Okta CEO on challenged tech industry: ‘You have to take the long-term view’
Okta CEO and Co-Founder Todd McKinnon joins Yahoo Finance Live to discuss company earnings, inflation, challenges in the tech industry, and the outlook for business growth.
Video Transcript
BRIAN SOZZI: Okta is coming off a better than expected quarter despite big companies looking for new ways to cut costs with a potential recession looming. The company raised its outlook, as demand remains strong. Customers looking to invest in security infrastructure. Joining us now for more on the state of the software space is Okta co-founder and CEO, Todd McKinnon. And Todd, good to see you, as always. Look, you were one of the few software players to actually raise your outlook. What gives you the confidence in doing so in this type of volatile environment?
TODD MCKINNON: Well, first of all, thanks for having me on. It's great to be on Yahoo Finance once again, Brian. We are-- our success is driven by, in the big picture, three big trends. And these trends are long-term and very enduring. The one is companies want to do more with cloud computing. You talk about managing through a choppy investor market and potentially a choppy economy. Companies want to do more with less.
And that's what the cloud is all about. The cloud is about using this modern technology to make your workforce more productive and lower your costs and increase your revenue. That's one major trend that's driving this. More cloud, you need more identity to manage it. And we sell identity, so that's good for us.
The second major trend is companies want to get closer to their customers. They want to build better websites and mobile apps and have that great customer experience. You want to be able to go online if you're going to take a vacation and check your reward points online. You want to be able to interact with all the products you use as a consumer online. And companies want to invest to make that customer experience great. And identity is at the center of that.
And finally, they want to do it all securely. It's no good if it's easy to use and convenient if it's not secure. Companies don't want to be hacked. They want to be secure. They want to keep their customer information secure. And we help them do all of that. And that's why we're confident raising our outlook and going into the remainder of this year and the years ahead.
JULIE HYMAN: Well, all that stuff sounds fantastic, but all of it takes money. And right now, with the headwinds that we are hearing about with the sentiment, certainly, that we're hearing about from a lot of CEOs, maybe they're going to be less willing to open their wallet, to open up their budget, to write you guys a check. Are you seeing any signs of that kind of pullback in your customers?
TODD MCKINNON: We aren't. We're not seeing that. Demand remains robust, and our pipeline is strong. I think the one thing that gives us-- we're obviously like everyone else. We're being reactive where it makes sense and doing what we need to do to navigate the choppy market and the choppy-- potentially the economy changing direction.
But the one thing that gives us confidence is, it's not just us speculating that these demand trends are robust. If you look at something like the Gartner CIO survey, CIOs are surveyed, and they say over 2/3 of them said they have to continue to invest in security, because it is a pillar of what they're trying to do.
And also, a lot of the products we sell help customers not only raise revenue in the top line, but cut costs. You're talking about taking out legacy infrastructure that may be costly to maintain, costly to patch, costly to modernize. And we can help them do that less expensively.
BRAD SMITH: Even right now, as some of the major tech companies are identifying where that revenue is going to come in from, even if there is an outlook that looks solid or sustainable, they're still looking across their headcount and making some of those either freezes or reductions. Where is Okta at in that kind of headcount and the resources that are necessary in order to hit some of the targets you've set forth?
TODD MCKINNON: We're consistently over the last few years and over the next few years, we're investing for growth. We are on target for our commitment to be at $4 billion plus of revenue by FY '26. That includes growing at least 35% each year in revenue. And so that's going to take investment. And that's going to take people. People are at the heart of our products and what we do for customers and how we make them successful.
And one of the things about some of these hiring changes you've talked about is, it gives us the chance to go out and hire talented people and bolster the amazing team we have. The hiring in the labor market, as you've covered so well, has been pretty tough the last few years. And I think one of the silver linings in some of this economic uncertainty is that I think the labor market might get more flexible. And it gives us the chance to bring on even more amazingly talented people on our team.
BRIAN SOZZI: Todd, just the tone change in tech land has been stark the past month for hiring freezes, less growth when it comes to hiring. Looking longer term, how do you think these decisions will impact the longer term future of your company? Not necessarily you're pulling back on hiring, but how does it impact your company and then tech, more broadly?
TODD MCKINNON: Well, I think that you have to take a long-term view. And we're all about this at Okta. We know these trends of digital transformation, having to be secure, having to invest in the future, whether it's better tools and technology for your employees to make them more productive, making it easy to use, or it's investing in your customer experience and connecting with that customer. Those are enduring long-term trends.
And market sentiments go up. And the news cycle goes around and around. And we're investing for the long-term. And we think what we're providing to customers, this identity platform that helps them accomplish all these critical business objectives they have, are going to be valuable today, next week, next month, and in many years to come.
BRAD SMITH: Okta CEO and co-founder Todd McKinnon, thanks so much for taking the time, taking our questions here as well today. I look forward to continuing the conversation at a later date.
