into PAM.

Photo: Okta/Facebook