OKTA Inc (NASDAQ:OKTA) Shares Fall Despite Q3 Earnings Beat as Guidance Disappoints

Okta Inc (NASDAQ:OKTA) reported financial results for its fiscal third quarter that concluded on October 31, 2025, delivering a performance that surpassed analyst expectations on the top and bottom lines. Despite the beat, the company’s shares moved lower in after-hours trading, suggesting investor focus may have shifted to forward-looking metrics and guidance within a competitive cybersecurity landscape.

Earnings and Revenue Versus Estimates

The identity management specialist posted quarterly revenue of $742 million, marking a 12% increase year-over-year. This figure came in ahead of the Wall Street consensus estimate of approximately $744.96 million. The company’s profitability, as measured by non-GAAP earnings per share (EPS), also exceeded forecasts.

• Reported Non-GAAP EPS: $0.82
• Analyst Estimate (Non-GAAP EPS): $0.771
• Reported Revenue: $742 million
• Analyst Revenue Estimate: ~$744.96 million

The revenue beat, while modest, demonstrates Okta’s ability to maintain growth momentum, primarily driven by its subscription business, which generated $724 million of the total.

Market Reaction and Price Action

Following the earnings release, Okta’s stock price declined approximately 4.5% in after-hours trading. This negative reaction occurred despite the earnings and revenue beats, a dynamic often attributed to the market’s forward-looking nature. Investors likely evaluated the company’s guidance and broader financial metrics against high expectations.

Recent stock performance provides additional context:

• The stock was essentially flat over the past two weeks leading into the report.
• It has declined roughly 10% over the past month, indicating some investor caution ahead of the earnings release.

The after-hours dip suggests that while the quarterly results were solid, they may not have been strong enough to alter the near-term narrative or fully alleviate concerns about competitive pressures and the pace of growth deceleration.

Key Highlights from the Quarter

Beyond the headline numbers, Okta’s press release highlighted several areas of operational strength and strategic positioning:

• Profitability Improvement: The company achieved a GAAP operating income of $23 million, a significant improvement from a $16 million loss in the year-ago quarter. Non-GAAP operating income expanded to $178 million, representing a 24% margin.
• Strong Cash Generation: Operating cash flow was robust at $218 million, with free cash flow reaching $211 million. This represents a substantial 28% free cash flow margin, underscoring the efficiency of its subscription-based model.
• Healthy Backlog: Remaining Performance Obligation (RPO), a measure of subscription backlog, grew 17% year-over-year to $4.29 billion. Current RPO, which represents revenue expected to be recognized in the next 12 months, increased 13% to $2.33 billion, indicating visibility into near-term revenue.
• AI Focus: CEO Todd McKinnon emphasized the company’s role in securing AI technologies, specifically citing the recent launch of "Auth0 for AI Agents" as a key strategic initiative.

Forward Guidance and Analyst Expectations

Management provided guidance for the fourth quarter and updated its full-year fiscal 2026 outlook. The company’s forecast for the upcoming quarter appears slightly more conservative than the broader analyst consensus at the time of the report.

For Q4 Fiscal 2026, Okta expects:

• Total revenue between $748 million and $750 million.
• This midpoint of $749 million compares to an analyst sales estimate of approximately $752.68 million.
• Non-GAAP operating income of $189-$191 million.
• Non-GAAP EPS between $0.84 and $0.85.

For the full Fiscal Year 2026, the company now expects:

• Total revenue of $2.906 billion to $2.908 billion.
• This outlook implies an 11% annual growth rate and sits below the analyst sales estimate of $2.942 billion.
• Non-GAAP EPS in the range of $3.43 to $3.44.

The company described its approach to guidance as "prudent," factoring in current market conditions. The revenue guidance for both Q4 and the full year falling short of analyst estimates likely contributed to the negative market reaction, as it signals a continuation of a moderated growth trajectory.

For a detailed breakdown of upcoming earnings estimates and historical performance, you can review more data here.

Disclaimer: This article is for informational purposes only and does not constitute investment advice, nor does it recommend buying or selling any securities. Investors should conduct their own research and consult with a qualified financial advisor before making any investment decisions.