Identity management company Okta (NASDAQ:OKTA) reported revenue ahead of Wall Streets expectations in Q3 CY2025, with sales up 11.6% year on year to $742 million. Guidance for next quarter’s revenue was better than expected at $749 million at the midpoint, 1.6% above analysts’ estimates. Its non-GAAP profit of $0.82 per share was 8.4% above analysts’ consensus estimates.
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Okta (OKTA) Q3 CY2025 Highlights:
- Revenue: $742 million vs analyst estimates of $729.9 million (11.6% year-on-year growth, 1.7% beat)
- Adjusted EPS: $0.82 vs analyst estimates of $0.76 (8.4% beat)
- Adjusted Operating Income: $178 million vs analyst estimates of $163.2 million (24% margin, 9.1% beat)
- Revenue Guidance for Q4 CY2025 is $749 million at the midpoint, above analyst estimates of $737 million
- Management raised its full-year Adjusted EPS guidance to $3.44 at the midpoint, a 2.4% increase
- Operating Margin: 3.1%, up from -2.4% in the same quarter last year
- Free Cash Flow Margin: 28.4%, up from 22.3% in the previous quarter
- Market Capitalization: $14.22 billion
Company Overview
Named after the meteorological measurement for cloud cover, Okta (NASDAQ:OKTA) provides cloud-based identity management solutions that help organizations securely connect their employees, partners, and customers to the right applications and services.
Revenue Growth
A company’s long-term performance is an indicator of its overall quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Over the last five years, Okta grew its sales at an impressive 29.9% compounded annual growth rate. Its growth beat the average software company and shows its offerings resonate with customers.
We at StockStory place the most emphasis on long-term growth, but within software, a half-decade historical view may miss recent innovations or disruptive industry trends. Okta’s recent performance shows its demand has slowed significantly as its annualized revenue growth of 14.5% over the last two years was well below its five-year trend. 
This quarter, Okta reported year-on-year revenue growth of 11.6%, and its $742 million of revenue exceeded Wall Street’s estimates by 1.7%. Company management is currently guiding for a 9.8% year-on-year increase in sales next quarter.
Looking further ahead, sell-side analysts expect revenue to grow 8.2% over the next 12 months, a deceleration versus the last two years. This projection is underwhelming and indicates its products and services will face some demand challenges.
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Customer Acquisition Efficiency
The customer acquisition cost (CAC) payback period measures the months a company needs to recoup the money spent on acquiring a new customer. This metric helps assess how quickly a business can break even on its sales and marketing investments.
It’s relatively expensive for Okta to acquire new customers as its CAC payback period checked in at 75.5 months this quarter. The company’s slow recovery of its sales and marketing expenses indicates it operates in a highly competitive market and must invest to stand out, even if the return on that investment is low. 
Key Takeaways from Okta’s Q3 Results
It was great to see Okta’s full-year EPS guidance top analysts’ expectations. We were also glad its revenue guidance for next quarter exceeded Wall Street’s estimates. Overall, this print had some key positives. The market seemed to be hoping for more, and the stock traded down 3.7% to $79.47 immediately following the results.
Is Okta an attractive investment opportunity right now? We think that the latest quarter is only one piece of the longer-term business quality puzzle. Quality, when combined with valuation, can help determine if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free for active Edge members.