What happened
Okta (OKTA -0.89%) shareholders beat the market on Thursday as the stock gained 11% by 3 p.m. ET, compared with a 1.4% rally in the S&P 500. The surge erased just a small piece of the software company's recent losses, and shares remain lower by over 50% so far in 2022.
It was powered by rising optimism in the tech industry, but also by hope from investors that Okta will have good things to say in its upcoming quarterly report.
Image source: Getty Images.
So what
Okta later today will announce results for the Q1 selling period that ended in late April. Expectations are building around that announcement after a few other cloud services companies reported solid results. Salesforce shares surged in the wake of its recent Q1 report showing robust demand for its enterprise services.
And closer to Okta's data security niche, Palo Alto Networks raised its outlook in its latest report. Hopes are running high that Okta might have similarly good news to say around its engagement and profitability metrics later today.
Now what
Okta is likely to show solid sales growth for the Q1 period, with revenue rising 55% as enterprises continue to shift more work into the online space. Keep an eye on its average contract sizes, as companies like Zoom Video Communications have recently found success with attracting larger enterprise clients. Okta needs continued growth here to hit management's long-term expansion targets.
Okta's shares might remain pressured, though, until it can show that it is on a path back toward profitability after having swung to losses due to its recent acquisition of the Auth0 business.
That purchase will unlock a bigger addressable market for the identity services provider, but investors will likely demand to see that Okta can also generate sustainable profits even as it targets growth.
