Identity management software maker Okta (OKTA) reported Q4 CY2024 results topping the market’s revenue expectations , with sales up 12.7% year on year to $682 million. Guidance for next quarter’s revenue was better than expected at $679 million at the midpoint, 1.3% above analysts’ estimates. Its non-GAAP profit of $0.78 per share was 6% above analysts’ consensus estimates.

Is now the time to buy Okta? Find out in our full research report.

Company Overview

Founded during the aftermath of the financial crisis in 2009, Okta (NASDAQ:OKTA) is a cloud-based software-as-a-service platform that helps companies manage identity for their employees and customers.

Identity Management

As software penetrates corporate life, employees are using more apps every day, on more devices, in more locations. This drives the need for identity and access management software that help companies efficiently manage who has access to what, and ensure that access privileges are secure from cyber criminals.

Sales Growth

Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can have short-term success, but a top-tier one grows for years. Thankfully, Okta’s 26.1% annualized revenue growth over the last three years was solid. Its growth beat the average software company and shows its offerings resonate with customers.

This quarter, Okta reported year-on-year revenue growth of 12.7%, and its $682 million of revenue exceeded Wall Street’s estimates by 2.1%. Company management is currently guiding for a 10% year-on-year increase in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to grow 6.8% over the next 12 months, a deceleration versus the last three years. This projection is underwhelming and implies its products and services will see some demand headwinds.

Software is eating the world and there is virtually no industry left that has been untouched by it. That drives increasing demand for tools helping software developers do their jobs, whether it be monitoring critical cloud infrastructure, integrating audio and video functionality, or ensuring smooth content streaming. Click here to access a free report on our 3 favorite stocks to play this generational megatrend.

Customer Acquisition Efficiency

The customer acquisition cost (CAC) payback period measures the months a company needs to recoup the money spent on acquiring a new customer. This metric helps assess how quickly a business can break even on its sales and marketing investments.

It’s relatively expensive for Okta to acquire new customers as its CAC payback period checked in at 55.5 months this quarter. The company’s slow recovery of its sales and marketing expenses indicates it operates in a highly competitive market and must invest to stand out, even if the return on that investment is low.

Key Takeaways from Okta’s Q4 Results

Revenue and operating profit beat in the quarter. It was encouraging to see Okta’s full-year revenue guidance beat analysts’ expectations. Furthermore, full-year operating profit guidance beat by an impressive amount. Overall, this quarter was quite strong, with very few blemishes. The stock traded up 11.8% to $97.50 immediately following the results.

So should you invest in Okta right now? What happened in the latest quarter matters, but not as much as longer-term business quality and valuation, when deciding whether to invest in this stock. We cover that in our actionable full research report which you can read here, it’s free.