Okta (OKTA, Financial) is experiencing a decline of 13% today, even after reporting strong Q1 results. The cybersecurity company, specializing in identity and access management, achieved an 11.5% year-over-year revenue increase to $688 million, surpassing analyst expectations. However, this marks the fourth consecutive quarter of slowing revenue growth. Despite this, Okta provided positive EPS and revenue guidance for Q2.
Analysts expressed disappointment as Okta only reaffirmed its full-year revenue guidance, despite the Q1 upside. The company is considering potential risks due to the uncertain economic environment for the rest of FY26.
During the Q&A, management expressed satisfaction with Q1 results and acknowledged macroeconomic factors influencing guidance. Although no macro impact was seen in Q1, Okta's decision to reaffirm was based on customer feedback, market observations, and sales team discussions. The company feels the market tone has shifted and opted for a conservative approach.
Another concern is Okta's cRPO metric, which rose 14% year-over-year to $2.227 billion, exceeding prior guidance. However, Q2 cRPO guidance of $2.200-2.205 billion indicates a 10-11% growth, showing a slowdown and a sequential decline from Q1, which is atypical for Q2. Okta usually guides conservatively with cRPO, possibly lowballing the guidance, but it did raise questions during the call.
Okta reported no softness in April, maintaining predictability after a strong Q4 performance. Although there is industry chatter about softness in April, Okta did not experience it. The cRPO guidance accounts for future macroeconomic uncertainty.
The pressure on Okta today seems mainly due to the reaffirmed FY26 revenue guidance, perceived as a disappointment. The muted cRPO guidance also contributes to this sentiment. Coming off a strong Q4, expectations were high, and Okta's stock had been trading near a two-year high, indicating elevated sentiment. Therefore, the sharp pullback on muted guidance is not surprising.
