Buy, Sell or Hold OKTA Stock? Key Tips Ahead of Q2 Earnings

Okta OKTA is set to release second-quarter fiscal 2026 results on Aug. 26.Okta anticipates non-GAAP earnings in the range of 83-84 cents per share in the to-be-reported quarter. Revenues are expected to be in the range of $710-$712 million, indicating growth of 10% year over year.The Zacks Consensus Estimate for earnings has remained steady at 84 cents per share over the past 30 days, indicating year-over-year growth of 16.7%. The consensus mark for revenues is pegged at $711 million, indicating an increase of 10.1% from the year-ago quarter’s reported figure. Okta’s earnings beat the Zacks Consensus Estimate in all the trailing four quarters, with the average earnings surprise being 13.53%.  Okta, Inc. Price and EPS Surprise Okta, Inc. price-eps-surprise | Okta, Inc. Quote Let’s see how things have shaped up for Okta prior to this announcement:Factors to Note for Okta’s Q2OKTA’s expanding product portfolio, especially in security and identity governance, is expected to have helped it win clients, driving top-line growth in the to-be-reported quarter. It exited first-quarter fiscal 2026 with roughly 20,000 customers, reflecting strong growth prospects for subscription revenues. Customers with more than $100 thousand in Annual Contract Value increased by 70 sequentially to 4,870.Continued momentum from new products like Identity Governance, Privileged Access, Device Access, Fine Grained Authorization, Identity Security Posture Management, and Identity Threat Protection with Okta AI is expected to have been a tailwind in the to-be-reported quarter. Okta’s offerings include Okta AI, a suite of AI-powered capabilities embedded across several products, which empowers organizations to harness AI to build better experiences and protect against cyberattacks.Okta is benefiting from a rich partner base that includes the likes of Amazon Web Services, CrowdStrike, Google, LexisNexis Risk Solutions, Microsoft, Netskope, Palo Alto Networks, Plaid, Proofpoint, Salesforce, ServiceNow, VMware, Workday, Yubico and Zscaler. The company has more than 7,000 integrations with cloud, mobile, and web applications and IT infrastructure providers as of April 30, 2025. This is expected to have benefited top-line growth in the fiscal second quarter.However, results are expected to have suffered from sluggish federal business, a challenging macroeconomic condition and stiff competition from Microsoft MSFT in the Identity and Access management domain. The company is also facing stiff competition from enterprise security providers like SentinelOne S and Cisco Systems CSCO.OKTA Shares Outperform Sector, IndustryOkta shares have increased 13.9% in the year-to-date period against the Zacks Computer & Technology sector’s return of 10.4% and the Zacks Security industry has increased 6.9% over the same time frame. Okta has outperformed SentinelOne and Cisco over the same timeframe, but lags Microsoft. While Cisco and Microsoft shares have appreciated 19.6% and 13.2% year to date, SentinelOne declined 25.1%.OKTA Stock’s Performance Image Source: Zacks Investment ResearchOKTA Stock is Currently OvervaluedOKTA stock is not so cheap, as the Value Score of D suggests a stretched valuation at this moment.In terms of forward 12-month Price/Sales, OKTA is trading at 5.22X, higher than SentinelOne’s 4.99X and Cisco’s 4.46X.Valuation: OKTA vs. SentinelOne Image Source: Zacks Investment ResearchValuation: OKTA vs. CSCO Image Source: Zacks Investment ResearchHere is Why Okta Shares are a Hold NowOkta rides on an innovative portfolio and an expanding clientele. For fiscal 2026, OKTA expects revenues between $2.85 billion and $2.86 billion, indicating 9-10% growth from the figure reported in fiscal 2025.Rich partner base bodes well for Okta. The company and Palo Alto Networks announced an expanded partnership that combines Okta Workforce Identity and Palo Alto Networks’ Prisma Access Browser. Integration between Identity Threat Protection with Okta AI and Palo Alto Networks AI-driven Cortex SecOps platform offers organizations a unified view of identity-related risks across their entire attack surface.Okta’s strong liquidity is a key catalyst. The company ended the first quarter of fiscal 2026 with $2.73 billion in cash, cash equivalents, short-term, and long-term investments. Net cash provided by operations was $241 million in the first quarter of fiscal 2026, while free cash flow was $238 million. For fiscal 2026, Okta raised free cash flow margin guidance to roughly 27%.However, a challenging macroeconomic condition, anticipated sluggishness in federal business and a stretched valuation makes make the stock a risky bet ahead of second-quarter fiscal 2026 results.OKTA currently carries a Zacks Rank #3 (Hold), which implies that investors should wait for a favorable entry point to accumulate the stock. 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(CSCO): Free Stock Analysis Report SentinelOne, Inc. (S): Free Stock Analysis Report Okta, Inc. (OKTA): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks