Okta Nearly Doubled This Year. So Why Is SailPoint Still Below Its IPO Price?
SailPoint is beating earnings expectations and stacking up AI-driven identity contracts at a rapid clip, yet its stock still trades below its IPO price while Okta has more than doubled. Something about that gap demands an explanation.
SailPoint (NASDAQ:SAIL | SAIL Price Prediction) reported Q2 FY27 results before the open on Sept. 9, delivering its fourth consecutive EPS beat alongside a slim revenue miss. Shares are trying to shake off the funk, gaining 5.35% intraday to about $18.52, but SAIL still sits below its $22 first-session price from Feb. 13, 2025. Meanwhile, identity peer Okta (NASDAQ:OKTA) is up more than 100% year to date. That gap is the story.
AI Identity Engine Kicks Into Gear
The recurring-revenue metrics were the highlight. Total ARR reached $1.23 billion, up 25% year over year (YoY), while SaaS ARR grew 36% to $847 million. AI-driven ARR topped $70 million and made up more than 30% of net new ARR, and existing customers adopting AI solutions lifted annual spend by more than 60%.
I liked the customer-quality signals. SaaS customer count rose 16%, with ARR per SaaS customer climbing 17% to over $400,000, and dollar-based net revenue retention held at 113%. This is the exact AI identity narrative that sent CrowdStrike (NASDAQ:CRWD) and Okta sharply higher in late August.
Why the Market Still Won’t Pay Up
Revenue of $308.81 million missed the $310.26 million consensus by 0.47%. More importantly, the GAAP net loss widened to $50.36 million, a 377.26% deterioration driven by heavy equity-based compensation, and free cash flow fell 18.6% YoY to $37.41 million. Legacy lines also faded, with term subscriptions down 3%, maintenance down 8%, and services down 17%. That mix shift is healthy long term, but it dampens near-term reported revenue.
Numbers That Frame the Debate
- Adjusted EPS: 9 cents vs 8 cents expected
- Revenue: $308.81 million vs $310.26 million expected; up 16.8% YoY
- Total ARR: $1.23 billion, up 25%
- SaaS ARR: $847 million, up 36%
- RPO: $1.9 billion, up 30%
- Free Cash Flow: $37.41 million, down 18.6%
- Adjusted Operating Margin: 20.3%
You should watch the SaaS-mix headwind. CFO Brian Carolan noted that every $5 million shift from term to SaaS ARR costs roughly $10 million of in-period revenue, calling the shortfall a “rev-rec timing issue” rather than a demand problem.
McClain Stakes the FY29 Flag
CEO Mark McClain sounded confident, tying the quarter to long-term ambition: “Our strong Q2 results demonstrate the powerful compounding effect of our identity security platform and AI-driven innovations. This momentum reinforces our confidence in our long-term trajectory, keeping us firmly on track to achieve our FY’29 targets, including at least $2.1 billion of ARR.” He also framed the opportunity bluntly, saying non-human identities are “exploding across the enterprise landscape” yet mostly ungoverned.
Closing the Gap With Okta
Guidance held the line. Q3 revenue is guided to $326 million to $330 million with FY27 revenue of $1.265 billion to $1.275 billion. I’d keep an eye on AI-driven ARR conversion. Management said the AI-driven pipeline is over $200 million and has more than doubled since investor day. If that pipeline closes, the discount to Okta gets much harder to justify.
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Joel South covers large-cap stocks, dividend investing, and major market trends, with a focus on earnings analysis, valuation, and turning complex data into actionable insights for investors.
He brings more than 15 years of experience as an investor and financial journalist, including 12 years at The Motley Fool, where he served as an investment analyst, Bureau Chief, and later led the Fool.com investing news desk. He has also co-hosted an investing podcast and appeared across TV and radio discussing market trends.
