Should You Buy, Hold or Sell OKTA Stock Before Q1 Earnings Release?
Okta OKTA is set to release first-quarter fiscal 2026 results on May 27.
For the fiscal first quarter of 2026, Okta anticipates non-GAAP earnings in the range of 76-77 cents per share. Revenues are expected to be in the range of $678-$680 million, indicating growth of 10% from the year-ago period's reported figure.
The Zacks Consensus Estimate for earnings has remained steady at 77 cents per share over the past 30 days, indicating year-over-year growth of 18.46%. The consensus mark for revenues is pegged at $679.73 million, indicating an increase of 10.17% from the year-ago quarter's reported figure.
Okta's earnings beat the Zacks Consensus Estimate in all the trailing four quarters, with the average earnings surprise being 15.70%. (Find the latest EPS estimates and surprises on Zacks Earnings Calendar.)
Let's see how things have shaped up for Okta prior to this announcement:
Factors to Note for Okta
OKTA's expanding product portfolio, especially in security and identity governance, is expected to have helped it win clients, driving top-line growth in the to-be-reported quarter. It exited fourth-quarter fiscal 2025 with 19,650 customers and $4.215 billion in remaining performance obligations, reflecting strong growth prospects for subscription revenues. Customers with more than $100 thousand in Annual Contract Value increased 7% year over year to 4,800.
Continued momentum from new products like Okta Identity Governance, Privileged Access, Identity Threat Protection with Okta AI, Workforce Identity Suites and Auth for GenAI is expected to have been a tailwind in the to-be-reported quarter. More than 20% of the fiscal fourth-quarter bookings came from these products. The trend is expected to have continued in the to-be-reported quarter.
Okta Identity Governance, in particular, has grown to more than 1,300 customers contributing more than $100 million in annual contract value within just two years of launch. This rapid adoption is expected to drive bookings to grow further in the to-be-reported quarter.
Okta is expected to benefit from a rich partner base that includes the likes of Amazon's AMZN cloud computing platform Amazon Web Services (AWS), CrowdStrike, Google, LexisNexis Risk Solutions, Netskope, Palo Alto Networks, Plaid, Proofpoint, Salesforce, ServiceNow, VMware, Workday, Yubico and Zscaler.
Okta's increasing strength in its partner ecosystem, particularly through its relationship with Amazon Web Services, supported its security efforts. With more than 70% of deals influenced by partners in the fourth quarter of fiscal 2025, Okta was able to leverage its security capabilities more effectively. In fact, OKTA surpassed $1 billion in aggregate total contract value through its partnership with Amazon Web Services. Benefits from this partnership are likely to have been reflected in the to-be-reported quarter's performance.
OKTA Shares Outperform Sector, Industry
Okta shares have surged 54.9% in the year-to-date period against the Zacks Computer & Technology sector's decline of 2%. The Zacks Security industry has increased 17.1% in the same time frame. The outperformance can be attributed to the strong demand for its identity security solutions and rich partner base.
OKTA Stock's Performance
OKTA Stock is Currently Overvalued
OKTA stock is not so cheap, as the Value Score of F suggests a stretched valuation at this moment.
In terms of forward 12-month Price/Sales, OKTA is trading at 7.22X, higher than the Computer & Technology broader sector's 6.14X.
Price/Sales(F12M)
OKTA Suffers From Stiff Competition
Okta's robust portfolio is helping it expand its clientele. It benefits from positive industry trends, including growing demand for identity solutions.
However, the company faces stiff competition from CyberArk CYBR and Microsoft MSFT, which are also rapidly expanding its footprint in the identity and access management space.
This competitive pressure is highlighted by Microsoft's strong performance in the security segment. Microsoft's Entra identity offering now serves more than 900 million monthly active users. Furthermore, Microsoft now serves 1.4 million security customers in the security segment, with more than 900,000 of these customers utilizing four or more workloads, representing a 21% year-over-year increase in the third quarter of fiscal 2025.
CyberArk is also making advancements to strengthen its position. In April 2025, CyberArk announced the CyberArk Secure AI Agents Solution, which will allow organizations to implement identity-first security for agentic AI using the CyberArk Identity Security Platform.
Conclusion
Okta is suffering from challenging macroeconomic conditions due to higher tariffs, which could put pressure on its future performance. Intense competition and stretched valuation also remain a concern. These factors could affect the company's performance in the to-be-reported quarter despite strong product momentum.
OKTA currently carries a Zacks Rank #4 (Sell), which implies that investors should stay away from investing in this stock at present.
You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
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