Okta Delivers Strong Q1 Beat but Stock Drops on Conservative Outlook Amid Macro Uncertainty

Okta reported fiscal first-quarter 2026 earnings that exceeded Wall Street’s expectations across nearly every key metric. Revenue and EPS both topped consensus estimates, and the company posted record operating profits and strong free cash flow. However, shares tumbled more than 10% in after-hours trading, as investors reacted negatively to the company's cautious guidance and muted commentary around macroeconomic headwinds. The strong start to the fiscal year was not enough to convince management to raise its full-year forecast, a decision that’s being viewed as an overly conservative stance in light of the company's recent momentum.

For the quarter ended April 30, Okta delivered adjusted EPS of $0.86, beating the $0.77 consensus estimate. Revenue came in at $688 million, up 12% year-over-year and ahead of the $680.3 million expectation. Subscription revenue, which accounts for the bulk of the business, also rose 12% to $673 million. Current remaining performance obligations (cRPO), a key forward-looking metric, increased 14% to $2.23 billion—above guidance but below the whisper number of ~15% that had fueled the stock’s recent rally. Free cash flow was robust at $238 million, maintaining a healthy 35% margin.

While the beat was impressive on paper, Okta’s full-year fiscal 2026 outlook remained unchanged. The company continues to expect revenue between $2.85 billion and $2.86 billion and non-GAAP EPS between $3.23 and $3.28. That restraint, despite the Q1 momentum, unsettled investors. Adding to that unease, management’s Q2 cRPO guidance—$2.20 to $2.205 billion—implies a sequential decline and came in modestly below consensus. These signals suggest that management is bracing for a slowdown later in the year, despite noting no material impact from macro conditions in Q1.

CEO Todd McKinnon told CNBC that customer conversations had “turned more cautious” late in the quarter, prompting the company to embed additional prudence into its forward guidance. Okta’s go-to-market changes, including new specialization initiatives, are progressing according to plan, but management appears to be taking a deliberate wait-and-see approach given recent volatility in the macro backdrop. Notably, McKinnon pointed to strength in March and April pipeline activity, but also acknowledged the potential for slower deal execution in coming quarters.

Analysts echoed this mixed sentiment. While Needham, Stifel, and KeyBanc all praised the operational execution and strong Q1 beat, they highlighted the Q2 cRPO outlook as a disappointment. Needham noted the guidance contraction was especially surprising given traction in new products, sales team restructuring, and easing renewal headwinds. Meanwhile, KeyBanc revised its FY26 cRPO growth forecast down from 14% to 11%, citing “incremental macro caution,” though it remains positive on Okta’s identity security leadership and AI integration strategy.

In terms of macro context, Okta’s results arrive amid growing investor unease over inflation, geopolitical tensions, and lingering effects from recent tariff policy swings. McKinnon noted that while there was no macro impact in Q1, elevated uncertainty has reemerged in customer discussions. This hesitation is not unique to Okta—several tech peers have recently maintained or trimmed forecasts in response to shifting sentiment, particularly around IT spending priorities. Compounding this are competitive pressures from larger platform players like Microsoft, which continue to invest aggressively in identity and access management.

Despite the cautious tone, Okta remains on solid financial footing. The company holds over $2.7 billion in cash and short-term investments and maintains a forward free cash flow multiple of 21x. Analysts point to this strong balance sheet as a meaningful downside buffer, especially given that cash represents nearly 13% of the company’s market cap. While growth expectations have been tempered, Okta’s leadership position in identity security—particularly in complex enterprise and AI-driven environments—continues to be a long-term asset.

On the product front, Okta is seeing encouraging signals from newer offerings like Identity Governance and Auth0, which is gaining traction among developers. Two of the company’s three largest deals last quarter came from the public sector, and most of the top 10 were new business wins. This suggests that while the overall pace of IT spending may be uneven, demand for secure identity infrastructure remains resilient.

Looking ahead, investors will be watching for signs of reacceleration in cRPO growth and improvements in macro visibility. For Q2, Okta expects revenue between $710 and $712 million and adjusted EPS between $0.83 and $0.84—both slightly above consensus. Free cash flow margins are expected to dip in Q2 before rebounding later in the year, with management targeting a 27% margin for FY26 overall.

In sum, Okta’s Q1 performance was strong by most measures, but the market’s focus has shifted to the trajectory rather than the baseline. With its stock up nearly 60% year-to-date before the report, the bar was set high. The muted guidance, even if conservative, leaves room for disappointment. However, if Okta can continue executing against its strategic initiatives and the macro environment stabilizes, the identity leader may yet have more runway ahead.