Okta, Inc. (OKTA) experienced a significant stock decline on Thursday following the release of its second-quarter financial results. While the company surpassed revenue and earnings estimates, concerns arose over the slowing growth of its subscription revenue.
Okta reported revenue of $646 million for the second quarter, exceeding the consensus estimate of $632.7 million. Adjusted earnings per share reached 72 cents, outperforming the expected 61 cents. However, the company’s subscription revenue growth slowed down to 17% year-over-year, a decline from the 20% growth witnessed in the previous quarter.
Further adding to investor concerns, Okta’s guidance for its current remaining performance obligation (cRPO) growth in the third quarter also fell short of expectations. The company predicted a 9% year-over-year increase, compared to the 13% growth observed in the second quarter.
Analysts’ reactions to the report were mixed. While some analysts maintained a positive stance, like WestPark Capital, which reiterated a Buy rating and a $140 price target, others expressed concerns over the company’s growth trajectory and lowered their price targets. Notably, B of A Securities downgraded Okta from Buy to Underperform, significantly reducing the price target from $135 to $75, citing the slowing momentum and weaker guidance as key reasons for the downgrade.
Several analysts, including those from BMO Capital, Scotiabank, and Stifel, acknowledged Okta’s robust execution and highlighted some positive aspects, such as strong enterprise deal flows and larger contract sizes. However, they also pointed out challenges, including sluggish new customer acquisition and persistent uncertainty around seat growth and upsells, particularly affecting Okta’s Workforce Identity and Customer Identity segments.
Despite some encouraging results and optimism from certain analysts, the overall sentiment remains cautious. The company’s decelerating cRPO growth and mixed forward guidance have left analysts uncertain about Okta’s near-term growth prospects.
At the time of publication, Okta’s stock has fallen by 17.5% to $79.69 according to Benzinga Pro.
