Okta, Inc.OKTA
Okta, Inc. Income Taxes Disclosure
Income Taxes
The Company is subject to taxation in the U.S. and various other state and foreign jurisdictions. The domestic and foreign components of pre-tax income (loss) for fiscal 2026, 2025 and 2024 were as follows:
| Year Ended January 31, | |||||||||||||||||
| 2026 | 2025 | 2024 | |||||||||||||||
| (dollars in millions) | |||||||||||||||||
| Domestic | $ | 211 | $ | 28 | $ | (360) | |||||||||||
| Foreign | 44 | 18 | 23 | ||||||||||||||
Income (loss) before provision for income taxes | $ | 255 | $ | 46 | $ | (337) | |||||||||||
The components of the provision for income taxes for fiscal 2026, 2025 and 2024 were as follows:
| Year Ended January 31, | |||||||||||||||||
| 2026 | 2025 | 2024 | |||||||||||||||
| (dollars in millions) | |||||||||||||||||
| Current: | |||||||||||||||||
| Federal | $ | (1) | $ | 5 | $ | 2 | |||||||||||
| State | 2 | 2 | 3 | ||||||||||||||
| Foreign | 7 | 9 | 6 | ||||||||||||||
| Total current provision for income taxes | 8 | 16 | 11 | ||||||||||||||
| Deferred: | |||||||||||||||||
| Foreign | 12 | 2 | 7 | ||||||||||||||
Total deferred provision for income taxes | 12 | 2 | 7 | ||||||||||||||
Total provision for income taxes | $ | 20 | $ | 18 | $ | 18 | |||||||||||
For fiscal 2026, income tax expense resulted primarily from income tax expense related to profitable foreign tax jurisdictions offset by the favorable tax impact of certain U.S. tax legislation.
For fiscal 2025, income tax expense resulted primarily from profitable foreign jurisdictions, federal and state taxes resulting from limitations on tax attribute utilization, offset by the impact of tax windfalls from stock-based compensation in the United States.
For fiscal 2024, the income tax expense resulted primarily from income tax expense related to profitable foreign jurisdictions, federal and state taxes resulting from limitations on tax attribute utilization, and the tax impact of shortfalls from stock-based compensation in the United Kingdom.
On July 4, 2025, the “One Big Beautiful Bill Act” (the “Act”) was enacted. The Act, among other provisions, maintains the U.S. federal 21% corporate tax rate, makes permanent the immediate expensing of domestic research and development expenditures, allows for 100% bonus depreciation for qualified assets, and modifies the U.S. taxation of profits derived from foreign operations. The provisions of the Act have staggered effective dates beginning in 2025 and continuing through 2027. The Company’s provision for income tax reflects the impact of the enactment of the Act.
The Company does not provide for income taxes on undistributed earnings of subsidiaries that are intended to be indefinitely reinvested. Where the Company does not intend to indefinitely reinvest subsidiary earnings, income and withholding taxes, as applicable, are provided on such undistributed earnings and are insignificant.
A reconciliation of the statutory federal income tax rate to the Company’s effective tax rate for fiscal 2026 is as follows:
Year Ended January 31, 2026 | |||||||||||
(dollars in millions) | % | ||||||||||
| U.S. Federal Statutory Tax Rate | $ | 54 | 21.0 | % | |||||||
State and Local Income Taxes, Net of Federal (National) Income Tax Effect(1) | 1 | 0.3 | |||||||||
| Foreign Tax Effects | |||||||||||
| Australia | |||||||||||
Share based payment awards | 3 | 1.1 | |||||||||
| United Kingdom | 3 | 1.3 | |||||||||
| Other Foreign Jurisdictions | 4 | 1.4 | |||||||||
| Effect of Cross-Border Tax Laws | |||||||||||
| Foreign Derived Intangible Income Deduction | (3) | (1.3) | |||||||||
| Tax Credits | |||||||||||
| Research and development tax credits | (24) | (9.4) | |||||||||
| Changes in Valuation Allowances | (51) | (20.0) | |||||||||
| Nontaxable or Nondeductible Items | |||||||||||
| Share base payment awards | 4 | 1.8 | |||||||||
| Nondeductible Officer Compensation | 17 | 6.6 | |||||||||
| Other | 4 | 1.5 | |||||||||
| Changes in Unrecognized Tax Benefits | 8 | 3.3 | |||||||||
| Other Adjustments | — | 0.3 | |||||||||
| Effective Tax Rate | $ | 20 | 7.9 | % | |||||||
(1) State taxes in NY and NYC made up the majority (greater than 50%) of the tax effect in this category. | |||||||||||
The following is a reconciliation of the statutory federal income tax rate to the Company’s effective tax rate for fiscal 2025 and 2024:
| Year Ended January 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Tax at federal statutory rate | 21.0 | % | 21.0 | % | |||||||
| State income taxes, net of federal benefit | 3.7 | 3.8 | |||||||||
| Change in valuation allowance | 27.4 | (5.6) | |||||||||
| Stock-based compensation | 14.5 | (28.4) | |||||||||
Effect of foreign operations | 8.1 | (0.7) | |||||||||
| Research and development credits | (51.7) | 5.3 | |||||||||
| Non-deductible expenses | 19.2 | (1.5) | |||||||||
Provision to return true-up | (7.1) | 0.2 | |||||||||
Unrecognized tax benefits | 7.9 | — | |||||||||
| Other, net | (4.0) | 0.6 | |||||||||
| Effective tax rate | 39.0 | % | (5.3) | % | |||||||
The tax effects of temporary differences and related deferred tax assets and liabilities as of January 31, 2026 and 2025 were as follows:
| As of January 31, | |||||||||||
| 2026 | 2025 | ||||||||||
| (dollars in millions) | |||||||||||
| Deferred tax assets: | |||||||||||
| Net operating loss carryforwards | $ | 720 | $ | 702 | |||||||
| Capitalized research expenditures | 241 | 335 | |||||||||
| Stock-based compensation | 27 | 41 | |||||||||
| Operating lease liabilities | 28 | 31 | |||||||||
| Other reserves and accruals | 27 | 24 | |||||||||
| Research and development and other credits | 176 | 146 | |||||||||
| Total deferred tax assets | 1,219 | 1,279 | |||||||||
| Valuation allowance | (1,089) | (1,144) | |||||||||
| Total deferred tax assets, net | 130 | 135 | |||||||||
| Deferred tax liabilities: | |||||||||||
| Deferred commissions | (124) | (99) | |||||||||
| Other deferred tax liabilities | (16) | (15) | |||||||||
| Operating lease right-of-use assets | (18) | (20) | |||||||||
| Depreciation and amortization | — | (14) | |||||||||
| Total deferred tax liabilities | (158) | (148) | |||||||||
Net deferred tax liabilities | $ | (28) | $ | (13) | |||||||
The Company has determined that it is not more likely than not that it will realize the benefits of its net deferred tax assets in the United States due to negative evidence such as a continued cumulative loss. Therefore, the Company has recorded a valuation allowance to reduce the carrying value of the U.S. deferred tax assets, net of U.S. deferred tax liabilities. The U.S. valuation allowance decreased by $55 million and increased by $57 million during fiscal 2026 and 2025, respectively.
As of January 31, 2026, the Company had approximately $2,781 million of federal and $2,031 million of state net operating loss carryforwards available to offset future taxable income. If not utilized, the federal and state net operating loss carryforwards will begin to expire in 2035 and 2026, respectively. As of January 31, 2026, the Company had approximately $30 million of UK net operating losses and $10 million of Israel net operating losses which do not expire.
As of January 31, 2026, the Company had federal research and development tax credit carryforwards of $158 million and California research and development tax credit carryforwards of $100 million. The federal research and development credits will start to expire in 2038 while the California research and development credits do not expire.
The Company’s ability to utilize the net operating loss and tax credit carryforwards in the future may be subject to substantial restrictions in the event of future ownership changes as defined in Section 382 of the Internal Revenue Code and similar state tax laws.
A reconciliation of beginning and ending amount of unrecognized tax benefit was as follows:
| Year Ended January 31, | |||||||||||||||||
| 2026 | 2025 | 2024 | |||||||||||||||
| (dollars in millions) | |||||||||||||||||
| Gross amount of unrecognized tax benefits as of the beginning of the year | $ | 65 | $ | 49 | $ | 43 | |||||||||||
| Additions based on tax positions related to a prior year | 4 | 4 | — | ||||||||||||||
| Additions based on tax positions related to current year | 9 | 12 | 7 | ||||||||||||||
| Reductions based on tax positions taken in a prior year | — | — | (1) | ||||||||||||||
| Gross amount of unrecognized tax benefits as of the end of the year | $ | 78 | $ | 65 | $ | 49 | |||||||||||
For all periods presented, the Company has an immaterial amount of unrecognized tax benefits that, if recognized, would impact the effective tax rate. The Company’s policy is to include interest and penalties related to unrecognized tax benefits within the provision for income taxes. For all years presented, the Company has not accrued a material amount in interest and penalties related to unrecognized tax benefits.
As the Company has net operating loss carryforwards for the U.S. federal and state jurisdictions, the statute of limitations is open for all years. For material foreign jurisdictions, the tax years open to examination include the tax years 2018 and forward.
Cash paid for income taxes, net of refunds received, by jurisdiction for fiscal 2026 was as follows:
Year Ended January 31, 2026 | ||||||||
(dollars in millions) | ||||||||
| Federal Taxes | $ | (3) | ||||||
| State Taxes | ||||||||
| New York State | 2 | |||||||
| Other State Jurisdictions | 1 | |||||||
| Foreign Taxes | ||||||||
| India | 5 | |||||||
| Israel | 2 | |||||||
| Japan | 1 | |||||||
| Other Foreign Jurisdictions | 2 | |||||||
Total income taxes paid (net of refunds) | $ | 10 | ||||||
Cash paid for income taxes, net of refunds received during fiscal 2025 and 2024 was $17 million and $13 million, respectively.
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Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2026 | Mar 5, 2026 | Showing above |
| 2025 | Mar 5, 2025 | |
| 2024 | Mar 1, 2024 | |
| 2023 | Mar 3, 2023 | |
| 2022 | Mar 7, 2022 | |
| 2021 | Mar 4, 2021 | |
| 2020 | Mar 6, 2020 | |
| 2019 | Mar 14, 2019 | |
| 2018 | Mar 12, 2018 | |
About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.