Okta’s Earnings Call: Strong Q1 Amid Cautious Outlook

Okta, Inc. ((OKTA)) has held its Q1 earnings call. Read on for the main highlights of the call.

In the recent earnings call, Okta, Inc. showcased a robust performance in terms of profitability, cash flow, and new product growth. The sentiment during the call was generally positive, emphasizing successful engagements with large customers and notable strength in the public sector. However, there was a cautious tone regarding macroeconomic factors, which could potentially impact future growth, as evidenced by sequential declines in cRPO and NRR.

Strong Cash Flow and Record Profitability

Okta reported impressive Q1 results, highlighting exceptional cash flow and record operating profitability. The company’s profit margins reached new heights, underscoring its efficient financial management and operational excellence.

New Product Growth

The introduction of new products like Okta Identity Governance, Okta Privileged Access, and Identity Threat Protection with Okta AI significantly contributed to the company’s growth. Notably, Workflow executions increased by nearly 400% over the past three years, showcasing the strong market reception and adoption of these innovations.

Large Customer Success

Okta’s success with large customers was evident as the number of customers with $1 million ARR and higher grew by 20%. This growth indicates the company’s continued ability to attract and retain high-value clients, reinforcing its position in the market.

Successful Go-To-Market Specialization

The company’s newly specialized sales teams have shown early positive results. The Auth0 platform, in particular, performed well following a record Q4, demonstrating the effectiveness of Okta’s strategic focus on market specialization.

Public Sector Strength

The U.S. public sector vertical was a standout performer, with significant deals, including two of the top three deals in Q1. This success highlights Okta’s strong foothold and growing influence within the public sector.

Macro Economic Concerns

Despite the strong Q1 performance, Okta’s guidance for FY ’26 reflects potential risks due to the uncertain economic environment. These concerns could impact revenue growth expectations, prompting a more cautious outlook.

Sequential Decline in cRPO

Guidance for Q2 suggests a sequential decline in current RPO, indicating a cautious stance despite the strong performance in Q1. This decline reflects the company’s anticipation of potential challenges in maintaining its growth trajectory.

NRR Decline

Net Revenue Retention (NRR) declined for the fourth consecutive quarter, primarily due to headwinds in seat and MAU upsells mid-contract. This trend highlights some challenges Okta faces in maximizing revenue from existing customers.

Forward-Looking Guidance

Okta’s management provided cautious guidance for the second quarter and the full fiscal year 2026, considering potential macroeconomic uncertainties. For Q2, Okta anticipates a total revenue growth of 10%, with a non-GAAP operating margin of 26% and a free cash flow margin of approximately 19%. For the full fiscal year, they project revenue growth between 9% and 10%, with a non-GAAP operating margin of 25% and a free cash flow margin of around 27%. Despite the strong Q1 results, the company is factoring in economic risks and the effects of their go-to-market team specialization into their guidance.

In summary, Okta’s earnings call reflected a strong performance in profitability and product growth, with successful engagements in the public sector and with large customers. However, the company remains cautious about macroeconomic factors that could impact future growth. The forward-looking guidance suggests a careful approach, balancing optimism with prudence in the face of potential economic challenges.