3 Reasons to Snap Up Okta Stock Now After Q4 Earnings

Globe and Mail

04-03-2025

Okta (OKTA) has defied broader economic uncertainties surrounding software companies by delivering robust financial results for the fourth quarter of its fiscal 2025.
Despite market challenges, the identity and access management services provider's focus on serving large enterprise clients, accelerating growth through prioritizing its partner ecosystem, and optimizing costs have yielded impressive outcomes, including accelerated remaining performance obligations (RPO) and current remaining performance obligations (CRPO), record profitability, and strong free cash flow.
Okta's Q4 revenue and earnings exceeded Wall Street's expectations. The company's Q1 revenue guidance has surpassed analysts' forecasts, indicating continued strong performance.
For the fiscal year 2025, Okta reported a total revenue of $2.61 billion, marking a 15% increase year-over-year. Subscription revenue, a key metric for software-as-a-service companies, rose to $2.556 billion, up 16% year-over-year. Adjusted earnings per share (EPS) showed significant growth at $2.81, up 75.6% compared to the previous year.
Thanks to the higher sales and cost control measures, Okta delivered free cash flow of $730 million in FY25, representing 28% of total revenue, up from $489 million (22% of total revenue) in fiscal 2024.
The market responded positively to the company's solid financial results and optimistic outlook. Following the strong Q4 performance, Okta's stock jumped nearly 20%. Moreover, this momentum will likely sustain as Okta has multiple catalysts that will drive its financials and stock price.
Reason #1: Strong Product Demand and Innovation to Drive Okta Stock
As digital transformation accelerates and cybersecurity threats become more sophisticated, demand for identity solutions will likely increase. Okta is well-positioned to capitalize on this trend thanks to its strong product portfolio, expanding customer base, and strategic partnerships.
The demand for both workforce and customer identity products remains robust, and Okta's expanding suite of solutions will enable it to capture a higher market share. The company's focus on innovation is paying off, with over 20% of Q4 bookings coming from new products. Solutions like Okta Identity Governance (OIG), Device Access, Privileged Access, Fine-Grained Authorization, and Identity Threat Protection with Okta AI are resonating with customers, strengthening its competitive edge.
OIG has emerged as a standout performer among its new products. It has gained over 1,300 customers in just two years, contributing more than $100 million in annual contract value (ACV). When combined with Okta Lifecycle Management and Okta Workflows, the company now boasts over $400 million in governance-related business. Notably, the governance-related business has significant growth prospects and will drive Okta's financials in the coming years.
Reason #2: Large Deals and Enterprise Customers Fueling Momentum
Okta added 200 net new customers in Q4, bringing its total customer count to 19,650, up 4% year-over-year. However, over the past few years Okta has increasingly focused on large customers, which augurs well for growth. The total contract value of its top 25 deals in Q4 exceeded $320 million, reflecting the company's ability to secure high-value contracts. Additionally, Okta added 25 customers in Q4 with ACV exceeding $1 million, bringing its total base of such customers to 470 — up 22% year-over-year. Collectively, this $1 million-plus customer base represents over $1 billion in total ACV, highlighting the company's strong enterprise appeal.
Moreover, Okta is acquiring new customers and increasing the adoption of additional products among its existing user base. It is also increasing its revenue potential by cross-selling additional services to existing customers. The move will likely enhance customer retention and boost long-term revenue growth.
These efforts are already paying off, with RPO surging 25% year-over-year to exceed $4 billion. Moreover, the weighted average deal term length reached a multi-year high, reflecting customer confidence in Okta's services. Its Q4 bookings surpassed $1 billion in total contract value for the first time, signaling strong demand.
Reason #3: Strategic Partnerships Strengthening Okta's Market Position
Okta is also prioritizing its partner ecosystem to accelerate growth. In Q4, more than 70% of deals were influenced by partners, including 18 of the company's top 20 deals. Its partnership with Amazon's (AMZN) AWS Marketplace has been particularly successful, surpassing $1 billion in total contract value since launching just four years ago. Notably, revenue from AWS Marketplace grew over 80% in fiscal year 2025, reflecting the strength of this alliance.
The Bottom Line
Analysts currently rate Okta as a 'Moderate Buy,' but its strong financials, growing demand, and strategic focus suggest it has the potential to climb even higher. The company's ability to secure large enterprise deals, drive innovation, and strengthen partnerships positions it for sustained long-term success.