Okta (OKTA, Financial) has faced challenges with lower seat counts, slow upsell rates, and the aftermath of a significant security breach in October 2023, which led to an 11% decline in shares year-to-date before recent gains. Despite these challenges, Okta's better-than-expected Q3 earnings report has positively impacted its stock performance.

During the Q3 earnings call, CFO Brett Tighe noted that, like other cybersecurity firms such as Palo Alto Networks (PANW, Financial), Qualys (QLYS, Financial), and Zscaler (ZS, Financial), organizations continue to scrutinize budgets and rationalize software spending. The previous security incident also contributed to headwinds in seat growth and monthly active users (MAUs). However, Okta's cRPO growth of 13% surpassed its guidance of 9%, which had been a disappointment in the last quarter.

• Okta is experiencing seat declines in its workforce identity business, but it is successfully cross-selling more products to new and existing customers. New offerings like Okta privileged access, device access, fine-grained authorization, and identity threat protection are gaining traction, with new products making up 15% of total bookings in Q3.
• These new products are driving significant cross-selling opportunities. More customers are reaching the $1.0 million annual contract value (ACV) mark, making the $1.0+ million ACV cohort Okta's fastest-growing segment, representing about $1.0 billion in ACV.
• Okta's partner ecosystem is another strength, as all of its top ten deals in Q3 involved partners, each exceeding $1.0 million in ACV.
• For Q4, Okta's EPS and revenue outlook exceeded expectations, although its cRPO forecast indicates growth slowing to 9%, reaching $2.130-$2.135 billion. The initial outlook for FY26 estimates only 7% revenue growth, reflecting a conservative approach to guidance.

Overall, Okta's results and outlook alleviate concerns about seat declines, and with the security breach impact behind it, the company faces fewer obstacles. While new product growth boosts the top line, challenges with seat and MAU growth persist.