Okta Posts Strong Q2 Upside, But Some Analysts Cut Forecasts: 'Not Firing On All Cylinders'

Shares of Okta Inc OKTA tanked in early trading on Thursday, even after the company reported upbeat second-quarter results.

The company reported its results amid an exciting earnings season. Here are some key analyst takeaways.

• DA Davidson analyst Rudy Kessinger reaffirmed a Neutral rating, while slashing the price target from $100 to $85.
• BMO Capital Markets analyst Keith Bachman maintained a Market Perform rating, while lifting the price target from $100 to $103.
• Scotiabank analyst Patrick Colville reiterated a Sector Perform rating, while reducing the price target from $104 to $92.
• Stifel analyst Adam Borg reaffirmed a Buy rating, while cutting the price target from $122 to $108.
• WestPark Capital analyst Casey Ryan maintained a Buy rating and price target of $140.
• Truist Securities analyst Joel Fishbein reiterated a Hold rating, while reducing the price target from $105 to $95.
• Piper Sandler analyst Rob Owens reaffirmed a Neutral rating, while cutting the price target from $110 to $100.
• RBC Capital Markets analyst Matthew Hedberg maintained an Outperform rating and price target of $125.

Check out other analyst stock ratings.

DA Davidson: Okta reported revenues and earnings of $646 million and 72 cents per share. It beat the consensus of $632.7 million and 61 cents per share, respectively. However, the company's subscription revenue growth decelerated to 17% year-on-year, from 20% in the previous quarter.

The cRPO (current remaining performance obligation) guidance for the fiscal third quarter came in at $1.99 billion, implying 9% year-on-year growth, missing the consensus of 10% and representing a deceleration from the 13% figure achieved in the fiscal second quarter, Kessinger stated. "Mgmt. noted sales productivity is still not firing on all cylinders, consistent with what we’ve heard in our field checks," the further wrote.

BMO Capital Markets: The company "delivered steady growth with solid pipeline in 2QFY25," Bachman wrote in a note. Although CRPO growth decelerated moderately from the previous quarter, it was still "solid," he added.

"We are encouraged by the robust execution in enterprise deals, which results in larger deal size and increased contract duration," the analyst stated. While there is persistent uncertainty around seat growth and upsells, "we believe there is potential upside to Okta's topline in 2HFY25 given conservative guide," he said.

Scotiabank: Although Okta's cRPO came above the guidance, it was by a smaller margin than in recent quarters, Colville said. "Forward guidance is disappointing, implying just 9% growth in 3Q," he added.

The company's NRR (net revenue retention) declined by 1 percentage point in the fiscal second quarter. Management indicated the possibility of further pressure in the back half of the year, "as companies right size software spending upon renewals, resulting in lower monthly active users in Customer identity and fewer seats in Workforce identity," the analyst wrote.

Stifel: Okta delivered key financial metrics above guidance and consensus, driven by "solid execution against conservative guidance" and raised its full-year guidance by more than the beat, Borg said. He added, however, that the out-quarter cRPO guidance indicates deceleration, "now into the single digits (+9% Y/Y)."

"While there are a number of items moving in the right direction (traction with newer products, channel relationship, increasing contract duration, etc.) and management retains a conservative guidance posture, macro headwinds (seat growth for Workforce Identity; MAUs for Customer Identity) continue to have an outsized impact offsetting said improving fundamentals, which, unfortunately, likely continues in coming quarters," the analyst further wrote.

WestPark Capital: Okta's results were driven by "higher sales to larger customers.” The company witnessed softness in new customer wins, Ryan said. There were only 200 net new customer adds in the quarter, he added.

"We choose to focus on total RPO as being a more meaningful metric and believe cRPO will over time match RPO growth rates," the analyst wrote. Okta's total RPO grew by 16%, although current RPO (cRPO) rose by only 13%, he further stated.

Truist Securities: Okta's results were "solid" and the company raised its revenue and profit outlook for fiscal 2025, Fishbein said. He added, however, that the cRPO guidance for the third quarter was "disappointing."

"The company is seeing strength in large customers and is seeing success with uplift from its OIG & PAM solutions," the analyst wrote. "However, new logo growth has been anemic and selling to the SMB space has remained a challenge," he further stated.

Piper Sandler: Okta delivered some upside but to a conservative guidance, Owens said. The upside was overshadowed by the "mixed" fiscal 2025 guidance. The third-quarter cRPO guidance calls for a sequential decline at the midpoint.

Negative cRPO growth for 3Q “does not give us confidence in the near-term growth reaccelerating," he added.

RBC Capital Markets: The third-quarter cRPO guidance of 9% year-on-year growth "looks conservative to us relative to Q2/25," Hedberg said. Management "continues to be prudent with macro and potential security incident impacts," he added.

"Management believes field specialization, product innovation, and channel contributions are catalysts that could accelerate growth, though all on different timelines," the analyst wrote. He further stated that the company's performance was strong in the second quarter and estimates may be raised through the year.

OKTA Price Action: Shares of Okta had declined by 16.51% to $80.60 at the time of publication on Thursday.

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