TLDR
- Okta reported Q3 earnings of 82 cents per share on revenue of $742 million, beating estimates of 76 cents and $730 million
- Stock declined more than 3% after hours despite the beat as company didn’t offer fiscal 2027 guidance
- Fourth-quarter outlook exceeded expectations with revenue forecast of $748-$750 million and EPS of 84-85 cents
- Subscription backlog rose 17% year over year to $4.29 billion, above the $4.17 billion estimate
- BMO Capital dropped price target from $112 to $90 due to sector valuation compression
Okta turned in a strong third quarter Tuesday. The market’s response? Not good enough.
The identity management company posted earnings of 82 cents per share on revenue of $742 million. Analysts had forecast 76 cents per share on $730 million in sales.
That’s a clear beat on both metrics. Yet shares fell more than 3% in after-hours trading.
The disconnect came down to what Okta didn’t say. For the first time, the company declined to provide preliminary guidance for fiscal 2027.
CFO Brett Tighe blamed fourth-quarter seasonality. He said any guidance would require conservative assumptions. The market wanted that long-term view regardless.
Third-quarter revenue climbed 12% from $665 million in the same period last year. Net income surged 169% to $43 million, or 24 cents per share. The year-ago quarter brought $16 million in net income and breakeven EPS.
Subscription revenue hit $724 million, marking 11% growth. Wall Street had expected $715 million.
Guidance Brings Mixed Signals
Okta’s fourth-quarter outlook came in above consensus. The company guided to revenue of $748 million to $750 million. Adjusted earnings should range from 84 cents to 85 cents per share.
Analysts had modeled $738 million in revenue and 84 cents in EPS. The guidance beat doesn’t appear to have been enough to offset concerns about the missing fiscal 2027 outlook.
Returning performance obligations grew to $4.29 billion. That’s a 17% increase year over year. The subscription backlog figure topped the StreetAccount estimate of $4.17 billion.
AI Opportunity on the Horizon
CEO Todd McKinnon highlighted the company’s AI initiatives during a Tuesday interview. Okta launched new capabilities in Q3 that allow businesses to build AI agents and automate tasks.
McKinnon sees major potential ahead. He told CNBC the AI agent opportunity could exceed Okta’s core total addressable market over the next five years.
“It’s not in the results yet, but we’re investing, and we’re capitalizing on the opportunity like it will be a big part of the future,” he said.
The AI tools haven’t materially impacted financial results yet. But management is positioning for future growth in the space.
Wall Street Cuts Targets
BMO Capital adjusted its outlook Wednesday. The firm reduced its price target to $90 from $112. It kept a Market Perform rating on the stock.
BMO recognized the Q3 beat across all key metrics. The firm raised its fiscal 2026 estimates modestly. But sector-wide multiple compression drove the price target reduction.
The research note called management’s current remaining performance obligations guidance for January “a touch disappointing.” BMO still views the guidance as conservative and a solid baseline for fiscal 2027 revenue projections.
The firm praised Okta’s execution improvements. Management has successfully expanded both the product portfolio and sales capabilities.
Okta shares have gained roughly 4% in 2025. The broader cybersecurity sector has seen active deal-making this year, with major transactions from Palo Alto Networks and Google.
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