Okta (NASDAQ: OKTA) will join the S&P 500 before trading opens on Wednesday, November 4, replacing Kenvue (NYSE: KVUE), S&P Dow Jones Indices said after the close on Friday, October 30. The seat opens because Kimberly-Clark (NASDAQ: KMB), already in the index, is acquiring Kenvue in a deal S&P said is "expected to be completed soon, pending final closing conditions."
Okta moves up from the S&P MidCap 400, and it arrives as a GAAP-profitable company. Its filings show a net loss in every fiscal year from 2016 through 2024, peaking at $848 million. S&P's rules exempt a company moving up from the MidCap 400 from its earnings test, but by SaasBuzz's count from those filings, Okta has met that test for seven straight quarters.
The shares rose 2.1% in extended trading on Friday after falling more than 6% in the regular session, Investing.com reported at 5:29 p.m. ET. Okta had not commented publicly on the change by 6:20 p.m. ET.
What changes on November 4
The release sets off a chain of moves across S&P's three US indexes, all effective before the open on November 4:
Okta replaces Kenvue in the S&P 500.
Glaukos (NYSE: GKOS) moves up from the S&P SmallCap 600 to take Okta's place in the S&P MidCap 400.
McGrath RentCorp (NASDAQ: MGRC) takes Glaukos's place in the SmallCap 600.
Loar Holdings (NYSE: LOAR) replaces LiveRamp Holdings (NYSE: RAMP) in the SmallCap 600. Publicis Groupe (Euronext Paris: PUB) is acquiring LiveRamp in a deal S&P said is expected to close soon.
Two of the six companies in the changes are ones S&P classes in Information Technology, and they go in opposite directions. Okta goes up a tier. LiveRamp, the only other one, leaves the SmallCap 600 because it is being bought.
The rules for joining
S&P's US indexes require a company joining them to be profitable on a GAAP basis. In its June 4 consultation results, S&P restated the test: GAAP net income from continuing operations "must be positive for: the most recent quarter, and the sum of the most recent four consecutive quarters." Migrations from one S&P Composite 1500 index to another, such as Okta's move up from the MidCap 400, "do not need to meet the financial viability" criteria, the document adds. The same document said no changes would be made to the financial viability screens for the S&P 500, MidCap 400 or SmallCap 600.
Size is the other gate. The most recent update SaasBuzz found to S&P's market cap guidelines, on July 1, 2025, set the minimum for the S&P 500 at an unadjusted company market capitalization of $22.7 billion or more. S&P said those ranges are reviewed at the beginning of every calendar quarter. Its release on Okta gave no market value for the company.
How Okta measures up on the earnings test
Okta's fiscal year ends January 31. SaasBuzz applied S&P's two-part test to the quarterly GAAP net income Okta reported to the SEC. The trailing four quarters first summed to a positive number in the quarter that ended January 31, 2025, the year Okta recorded its first annual GAAP profit, $28 million. Every quarter since has passed both parts.
Quarter | Net income | Four quarters |
|---|---|---|
Jul. 2024 | $29M | -$136M |
Oct. 2024 | $16M | -$39M |
Jan. 2025 | $23M | $28M |
Jan. 2026 | $63M | $235M |
Jul. 2026 | $116M | $296M |
Source: Okta's 10-Q and 10-K filings, GAAP net income; quarters named by the month they ended. The January quarters are SaasBuzz calculations, full year minus nine months.
In its latest results, for the quarter that ended July 31, Okta reported revenue of $805 million, up 11% from a year earlier, and GAAP net income of $116 million, against $67 million a year before. GAAP operating income was $107 million, or 13% of revenue, up from 6%.
What it means for software investors
Index funds that replicate the S&P 500 will add Okta from November 4, and those that track the MidCap 400 will drop it. The news landed on a bad day for the sector: all ten software stocks in a SaasBuzz count fell on Friday, Okta among them.
The test also says something about how S&P treats software. It counts GAAP net income, not the non-GAAP net income Okta also reports, which was $194 million in the latest quarter, and Okta would not have passed it before its first profitable year closed in January 2025. Its swing from the fiscal 2022 loss to the latest four quarters is about $1.1 billion. S&P left those rules in place in June, after consulting on exceptions for the largest companies, saying exceptions to financial viability "should not be granted solely based on market capitalization."
For the third quarter of fiscal 2027, which ends October 31, Okta has guided to revenue of $813 million to $817 million, up 10% from a year earlier.
