When AI Gets More Autonomous, This Security Stock Gets More Important
The megacaps still dominate the headlines, but some of the cleaner earnings stories are showing up further down the market-cap ladder. This week’s five span cybersecurity, cloud infrastructure, lab equipment, discount retail, and optical networking.
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Okta (OKTA)
Catalyst: Higher guidance, 17% backlog growth, and a new security problem created by AI agents
The Quarter
Okta delivered a stronger second quarter than the headline revenue growth suggests.
Revenue increased 11% to $805 million, while subscription revenue rose 12% to $793 million. Adjusted earnings reached $1.05 per share, ahead of expectations.
The forward numbers were more important. Remaining performance obligations increased 17% to $4.86 billion, while current RPO grew 14%.
Management also raised its full-year outlook and now expects revenue of roughly $3.22 billion to $3.23 billion and adjusted earnings of $3.90 to $3.94 per share.
AI Creates Another Identity Problem
AI is becoming an unusually practical catalyst for Okta.
As companies deploy autonomous agents, those agents need permission to access files, systems, customer data, and applications. That creates thousands of new digital identities that enterprises need to authenticate and control.
The security question is no longer only about which employee logged in. Companies increasingly need to know which AI agent is acting, what it is allowed to touch, and when that access should stop.
Okta is building products specifically around that problem.
Cash Flow Strengthens the Case
The company generated $227 million of free cash flow during the quarter.
That matters because Okta has moved beyond the phase where investors had to choose between growth and profitability. Revenue growth is steadier now, but cash generation is much stronger.
My Take: Keep OKTA high on the list. AI-agent security gives the company another growth engine, while rising backlog and free cash flow make the story more durable than it was a few years ago.
What to watch: RPO growth, AI-agent security adoption, large enterprise deals, subscription growth, and free cash flow.
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Agilent Technologies (A)
Catalyst: Lab demand is improving, margins expanded, and management raised its full-year outlook
The Recovery Is Showing Up
Agilent is starting to see a better environment after a long slowdown across biotech and laboratory spending.
Third-quarter revenue increased 8.1% to $1.88 billion, while adjusted earnings rose 18% to $1.62 per share.
Operating performance improved even faster. GAAP operating margin expanded 290 basis points, while adjusted operating margin reached 28.3%.
Management raised its full-year revenue and earnings outlook. Agilent now expects adjusted EPS of $6.18 to $6.21, compared with its previous range of $6.00 to $6.10.
Why Lab Spending Matters
Agilent sells analytical instruments, diagnostics, consumables, and laboratory services used across pharmaceuticals, biotech, chemical analysis, and medical research.
That business struggled when biotech funding tightened and customers delayed equipment purchases.
The cycle is starting to turn.
Its CrossLab business, which provides recurring laboratory services and supplies, grew 6% last quarter. That recurring revenue gives Agilent a steadier base while customers start spending again on larger instruments.
Margins Give It Another Lever
Agilent does not need explosive sales growth to produce meaningful earnings growth.
When revenue rises and margins expand at the same time, profit can grow considerably faster than the top line. That is exactly what happened last quarter.
My Take: A is one of the quieter recovery stories in healthcare equipment. Buy normal pullbacks while end-market demand and margins keep improving.
What to watch: Biotech spending, CrossLab growth, instrument orders, China demand, and operating margins.
Dollar General (DG)
Catalyst: More customer traffic, better same-store sales, and another guidance increase
Value Is Winning Traffic
Dollar General is benefiting from a consumer who remains extremely price-conscious.
Second-quarter sales increased 5.2% to $11.29 billion, while earnings reached $2.48 per share, comfortably ahead of expectations.
Comparable sales increased 3.5%.
The details make that number stronger. Customer traffic rose 2%, and average transaction size increased another 1.5%. That means growth is not coming only from higher prices.
Customers are actually visiting more often.
Guidance Moved Higher
Management raised its full-year expectations.
Dollar General now expects same-store sales growth of 2.5% to 2.9%, compared with its prior forecast of 2.2% to 2.7%.
Full-year earnings guidance increased to $7.80 to $8.00 per share, while net sales are expected to grow between 4% and 4.3%.
The company also plans to resume share repurchases during the second half of the year.
The Consumer Signal
Dollar General is useful beyond the stock itself.
Its numbers tell us that households are still actively searching for value. Higher food, fuel, and everyday living costs are keeping discount retail relevant, and Dollar General has now posted customer traffic growth for five consecutive quarters.
That is a stronger operating signal than simply saying consumers feel stretched.
My Take: DG remains one of the cleaner defensive consumer setups. The business is gaining traffic, guidance is rising, and value retail has a clear reason to keep taking share.
What to watch: Customer traffic, discretionary merchandise, gross margins, fuel costs, store remodels, and execution against the raised guidance.
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Nutanix (NTNX)
Catalyst: Recurring revenue grew 16%, margins expanded sharply, and free cash flow topped $840 million
Cloud Growth With Better Economics
Nutanix ended fiscal 2026 with a strong combination of growth and profitability.
Fourth-quarter revenue increased 16% to $757 million, while annual recurring revenue reached $2.55 billion, also up 16%.
The margin improvement was even more impressive.
Non-GAAP operating margin expanded from 18.3% to 26.2% in the fourth quarter. Full-year free cash flow reached $841 million, up from roughly $750 million the year before.
This is no longer simply a revenue-growth story.
A Different Cloud Trade
Nutanix helps companies run applications and data across private and public clouds, as well as their own infrastructure.
That hybrid model matters because many enterprises do not want every workload sitting inside a single hyperscaler.
The company added more than 3,000 customers during fiscal 2026 and expanded partnerships with AMD, Lenovo, NetApp, and Nvidia.
It is also adding infrastructure for enterprise AI workloads, giving customers more ways to run AI applications without handing complete control to one cloud provider.
Margins Change the Story
Nutanix has spent years transitioning toward recurring subscriptions.
The payoff is starting to become obvious. ARR is growing, free cash flow is rising, and expenses are increasing much more slowly than revenue.
That creates operating leverage.
My Take: NTNX has matured into a higher-quality cloud infrastructure business. The combination of recurring revenue and expanding margins makes it more interesting than another software company chasing growth at any cost.
What to watch: ARR growth, new customers, operating margins, free cash flow, and adoption of enterprise AI products.
Ciena (CIEN)
Catalyst: AI networking demand is surging, and a fresh earnings report arrives Thursday
The Next Catalyst Is Already on the Calendar
Ciena gives this week’s list a forward-looking setup.
The company reports fiscal third-quarter results Thursday, September 3, before the market opens.
Management previously guided for quarterly revenue of roughly $1.63 billion, with adjusted operating margin between 19% and 20%.
For the full year, Ciena expects revenue of roughly $6.3 billion.
The upcoming report will tell investors whether one of the strongest AI networking trends is still accelerating.
AI Needs Data Centers to Talk
The core Ciena thesis is straightforward.
Building more AI data centers creates enormous computing capacity. Connecting those facilities to each other creates another infrastructure problem.
Ciena sells high-speed optical networking equipment that moves large volumes of data between data centers.
Management has said demand is outpacing supply in parts of the business, resulting in longer lead times and improved multi-year visibility.
The company has also won business connecting geographically dispersed AI training facilities, enabling them to operate more like a single large computing cluster.
Expectations Are the Risk
Ciena is no longer overlooked.
The business has benefited enormously from AI networking demand, and the market already understands the story. That raises the bar heading into Thursday’s report.
A good quarter alone will not be enough. Investors will want confirmation that orders, margins, and future demand remain strong.
My Take: CIEN is the event-driven name this week. Existing holders have a strong fundamental reason to stay interested, but new buyers should respect the earnings risk and avoid treating Thursday like a guaranteed beat.
What to watch: Thursday’s earnings, data-center interconnect demand, backlog, gross margins, supply constraints, and updated full-year guidance.
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Final Word
The Better Stories Are Not All Megacaps
Okta is turning AI agents into a new identity-security opportunity. Agilent is benefiting from recovering laboratory demand. Dollar General is taking traffic from a value-conscious consumer. Nutanix is converting recurring cloud revenue into stronger margins. Ciena has a major test this week as AI networking demand meets elevated expectations.
These are very different businesses, but the numbers tell a similar story.
Proof Before Price
The point of this watchlist is not to guess where any of these stocks trade on Monday morning.
Prices move. Fundamentals take longer.
Revenue growth, recurring contracts, guidance changes, customer traffic, operating margins, and backlog give us information that remains useful after the closing bell moves again.
The Takeaway
Look for companies where the business is getting stronger before worrying about the exact quote on the screen. Readers can decide their own entry price. Our job is to give them a reason to keep the stock on the watchlist.
That’s all for today. Thank you for reading. If you have any feedback, please reply to this email.
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— Adam Garcia
Elite Trade Club
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