Okta Inc. (NASDAQ: OKTA) stock shot up more than 10% the day after the cybersecurity company delivered a double beat in its Q4 earnings report for its 2026 fiscal year. For shareholders who have been holding the stock, the rally feels overdue. Even with the post-earnings surge, OKTA stock is still about 30% below its consensus price target.
While the stock price is moving up, analysts are lowering their price targets for OKTA stock. This could be a case of two things being true. In this case, OKTA stock may still be undervalued. However, with price targets below the consensus, investors have to wonder whether Okta is a long-term growth story in what should be a bullish space.
A Good Week for a Strong Report
The headline numbers in Okta’s report showed solid growth. Total revenue came in at $761 million, up 11% year-over-year, with subscription revenue matching that growth rate. Remaining performance obligations surged 15% to $4.83 billion, signaling that customers are locking in longer-term commitments.
Non-GAAP operating margins expanded nearly two points to 26.5%, and free cash flow margin held strong at 33.2%.
By most measures, this was a clean beat from a company that has quietly rebuilt its operational credibility after years of post-pandemic multiple compression and a damaging 2023 security breach.
The timing helped too. Cybersecurity was already having a moment this week, with renewed attention on identity-based threats reminding enterprise buyers why this space still matters.
Okta was well-positioned to benefit from that sentiment, which was reflected in the stock’s post-earnings move.
The Guidance May Limit the Upside
The answer lies in what comes next. Okta's outlook for the first quarter of its 2027 fiscal year calls for revenue between $749 million and $753 million. That's 9% year-over-year (YOY) growth. Solid, but a deceleration from the 11% pace it reported in the current quarter.
Full-year adjusted EPS guidance between $3.17and $3.19 billion also implies 9% growth, with non-GAAP operating margins guided at 25–26%, essentially flat to last year's 26%. Free cash flow margins are expected to dip to 27–28% from the 30% achieved last year.
For a company trading at a premium to the tech sector and its cybersecurity peers, 9% revenue growth is a number that doesn't add up. The dollar-based net retention rate, while stable at 106%, has been trending steadily lower from 117% just two years ago.
Adding to the concern is that customer additions with an annual contract value (ACV) over $100K grew only 6% YOY, adding just 70 net new companies in the quarter. The top line is growing, but the engines driving that growth are starting to cool, which calls future growth into question.
The AI Agent Play: Opportunity or Hype?
Okta is making a deliberate push into what it calls "securing AI agents." The idea being that as enterprises deploy autonomous AI systems, those agents need identities, permissions, and access controls just like human employees do. The company has launched both "Okta for AI Agents" targeting IT and security teams, and "Auth0 for AI Agents" for developers building agentic applications.
On paper, it's a compelling narrative. Identity has to be solved before AI deployments can scale safely, and Okta sits at the logical chokepoint.
The honest question, however, is how durable that moat really is. Microsoft Corp. (NASDAQ: MSFT), which already controls identity infrastructure for a significant portion of enterprise environments through Entra ID, is building its own AI agent governance capabilities. CrowdStrike Holdings (NASDAQ: CRWD), Palo Alto Networks (NASDAQ: PANW), and a wave of well-funded startups are also circling the non-human identity space.
That said, Okta's platform breadth is a genuine advantage, and its 20,000-plus customer base gives it distribution. But "we authenticate AI agents" is not yet a proven revenue driver, and the company has not broken out the portion of bookings, if any, from these new products. The $80 billion total addressable market (TAM) Okta cites looks promising, but capturing it is a different matter.
Two Things Can Be True
Here's the tension that makes OKTA stock interesting right now: the stock was genuinely undervalued heading into this print. It spent most of the past three years range-bound between $65 and $115, a far cry from the $290 highs of 2021. From a cost-benefit standpoint, the valuation had compressed to a point where solid execution was worth buying.
But for investors with a long time horizon, the chart tells a more cautionary story. Even a move to the analyst consensus price target would only get the stock back to its 2025 highs. To get back to all-time highs would require re-accelerating revenue growth, meaningful monetization of the AI agent narrative, and a macro environment that rewards high-multiple software again. None of those are guaranteed.
The practical read: Okta looks like a reasonable trade for investors with a 6-12 month horizon, particularly if cybersecurity tailwinds persist, and the company can show even modest acceleration in Current Remaining Performance Obligation (cRPO) growth in the coming quarters. But for long-term investors looking for a compounding growth story, the deceleration trend and unanswered questions around AI differentiation suggest there may be better options.
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The article "Okta Earnings Beat, But Growth Questions Remain" first appeared on MarketBeat.
