Key insights
- Okta's CEO emphasizes the need for rapid adaptation to AI, suggesting companies must change significantly each year. Despite the 'SaaS-pocalypse' impacting software stocks, Okta's earnings and guidance were positive, driven by increased cybersecurity spending related to AI. This suggests a potential bullish signal for cybersecurity-related software companies, as AI advancements create new security demands.
Okta (OKTA) co-founder and CEO Todd McKinnon is serving up the cold, hard truth on adapting to the world of AI: Not adapting likely means extinction for companies.
"In a normal time, when technology is maybe moving at a normal pace, you might think every year you want to change 20% of what you're doing. We've really amped that up. You need to change probably 40% or more of what you're doing. That could be a process. That could be how you think about markets and opportunities in the past and how you go after new things," McKinnon said on Yahoo Finance's Opening Bid (video above).
Tech investors are grappling with what some on Wall Street are calling the “SaaS-pocalypse.”
Loosely defined, this reflects the major pullback in the stock prices of software companies such as Salesforce (CRM) and ServiceNow (NOW) because of seemingly daily innovations out of model builders Anthropic (ANTH.PVT) and OpenAI (OPAI.PVT). The prevailing view is that software companies will be rendered obsolete in under three years.
Companies from Block (XYZ) to Meta (META) to Amazon (AMZN) have announced massive layoffs in the last six months.
But McKinnon said humans still need to be a part of the equation.
"The vast majority of agentic systems still have a human in the loop. It's all about balancing what the agentic systems can do and, more importantly, how the agentic systems can interact with multiple systems," he said.
Okta appears to be benefiting from a step up in corporate spending on security protection for AI agents. The fast pace of AI development could expose businesses to new cybersecurity risks.
The company's latest earnings report came in better than Wall Street expected across the board. Guidance was also upbeat. Shares are only down 10% year to date, relatively less severe than other software stocks caught up in the vortex of the SaaSpocolypse.
"We believe Okta has a significant opportunity as it attempts to build out a complete identity platform (AM/IGA/PAM/CIAM). Identity has increased in importance in a WFA/Zero Trust/AI world, and we believe Okta could be among the largest beneficiaries," Jefferies analyst Joseph Gallo said in a note.
Brian Sozzi is Yahoo Finance's Executive Editor and a member of Yahoo Finance's editorial leadership team. Follow Sozzi on X @BrianSozzi, Instagram, and LinkedIn. Tips on stories? Email brian.sozzi@yahoofinance.com.
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