Will Okta's stock-based compensation decline below 22% of revenue in any quarter through Q2 FY2027?

SBC at ~25% of revenue is structurally embedded in Okta's compensation model — all NEOs receive RSU-based compensation with quarterly vesting, and the company is actively adding quota-carrying reps and sales capacity, which increases RSU grants. To decline to 22%, SBC must fall ~12% as a share of revenue within 3 quarters. Revenue growth of ~11% provides denominator tailwind, but absolute SBC is likely increasing as headcount grows. At ~$661M annual SBC ($165M/quarter) and FY2026E revenue of ~$2.895B (~$724M/quarter), even flat absolute SBC yields ~22.8% — still above 22%. The buyback addresses dilution, not SBC expense. No management commentary suggests SBC reduction is a priority.

The math is instructive: quarterly revenue by Q2 FY2027 could reach ~$760-780M given 11% growth trajectory. At 22%, that requires quarterly SBC below ~$167-172M. Current quarterly SBC run rate is ~$165M based on FY2025 $661M annual. However, this understates the forward SBC because: (1) the company is adding headcount, (2) new RSU grants will be at higher stock prices than legacy grants, and (3) there is no public commitment to SBC reduction. The three-quarter observation window provides multiple chances, slightly improving the odds. The unresolved peer benchmarking debate matters — if 25% is industry standard, there is zero urgency to reduce. I assign slightly higher probability than pure math suggests because revenue could surprise to the upside, shrinking the ratio.

Strong conviction that SBC will NOT decline below 22% within 3 quarters. The 12:1 dollar-weighted ratio of questionable to disciplined capital deployment (Stress Scanner minority) indicates management does not view SBC as a problem to be solved. The $1B buyback covers only 1.5 years of SBC dilution — it is a cosmetic measure. Executive RSUs vest quarterly over 3 years, meaning ~$220M+ in unvested RSUs are baked into the cost structure. Revenue growth at 11% provides modest denominator help, but absolute SBC is growing as the company adds headcount. The GAAP/non-GAAP gap (26% non-GAAP operating margin vs barely positive GAAP) demonstrates management optimizes for non-GAAP metrics and views SBC as a non-cash afterthought. There is no structural mechanism to produce a 3pp decline in 3 quarters.

The numbers are clear: 25% SBC-to-revenue ratio declining to 22% requires either a ~12% cut in absolute SBC or significantly faster revenue growth than the guided 11%. Neither appears likely. Okta is in growth-investment mode, adding sales capacity and headcount — SBC will increase, not decrease. The 22% threshold is a meaningful structural change, not something that happens organically in 3 quarters. Revenue growth helps the denominator but at 11% is not fast enough to close the gap by itself. The buyback is dilution management, not SBC reduction. No activist pressure or management commitment to address SBC levels.

Slightly higher probability because of the staleness risk: fundamentals are ~115 days old, and three quarters will report during the observation window. It is conceivable that revenue accelerates beyond 11% guidance (management has a track record of conservative guidance in SaaS) while SBC growth moderates due to RSU cliff expirations or decelerated hiring. However, there is no concrete evidence of either scenario in the analysis facts. The unresolved peer benchmarking debate is the key uncertainty — if 25% SBC-to-revenue is an outlier vs. peers, external pressure could force action. But peer data was withdrawn as unsourced. Low confidence reflects high uncertainty about unknowns beyond the analysis window.

SBC as a percentage of revenue is a lagging structural metric — it changes slowly because RSU grants vest over 3 years. Even if Okta dramatically cut new RSU grants today, the existing vesting schedule would maintain high SBC for 8+ quarters. The committee found SBC at 25% with all insiders selling 100% of RSU vestings under 10b5-1 plans — this is a deeply ingrained compensation culture. The $661M annual SBC divided by 4 gives ~$165M quarterly, while quarterly revenue around $724M yields 22.8%. Even optimistically, reaching sub-22% requires quarterly revenue exceeding $750M with flat SBC — possible only in Q1-Q2 FY2027 if revenue meaningfully accelerates.

SBC at 25% of revenue, needs to drop to 22% — a 3pp decline in 3 quarters. Revenue growth of 11% helps the denominator but company is adding headcount which grows the numerator. Current math: ~$165M quarterly SBC on ~$724M quarterly revenue = 22.8%. Very close to threshold but on the wrong side, and SBC is growing. Three chances help slightly but structural headwinds dominate.

Management focuses on non-GAAP metrics and views SBC as non-cash. No incentive to reduce SBC expense. Active hiring means more RSU grants. Revenue growth alone at 11% cannot close a 3pp gap when SBC is also growing. The buyback addresses share dilution, not income statement SBC expense. Unlikely to see 22% in any quarter.

Low probability but not negligible. The three-quarter window means any single quarter with strong revenue and moderate SBC could trip the threshold. If Okta delivers a blowout revenue quarter while some RSU grants expire, the math could work — $165M SBC on $750M+ revenue = sub-22%. But this requires optimistic assumptions on both sides of the ratio simultaneously. More likely SBC grows alongside revenue, maintaining the ~25% ratio.