Okta OKTA is set to release fourth-quarter fiscal 2025 results on March 3.

For the fiscal fourth quarter, Okta anticipates non-GAAP earnings in the range of 73-74 cents per share. Revenues are expected in the range of $667-$669 million, indicating growth of 10-11% from the year-ago period’s reported figure.

The Zacks Consensus Estimate for earnings has remained steady at 73 cents per share over the past 30 days, indicating year-over-year growth of 15.87%. The consensus mark for revenues is pegged at $668.8 million, indicating an increase of 10.6% from the year-ago quarter’s reported figure. 

Okta’s earnings beat the Zacks Consensus Estimate in all the trailing four quarters, with the average earnings surprise being 19.87%.
 

Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

Let’s see how things have shaped up for Okta prior to this announcement:

Factors to Note for Okta

OKTA’s innovative portfolio is expected to have helped it win clients, driving top-line growth in the to-be-reported quarter. It exited third-quarter fiscal 2025 with 19,450 customers and $2.062 billion in current remaining performance obligations, reflecting strong growth prospects for subscription revenues. Customers with more than $100 thousand in Annual Contract Value increased 8% year over year to 4,705.

Okta’s Workforce and Customer Identity solutions have been gaining adoption and the momentum is expected to have continued in the to-be-reported quarter. Okta AI — a suite of AI-powered capabilities embedded across both Workforce Identity Cloud and Customer Identity Cloud — empowers organizations to harness AI to build better experiences and protect against cyberattacks. This is expected to have driven up the adoption of these solutions.

OKTA is benefiting from strong demand for Okta Identity Governance, which represents roughly one-third of the contract value when sold in a workforce deal. New solutions like Okta Privileged Access, Device Access, Fine Grain Authorization, Identity Threat Protection and Identity Security Posture Management are gaining traction. Roughly 15% of third-quarter fiscal 2025 bookings were from new products. The trend is expected to have continued in the to-be-reported quarter.

OKTA has increased the capability of its Auth0 Free Plan to include 25,000 monthly active users, as well as a passwordless feature, unlimited social and Okta connections, and custom domain support. Paid plans now include enterprise-grade identity security with multi-factor authentication, support for a System for Cross-domain Identity Management, enhanced log retention and more. These features are expected to have helped expand its clientele.

OKTA Shares Underperform Sector, Industry

Okta shares have declined 16.8% in the trailing 12 months, underperforming the Zacks Computer & Technology sector’s return of 14.7% and the Zacks Security industry’s appreciation of 17.1%.

Okta Stock’s Performance

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OKTA stock is not so cheap, as the Value Score of F suggests a stretched valuation at this moment.

In terms of the forward 12-month Price/Cash Flow, OKTA is trading at 23.86X, higher than the broader sector’s 21.72X.

P/CF Ratio (F12M)

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

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

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Strong Portfolio Aid OKTA’s Prospects

OKTA’s portfolio strength is noteworthy, with strong demand for new products like Okta Identity Governance and Okta Privileged Access amid a challenging macroeconomic environment. An expanding clientele, driven by the strong adoption of its Identity Threat Protection solution, is a key catalyst for growth-oriented investors.

Okta’s strong portfolio is helping it win market share in the cybersecurity domain against Microsoft MSFT, International Business Machines IBM and CyberArk CYBR. Gartner has placed OKTA higher than Microsoft and CyberArk in all use cases on the Gartner Critical Capabilities for Access Management. 

Okta benefits from the growing incidence of security breaches globally. IDC expects the global security market to witness double-digit growth over the next five years, with revenues hitting $200 billion in 2028. Identity and Access Management (“IAM”), which Okta specializes in offering, is expected to be one of the fastest-growing segments, with a CAGR expected in the teens or higher between 2024 and 2028.

IAM’s growth prospect is robust due to the growing need to offer secured remote access and heightened protection around enterprises’ ongoing digital transformation. These factors bode well for Okta’s long-term prospects.

Conclusion

Okta’s robust portfolio is helping it to expand its clientele. It benefits from positive industry trends, including growing demand for identity solutions, which justifies premium valuation. 

OKTA stock currently flaunts a Zacks Rank #1 (Strong Buy) and a Growth Score of A, a favorable combination that offers a strong investment opportunity, per the Zacks Proprietary methodology. You can see the complete list of today’s Zacks #1 Rank stocks here.

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

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