Okta (NASDAQ:OKTA) Beats Q1 Sales Targets, Next Quarter's Sales Guidance Is Optimistic

Petr Huřťák /
2024/05/29 4:08 pm EDT

Identity management software maker Okta (OKTA) reported results ahead of analysts' expectations in Q1 CY2024, with revenue up 19.1% year on year to $617 million. Guidance for next quarter's revenue was also optimistic at $632 million at the midpoint, 2.5% above analysts' estimates. It made a non-GAAP profit of $0.65 per share, improving from its profit of $0.22 per share in the same quarter last year.

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Okta (OKTA) Q1 CY2024 Highlights:

  • Revenue: $617 million vs analyst estimates of $604.5 million (2.1% beat)
  • EPS (non-GAAP): $0.65 vs analyst estimates of $0.55 (19.1% beat)
  • Revenue Guidance for Q2 CY2024 is $632 million at the midpoint, above analyst estimates of $616.8 million
  • The company lifted its revenue guidance for the full year from $2.5 billion to $2.54 billion at the midpoint, a 1.4% increase
  • RPO: $3.36 billion, an increase of 14% year-over-year
  • Gross Margin (GAAP): 76%, up from 72.6% in the same quarter last year
  • Free Cash Flow of $214 million, up 28.9% from the previous quarter
  • Market Capitalization: $16.17 billion

“We began the new fiscal year with record non-GAAP profitability and cash flow as we continue to benefit from the operating efficiency actions we’ve taken over the past several quarters,” said Todd McKinnon, Chief Executive Officer and co-founder of Okta.

Founded during the aftermath of the financial crisis in 2009, Okta (NASDAQ:OKTA) is a cloud-based software-as-a-service platform that helps companies manage identity for their employees and customers.

Identity Management

As software penetrates corporate life, employees are using more apps every day, on more devices, in more locations. This drives the need for identity and access management software that help companies efficiently manage who has access to what, and ensure that access privileges are secure from cyber criminals.

Sales Growth

As you can see below, Okta's revenue growth has been very strong over the last three years, growing from $251 million in Q1 2022 to $617 million this quarter.

Okta Total Revenue

This quarter, Okta's quarterly revenue was once again up 19.1% year on year. However, its growth did slow down compared to last quarter as the company's revenue increased by just $12 million in Q1 compared to $21 million in Q4 CY2023. While we'd like to see revenue increase by a greater amount each quarter, a one-off fluctuation is usually not concerning.

Next quarter's guidance suggests that Okta is expecting revenue to grow 13.7% year on year to $632 million, slowing down from the 23.1% year-on-year increase it recorded in the same quarter last year. Looking ahead, analysts covering the company were expecting sales to grow 8.6% over the next 12 months before the earnings results announcement.

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Cash Is King

If you've followed StockStory for a while, you know that we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can't use accounting profits to pay the bills. Okta's free cash flow came in at $214 million in Q1, up 72.6% year on year.

Okta Free Cash Flow

Okta has generated $579 million in free cash flow over the last 12 months, an impressive 24.5% of revenue. This high FCF margin stems from its asset-lite business model and strong competitive positioning, giving it the option to return capital to shareholders or reinvest in its business while maintaining a cash cushion.

Key Takeaways from Okta's Q1 Results

It was good to see Okta beat analysts' revenue, RPO, and EPS estimates this quarter. We were also glad its full-year revenue, operating income, EPS, and free cash flow guidance topped analysts' expectations. Overall, this quarter's results seemed fairly positive and shareholders should feel optimistic. The stock is flat after reporting and currently trades at $97.20 per share.

Okta may have had a good quarter, but does that mean you should invest right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.