What Happened?
Shares of identity management software maker Okta (OKTA) fell 14% in the morning session after the company reported mixed first quarter 2025 (fiscal 2026) results as it only reconfirmed full-year revenue guidance, which was in line with Wall Street's estimates.
Also fiscal Q2 cRPO (current Remaining performance indicator - leading growth indicator) was guided below expectations and implied continued growth deceleration.
On a more positive note, revenue and adjusted EPS both beat, which is a good start. Typically, beats flow through to an increase in the full-year guidance.
The company also stated that they are "now factoring in potential risks related to the uncertain economic environment for the remainder of" the year.
Cybersecurity had been a strong performer as the market saw the sector as recession resistant and largely unaffected by tariffs. Overall, the quarter was underwhelming as expectations were likely high heading into the print.
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What The Market Is Telling Us
Okta’s shares are somewhat volatile and have had 12 moves greater than 5% over the last year. But moves this big are rare even for Okta and indicate this news significantly impacted the market’s perception of the business.
The previous big move we wrote about was 29 days ago when the stock gained 8.9% on the news that S&P Dow Jones Indices announced the company would be added to the S&P MidCap 400 before trading opens on Thursday, May 1, 2025.
Being included in the index means that Okta will likely be held by many mutual funds and ETFs, which could potentially drive up demand for the stock. We note that while buying of the stock could increase, this development does not change the fundamentals of the company. Revenue growth, expense efficiency, and capital intensity of the business, for instance, are not impacted by index inclusion or exclusion, so this is more of a technical tailwind for the stock.
Okta is up 36.4% since the beginning of the year, but at $107.53 per share, it is still trading 15.5% below its 52-week high of $127.30 from May 2025. Investors who bought $1,000 worth of Okta’s shares 5 years ago would now be looking at an investment worth $584.66.
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