What happened

Shares of Okta (OKTA -0.65%) tumbled out of the gate Thursday, losing as much as 22.8%. As of 11:34 a.m. ET, the stock was still down 20.3%.

The catalyst that sent the cybersecurity specialist lower was its quarterly earnings results, which were something of a mixed bag.

So what

For its fiscal 2024 first quarter, Okta generated revenue of $518 million, up 25% year over year, fueled by subscription revenue, which grew 26%. The company's focus on costs helped boost its bottom line, as it swung from a loss to a profit, with adjusted diluted earnings per share (EPS) of $0.22. 

To give the results some context, analysts' consensus estimates were calling for revenue of $518 million and EPS of $0.12. Therefore, while sales were in line with expectations, adjusted profits were surprisingly strong. 

Okta's strong cash generation continued, with operating cash flow of $129 million, up from $19 million in the prior-year quarter, while free cash flow of $124 million was much improved from $11 million.

The company's customer metrics improved marginally, with total customers of 18,050, up 14% year over year, though Okta's most lucrative customers -- those spending $100,000 annually -- climbed 23%. At the same time, the company's trailing-12-month dollar-based net retention rate clocked in at 117%, showing that existing customers continue to expand their relationship with Okta.  

A bit more concerning, however, was the company's remaining performance obligation (RPO), or contractually obligated sales not yet booked into revenue. Current RPO of $1.7 billion increased 20% year over year, while its total RPO increased by just 9%. Since RPO is a forward-looking indicator, it suggests Okta's sales growth will continue to slow in the months to come.

Now what

Management seemed to confirm those fears, as Okta's tepid guidance gave investors pause. For the second quarter, the company is expecting revenue of about $534 million, up 18% at the midpoint of its guidance. Its full-year guidance was even more concerning, as management is forecasting revenue of $2.18 billion, an increase of about 17%, which fell short of Wall Street's expectations for $2.2 billion.

Okta continues to generate growth, but the economic headwinds appear to by taking their toll. This ongoing revenue slide bears watching, and investors should approach the stock with caution until its growth reaccelerates.