Okta Declines 16% Post Q1 Earnings: Buy, Sell or Hold the Stock?

Okta OKTA shares dropped 16.16% on Wednesday to close at $105.22 following first-quarter fiscal 2026 results on Tuesday. Although the company reported impressive earnings and revenue growth, the decline in shares can be attributed to slowing top-line growth expectations for the fiscal second quarter as well as fiscal 2026. 

Okta expects second-quarter fiscal 2026 revenues between $710 million and $712 million, indicating 10% year-over-year growth (11.5% year-over-year growth in first-quarter fiscal 2026). The current portion of the company’s remaining performance obligations (RPOs) is expected in the 10-11% range. Okta anticipates non-GAAP earnings between 83 cents and 84 cents per share.

For fiscal 2026, OKTA still expects revenues between $2.85 billion and $2.86 billion, indicating 9-10% growth from the figure reported in fiscal 2025. Uncertainty in the federal business, along with challenging macroeconomic conditions, are headwinds for the company. However, Okta expects fiscal 2026 non-GAAP earnings between $3.23 and $3.28 per share, up from previous guidance between $3.15 and $3.20 per share. 

Year to date, Okta shares returned 33.5%, outperforming the broader Zacks Computer & Technology and close peers, including Microsoft MSFT, International Business Machines IBM and CyberArk CYBR. Shares of International Business Machines, CyberArk and Microsoft returned 18.4%, 14.5% and 8.5%, respectively.

OKTA Stock's Performance

Earnings Estimates Revision Trend Steady for OKTA

For second-quarter fiscal 2026, the Zacks Consensus Estimate for OKTA’s earnings has been steady at 79 cents per share over the past 30 days. The earnings figure suggests 9.72% year-over-year growth.
 

Okta, Inc. Price and Consensus

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

For fiscal 2026, the Zacks Consensus Estimate for Okta’s earnings has been steady at $3.19 per share over the past 30 days. The earnings figure suggests 13.52% growth over the figure reported in fiscal 2025.

Okta’s earnings beat the Zacks Consensus Estimate in all the trailing four quarters, the average surprise being 13.53%.

OKTA Benefits From Strong Demand for Identity Solutions

Okta benefits from strong demand for its new products, including Identity Governance, Privileged Access, Device Access, Fine Grained Authorization, Identity Security Posture Management, and Identity Threat Protection with Okta AI. Okta’s Identity Security Posture Management and Privileged Access solutions are helping enterprises tackle non-human identities that comprise service accounts, shared accounts, machines and tokens. 

OKTA’s innovative portfolio is helping the company win clients, driving top-line growth. It exited first-quarter fiscal 2026 with roughly 20,000 customers and $4.084 billion in RPOs, reflecting strong growth prospects for subscription revenues. Customers with more than $100 thousand in Annual Contract Value increased by 70 sequentially to 4,870. 

Okta’s offerings include Okta AI, a suite of AI-powered capabilities embedded across several products, which empowers organizations to harness AI to build better experiences and protect against cyberattacks. Okta Platform and Auth0 Platform are compatible with public clouds, on-premises infrastructures and hybrid clouds. The Auth0 platform comprises the Auth0 Platform, Fine Grain Authorization, Highly Regulated Identity and Self Service. 

The combined governance portfolio of Okta Identity Governance, Lifecycle Management, and Workflows has surged 400% over the past three years to nearly $40 billion at the end of the fiscal first quarter. 

Okta is benefiting from a rich partner base that includes the likes of Amazon Web Services, CrowdStrike, Google, LexisNexis Risk Solutions, Microsoft, Netskope, Palo Alto Networks, Plaid, Proofpoint, Salesforce, ServiceNow, VMware, Workday, Yubico and Zscaler.

Here’s Why Okta Stock is a Hold Now

Okta shares are overvalued, as suggested by the Value Score of F. 

In terms of forward Price/Cash Flow, OKTA is trading at 24.59X compared with the broader sector’s 19.8X, suggesting a premium valuation.

Price/Cash Flow F12M

The stock is currently trading below the 50-day and 200-day moving averages, indicating a bearish trend.

OKTA Stock Trades Below 50-Day & 200-Day SMAs

Despite having an innovative portfolio and expanding clientele OKTA suffers from challenging macroeconomic condition and a stretched valuation that makes the stock risky in the near term.

Okta currently has a Zacks Rank #3 (Hold), which implies that investors should wait for a better entry point to accumulate the stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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

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