According to CNBC, identity management giant Okta beat Wall Street’s third-quarter estimates on Tuesday. The company reported revenue of $665 million, a nearly 12% year-over-year increase, and saw net income nearly triple to $43 million. Subscription revenue hit $724 million, beating the $715 million estimate, and its future subscription backlog, or remaining performance obligation, jumped 17% to $4.29 billion. For the current quarter, Okta issued an upbeat outlook, forecasting revenue between $748 million and $750 million, which is above analyst expectations of $738 million. Despite all these positive numbers, shares of the cybersecurity company still fell slightly in after-hours trading following the report.
The market is sending a message
So, the numbers look good on paper. Revenue beat, profit soared, guidance is strong. But the stock dipped. That’s the market telling you something, and it’s worth listening to. Here’s the thing: a 12% revenue growth is solid, but for a company that was once a hyper-growth darling, it might not be enough to get investors truly excited again. The stock has been on a wild ride over the past few years, grappling with the aftermath of high-profile security breaches and a broader tech sector re-rating. Beating expectations is the baseline now; they need to crush them to rebuild that premium valuation.
The real story is in the backlog
Now, the most interesting number to me is that remaining performance obligation (RPO) of $4.29 billion. It’s up 17% and beat estimates. That’s basically the company’s subscription backlog, a signal of future revenue that’s already in the contract bag. In a shaky economic environment where companies are scrutinizing every software spend, a growing backlog is a powerful sign of resilience. It suggests Okta’s identity solutions are still seen as essential, non-negotiable infrastructure. But—and there’s always a but—it also puts immense pressure on execution. They have to deliver on those contracts flawlessly. Any stumbles in implementation or, heaven forbid, another security incident, and that confidence evaporates.
Can the momentum last?
The guidance for Q4 is above the street, which is good. But I think the skepticism baked into that after-hours stock price is about the long game. Competition in identity is fierce, with Microsoft, Ping Identity, and a host of others coming for their lunch. Okta’s bet is that its independent, best-of-breed status gives it an edge over bundled offerings from the giants. That’s a compelling story, but it’s an expensive one to maintain. They have to keep innovating at a breakneck pace. So, was this quarter a win? Absolutely. Is the war over? Not even close. The company’s proving it can be profitable, but the growth story needs a new chapter to get the stock soaring again.
