Given how digital transformation has proliferated, cyberattacks have also been on the rise. Okta (NASDAQ:OKTA) has gained notoriety as a cybersecurity firm that offers identity security in the U.S. and internationally. In essence, it secures online identity to help people feel safe using any technology.
But Okta hit a hurdle in its growth trajectory when it disclosed that a hacker group had accessed client files through a support system in 2023. Investors really lost confidence in Okta then and the share price plunged leading to a $2 billion wipeout in market capitalization.
Since then, it has been on a path of trying to gain back lost ground but the share price is still down by about 24% over the past three years. On the other hand, the shares gained more than 30% this year so it looks to be on the path to regain investor confidence.
We look into Okta a bit more deeply to see if it can be a stable investment now or another dip is coming.
High Value Customers Rise Massively
Management reported its fourth quarter and annual results for fiscal 2025 and, for the most part, steady customer growth was reported with 19,650 customers, a marginal 4% jump sequentially (from the end of the fiscal third quarter).
Its cohort of big customers, meaning those having an annual contract value greater than $100,000, went up by 7% year-over-year and 2% sequentially. These “whales” also make up about a quarter of its total customers now. Management also reported that the top $1 million deal cohort grew 22% year-over-year.
Okta is seeing a solid momentum manifesting in its new products, like Okta Identity Governance, Privileged Access, Device Access, Fine Grained Authorization, Identity Security Posture Management, and Identity Threat Protection with Okta AI, which made up over 20% of its total bookings in the fourth quarter.
The leadership team reported more than 1,300 customers and above $100 million in ACV in Okta Identity Governance, which can be considered Okta’s standout offering as of the last reported results, and has become popular in a span of two years.
Okta’s Auth0 offering also posted its best bookings quarter in its history. The absolute standout is the record bookings figure, crossing over $1 billion in total contract value for the first time in its history.
Dollar-based net retention rate on a trailing-12-month basis has been on a slow downtrend for a long time, though. As of Q4 of FY2025, this stood at 107%, down by some margin from the 123% it had in Q1 of FY2023.
How Have Okta’s Financials Held Up?
With lots of bullish tailwinds propelling the financials forward, the company reported better-than-expected results and bumped the share price higher.
Quarterly revenues of $682 million represented an increase of 13% from the prior year’s period. 98% of the total top line stemmed from subscriptions, which grew by 13% year-over-year as well, to reach $670 million for the quarter. The revenue trend reveals a long-term uptrend, cementing the firm’s position as a growth name.
Okta also reported that it is seeing profitability gains from lower costs. It wasn’t a surprise then to see management post a GAAP-based net income of $0.13 per share, a huge turnaround from the net loss it had posted in the year-ago period. On a non-GAAP basis, its quarterly net income stood at $0.78 per share, up 24% year-over-year.
For the whole fiscal year, Okta’s non-GAAP operating margin came in at 22.5% compared to only 13.7% in the prior fiscal year and a negative 0.5% in FY2023. Non-GAAP free cash flow margin for the year stood at 28%, once again, exhibiting quite a jump from the prior two years.
Is Okta Stock Finally Going Up?
If analysts are right, Okta stock is finally going up to reach fair value at $117 per share, the consensus price target among 40 analysts.
With lots of cash on the balance sheet, net income on the rise, 30 analysts revising their estimates higher and a 12-months streak of profitability under its belt, there’s lots to like about Okta now.
Numerous growth vectors, including broadening its international footprint, are likely to propel the share price to the target.
While the company’s new products keep gaining momentum, it has an $80 billion total addressable market of which Okta commands a small portion. So, there is certainly room left to balloon higher.
The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.
