OKTA Shares Jump on Solid Q3 Earnings Beat, Revenues Increase Y/Y

Okta OKTA shares jumped 5.46% to close at $86.34 on Wednesday following impressive third-quarter fiscal 2025 results. Earnings of 82 cents per share beat the Zacks Consensus Estimate by 9.33% and increased 22.4% year over year.

Total revenues increased 11.6% year over year to $742 million, surpassing the consensus mark by 1.64%. The year-over-year upside can be attributed to higher subscription revenues that rose 11.2% year over year to $724 million, which accounted for 97.6% of total revenues. Professional services and other revenues (2.4% of total revenues) jumped 28.6% year over year to $18 million.

Location-wise, revenues from the United States contributed 81% to total revenues in the fiscal third quarter. The figure increased 12.17% year over year to $590 million. International revenues contributed 20.9% to total revenues. The figure increased 9.35% year over year to $152 million.

Okta’s Q3 Top-Line Details

Customers with more than $100K in Annual Contract Value (ACV) increased 7% year over year to 5,030. The dollar-based retention rate for the trailing 12 months was 106%, down 2% year over year.

Okta, Inc. Price and Consensus

Okta, Inc. price-consensus-chart | Okta, Inc. Quote

Remaining Performance Obligations (RPO) totaled $4.292 billion, up 17% year over year. The current RPO, expected to be recognized over the next 12 months, was $2.328 billion, up 13% year over year.

Okta’s Q3 Operating Details

Third-quarter fiscal 2025 non-GAAP gross margin was unchanged on a year-over-year basis at 81.4%.

As a percentage of revenues, research and development expenses decreased 140 basis points (bps) year over year to 15%. General and administrative expenses decreased 70 bps to 11.2%. Sales and marketing expenses decreased 110 bps year over year to 31.3%.

Non-GAAP operating margin expanded 320 bps year over year to 24% in the reported quarter.

Okta’s Balance Sheet

Okta had $2.46 billion in cash, cash equivalents and short-term investments as of Oct. 31, 2025.

Net cash provided by operations was $218 million in the reported quarter, while free cash flow was $211 million.

Okta Offers Positive Guidance

For fourth-quarter fiscal 2026, Okta expects revenues in the $748-$750 million range, indicating year-over-year growth of 10%. Current RPO is expected to be between $2.445 billion and $2.450 billion, suggesting year-over-year growth of 9%.

Non-GAAP operating income is expected to be in the range of $189-$191 million. Operating margin is expected to be 25%. Non-GAAP earnings are anticipated to be 84-85 cents per share, assuming diluted weighted-average shares outstanding of approximately 185 million. 

Non-GAAP free cash flow margin is expected to be approximately 31%.

For fiscal 2026, revenues are expected to be $2.906-$2.908 billion, indicating year-over-year growth of 11%. Non-GAAP operating income is expected to be in the range of $753-$755 million, while operating margin is expected to be 26%. Non-GAAP earnings are anticipated to be between $3.43 and $3.44 per share, assuming diluted weighted-average shares outstanding of approximately 185 million. 

Non-GAAP free cash flow margin is expected to be approximately 29%.

Zacks Rank & Stocks to Consider

Currently, Okta carries a Zacks Rank #3 (Hold).

Advanced Energy Industries AEIS, Digital Turbine APPS and Amphenol APH are some better-ranked stocks that investors can consider in the broader Zacks Computer and Technology sector. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Long-term earnings growth rates for Advanced Energy Industries, Digital Turbine and Amphenol are currently pegged at 33.41%, 42.42% and 38.67%, respectively.

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This article originally published on Zacks Investment Research (zacks.com).

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