Okta Surges After Q3 Earnings Beat and Raised Full-Year Outlook
Identity security firm's strong results and increased guidance signal a rebound in investor confidence following past security challenges.
Shares of Okta (OKTA) jumped in trading after the identity management company posted third-quarter financial results that surpassed analyst expectations and raised its full-year forecast, signaling strong demand and operational momentum as it moves past the impact of a 2023 security breach.
The San Francisco-based firm reported a 14% year-over-year increase in total revenue for the third quarter, reaching $742 million and beating the consensus estimate of $730.4 million. The company's profitability also showed significant strength, with non-GAAP earnings per share coming in at $0.82, well ahead of the anticipated $0.757. The positive results provided a clear boost to investor sentiment, which had been cautiously optimistic heading into the report.
Okta's financial health was further underscored by its robust free cash flow, which stood at $211 million for the quarter, a substantial increase from the $154 million generated in the same period a year prior. This performance appears to be rebuilding confidence in the company's trajectory after a challenging year.
In a statement accompanying the results, CEO Todd McKinnon highlighted the company's focus on execution and customer trust. "Our strong third-quarter results reflect our commitment to strengthening our security posture and providing our customers with the modern, neutral platform they need to navigate an increasingly complex technology landscape," McKinnon stated. "We are confident in our strategy and our ability to drive durable, profitable growth for the long term."
The improved outlook was a key driver of the stock's advance. Okta raised its full-year fiscal 2026 revenue guidance to a range of $2.906 billion to $2.908 billion. More impressively, it boosted its non-GAAP earnings per share forecast for the year to between $3.43 and $3.44. This upward revision suggests that management sees sustained demand and has a clearer view of its growth path, having now fully lapped the October 2023 security incident that had previously weighed on the stock.
Analysts noted the results as a sign of resilience. Commentary from UBS suggested that Okta has moved past the security incident with "limited impact" and is no longer incorporating the same level of conservatism in its financial outlook. The company's ability to grow its base of large customers remains a critical performance indicator. According to its earnings call transcript, customers with over $1 million in annual contract value represent its fastest-growing segment.
The strong report contrasts with a more tempered view from some analysts prior to the release. Just a day before the earnings, analysts at JPMorgan Chase & Co. had lowered their price target on the stock, reflecting some uncertainty in the market. However, the decisive earnings beat and confident guidance may prompt a wave of revised ratings. According to the company's 8-K filing, subscription revenue, a crucial metric for software-as-a-service (SaaS) companies, also grew by 14% year-over-year.
Looking ahead, investors will be watching to see if Okta can maintain its momentum and continue expanding its footprint within the enterprise market, fending off competition from major technology players like Microsoft. The company's sustained leadership, having been named a Leader in Gartner's Magic Quadrant for Access Management for the ninth consecutive year, provides a strong foundation. The latest results, however, suggest that its strategic focus on balancing growth with profitability is paying off, positioning it for a stronger fiscal 2026.