Share prices of Okta (OKTA +11.14%) surged higher after the cybersecurity company on Monday reported fiscal 2025 fourth-quarter results that easily topped analyst expectations and offered upbeat guidance. The stock trades up about 30% year to date as of this writing, although it's still down over the past 12 months.
With that initial pop in the books, can Okta continue to rally, or have investors missed their near-term window to buy the stock?
NASDAQ: OKTA
Key Data Points
Blowout quarter and solid outlook
Okta suffered a big cybersecurity failure in the autumn of 2023 when hackers stole data from customers who used its support system. That put a damper on the stock price through much of 2024, but the impact of the incident now appears to be in the rear-view mirror.
For its fiscal Q4, which ended Jan. 31, Okta's revenue increased by 13% year over year to $682 million, which blew past both its $667 million to $669 million guidance range and the $669 million analyst consensus compiled by FactSet. Subscription revenue also rose by 13% to $670 million. Adjusted earnings per share (EPS) jumped 24% to $0.78 from $0.63 a year ago. The company had guided for adjusted EPS to be between $0.73 and $0.74.
Okta's net dollar retention rate -- which measures the amount of revenue that came from established customers relative to their prior-year spending -- was 107%. Management expects it to remain in that neighborhood in fiscal 2026. That metric has drifted lower in recent quarters, a trend Okta attributed to relatively low hiring rates among its clients. Its net dollar retention rate was 111% in fiscal 2024.
Okta continues to add customers, and it's doing particularly well at bringing on new enterprise-level clients. It added about 200 total customers in the quarter, ending the fiscal year with 19,650, an increase of 4% year over year. Customers with annual contract values (ACVs) above $100,000 rose to 4,800, up 7% year over year, and customers with ACVs of more than $1 million climbed by 22% to 470. That customer cohort accounted for over $1 billion in total ACV.
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The company said that its Okta Identity Governance (OIG) solution has been a strong seller since its launch two years ago; it now has 1,300 customers with a total ACV of more than $100 million. Later this month, the company will launch its new Auth for GenAI solution, which will help customers securely build and scale generative AI applications. It says it has a waitlist of customers looking to try the product.
Okta's remaining performance obligation (RPO) backlog climbed by 25% to $4.22 billion, while its current RPO (cRPO) backlog, which is subscription backlog expected to be recognized over the next 12 months, increased by 15% to nearly $2.25 billion. Both metrics are based on signed contracts and are an indication of future revenue. Both its RPO and cRPO backlog growth saw nice accelerations in growth from their fiscal Q3 levels.
Management is now guiding for fiscal 2026 revenue to be between $2.85 billion and $2.86 billion, which would amount to growth of 9% to 10%. The company had previously forecast fiscal 2026 revenue would be between $2.77 billion and $2.78 billion. It's also now projecting adjusted EPS of $3.15 to $3.20 for the year.
For fiscal Q1 2026, it guided for revenue to grow by about 10% to between $678 million to $680 million, which was above the $670 million analyst consensus. It is looking for adjusted EPS to be between $0.76 to $0.77.
Is it too late to buy the stock?
With a forward price-to-sales (P/S) ratio of about 6 times fiscal 2026 analyst estimates, Okta is still reasonably valued relative to many other cybersecurity stocks.
Data by YCharts.
The company has been conservative with its guidance recently, and in part as a result surpassed the high end of its original fiscal 2025 revenue guidance range by 4%. A similar outcome in fiscal 2026 would see Okta produce revenue of around $2.9 billion, which would represent growth of around 11%.
Fiscal 2025's Q4 was a good quarter and I expect the company to continue to raise its guidance throughout fiscal 2026. That said, I would not chase the stock at this time. Cybersecurity investors tend to prefer growth, and Okta's revenue growth rates are still relatively low compared to top-tier companies in the industry. With the labor market environment likely to not be robust this year (a condition which could drag on Okta's growth), I'd stay on the sidelines.
