CHONGQING, CHINA AUGUST 24: In this photo illustration, a smartphone displaying the logo of Okta Inc. (NASDAQ: OKTA), a leading U.S. identity and access management company, is seen in front of the company’s latest stock market chart on August 24, 2025, in Chongqing, China. (Photo illustration by Cheng Xin/Getty Images)
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20% — This figure closely reflects the decrease in Okta’s (NASDAQ:OKTA) market capitalization over the past six months. Below is a succinct overview of the factors that led to this decline — along with what could happen next. In its most recent quarter (the third quarter of fiscal 2026), Okta reported $742 million in total revenue (up 12% year-over-year) and subscription revenue of $724 million (an increase of 11% year-over-year). The adjusted earnings per share (EPS) amounted to $0.82, surpassing expectations. Its “current remaining performance obligations” (cRPO), a significant backlog indicator, increased to $2.328 billion — representing a 13% rise from the previous year.
Nevertheless, the stock declined — suggesting that satisfactory quarterly results were not sufficient to alleviate overarching investor worries.
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Why the drop
Firstly, there is valuation compression: Okta’s stock had previously surged based on high growth expectations, but the market now appears to be pricing in greater caution, demanding sustainable margins and predictable cash flows instead of merely high growth.
Secondly, macroeconomic factors and market sentiment play a role: In periods of economic uncertainty, firms like Okta — which provide enterprise software — are frequently regarded as discretionary expenditures for businesses. This uncertainty has affected investor interest.
Thirdly, there is a recalibration of risk-return: As Okta shifts from rapid growth to a more mature growth model, some investors may opt for newer or faster-growing companies. The recovery in fundamentals might seem too modest when contrasted with expectations.
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What’s still working for Okta
Okta is experiencing solid growth and enhancing cash flow. The $742 million in revenue and updated EPS reflect profitability. Its backlog (cRPO) growth offers future revenue visibility. Management anticipates full-year revenue between $2.906 billion and $2.908 billion, coupled with a healthy operating margin, indicating their confidence.
Furthermore, Okta’s role in identity and access management as part of the “security foundation” remains essential — particularly as companies increasingly prioritize investments in security and identity protection.
What’s next
If Okta maintains mid-teens revenue growth while improving margins and cash flow, and if macroeconomic conditions stabilize, the market may gradually re-evaluate the stock. This presents potential upside. Conversely, if growth decelerates or enterprise IT spending declines, the stock might stay within a narrow range or potentially drift lower.
The most probable near-term scenario is a modest recovery: steady business performance, gradually restoring investor confidence, but no significant rebound — unless Okta achieves stronger-than-expected growth or secures substantial enterprise/AI-security contracts.
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