Okta’s Stock Upgraded Into Earnings As Analyst Expects Strong Second Half

Okta's stock price (NASDAQ: OKTA) is 1% higher this pre-market, as the company prepares to announce its Q2 2026 earnings after the closing bell today. Trading at $92.32 in the pre-market, the stock sits below both its 50-day ($97.58) and 200-day ($95.57) simple moving averages after a 6.6% pullback on the 1 month, as the early year rally takes a breather.

Analysts are looking for an EPS of $0.85 for the quarter, up from $0.72 in the same period last year, reflecting a year-over-year increase of 18%. Revenue is expected to reach $711.84 million, marking a 10.2% growth compared to the prior year.

Heading into earnings, Truist have upgraded OKTA from Hold to Buy, whilst raising their price target from $100 to $125. This is a strong sign of confidence from the firm leading into the print, with Truist expecting traction in IGA and PAM, and the company at an inflection point towards a stronger second half of FY26.

The company's performance in Q1 2026 offered a mixed bag of positive surprises and lingering concerns. Okta reported an EPS of $0.86, exceeding the consensus estimate of $0.77, and revenue of $688 million, surpassing expectations of $680.14 million and demonstrating an 11.5% year-over-year growth. However, this growth rate, while positive, represents a deceleration from previous periods, raising questions about Okta's ability to sustain its historical high-growth trajectory.

A look back at Q2 FY2025, reported in August 2024, reveals a stronger narrative. Total revenue reached $646 million, a 16% year-over-year increase, with subscription revenue growing by 17% to $632 million. More impressively, Okta achieved GAAP net income of $29 million, a significant improvement from the $111 million loss in the same quarter the previous year. This turnaround fueled a nearly 25% surge in the stock price, briefly pushing it above $100.

The key question is whether Okta can meet or exceed these expectations, and more importantly, whether it can provide a convincing outlook for future growth. The market will be scrutinizing not only the headline numbers but also the underlying drivers of growth, including new customer acquisition, expansion within existing accounts, and the impact of macroeconomic headwinds.

However, it should be noted that while the company has undoubtedly made strides in improving profitability, its growth rate is undeniably slowing. The identity and access management market is becoming increasingly crowded, with competitors offering compelling alternatives.

Furthermore, Okta's high valuation leaves little room for error. A potential concern lies in the increasing commoditization of identity management solutions. While Okta offers a comprehensive platform, some organizations may opt for simpler, more cost-effective solutions, particularly in the current economic climate. The company's ability to differentiate itself and maintain its pricing power will be crucial in the coming years.