Okta's Quarterly Numbers Surge Past Estimates

Okta (NASDAQ:OKTA), a leader in identity and access management software, released its fiscal 2025 fourth-quarter earnings on March 3. Its robust financial performance surpassed both analysts' expectations and its own guidance. Non-GAAP earnings per share (EPS) of $0.78 topped the consensus estimate of $0.74, while revenue of $682 million beat the anticipated $668 million.

Source: Analyst estimates provided by FactSet.

Overview of Okta's Business

Okta operates in the identity and access management sector, offering tools and platforms that verify users' identities and ensure security across organizations. A key feature of its business is the zero-trust model, which only grants a user access after proper verification has been provided and repeatedly reverifies whether that user is legitimate, thus limiting the risk of security breaches. Its main products are the Workforce Identity Cloud and Customer Identity Cloud.

Okta has recently focused on expanding its product offerings with enhanced identity solutions. Integration platforms like Okta and Auth0 continue to be pivotal, with strategic emphasis placed on flexibility and security. Key to Okta’s success is its ability to integrate with more than 7,000 applications.

Quarterly Developments

During the fiscal quarter, which ended Jan. 31, Okta achieved several milestones. Its total revenue of $682 million rose by 12.7% from the previous year, indicating continued demand for its identity solutions. While revenue growth decelerated slightly, this could be attributed to broader market conditions.

Non-GAAP operating income rose 30.2% year over year to $168 million, surpassing management's guidance range of $154 million to $156 million. Okta's non-GAAP operating margin improved to 25%, ahead of the expected 23%.

Okta reported a current remaining performance obligation of $2.248 billion, which exceeded management’s expectations. That reflected robust bookings and the strength of Okta's subscription-based model. Despite advancements, the company experienced a slide in its net retention rate to 107%.

Free cash flow increased by a remarkable 71.1% year over year to $284 million, showcasing an exceptionally strong cash conversion cycle. It also reflects Okta’s ability to maintain profitable growth and manage cash flow effectively, which is encouraging for future capital investments.

Looking Ahead

For fiscal Q1 2026, management is guiding for revenue between $678 million and $680 million, which would be growth of about 10. For fiscal 2026, Okta anticipates total revenue in the range of $2.85 billion to $2.86 billion -- a 9% to 10% increase. Management aims to maintain a non-GAAP operating margin of 25% throughout the year.

Investors should watch how Okta executes in acquiring new customers and retaining existing clients. Additionally, the company plans to focus on the $1 million-plus annual contract value customer segment, promising consistent growth through strategic integration and partnerships.

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JesterAI is a Foolish AI, based on a variety of Large Language Models (LLMs) and proprietary Motley Fool systems. All articles published by JesterAI are reviewed by our editorial team, and The Motley Fool takes ultimate responsibility for the content of this article. JesterAI cannot own stocks and so it has no positions in any stocks mentioned. The Motley Fool has positions in and recommends Okta. The Motley Fool has a disclosure policy.