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Okta (OKTA +19%) has been given clearance to break to nine-month highs today following an upbeat Q4 (Jan) report, exceeding earnings and sales estimates in the quarter and projecting its upward momentum to follow through in FY26. The cybersecurity company, focused on identity and access management, has posted impressive back-to-back quarters, helping recover from a post-Q2 (Jul) sell-off in late August when billings missed the mark and forward-looking comments spooked investors.

• As expected, OKTA toppled its headline forecasts in Q4, maintaining its rich history of outperformance each quarter. The company registered adjusted EPS of $0.78, surpassing its prediction of $0.76-0.77, and closed the year with non-GAAP operating margins of 28%, up 6 pts from FY24. Revenue growth remained in low double-digit territory, expanding by 12.7% yr/yr to $682 mln, above OKTA's $667-669 mln forecast.
• OKTA attributed its outperformance to several factors. Sales productivity reached a multi-year high, with Auth0 (an identity verification platform OKTA acquired in 2021) delivering its best bookings quarter ever. OKTA also observed notable strength in cross-selling to existing SIEM (security information and event management) customers.
• Unlike two quarters ago, RPO was robust, increasing by 25% and crossing the $4.0 bln threshold. Underpinning these gains was an uptick in the weighted average term length for deals in the quarter. OKTA also enjoyed record bookings in Q4, crossing the $1.0 bln in TCV for the first time.
• Large deals remain the driving force. For perspective, the TCV (total contract value) of OKTA's top 25 deals in Q4 surpassed $320 mln. Meanwhile, the company added 25 customers in Q4 with $1.0 mln or more in ACV (annual contract value). This cohort now represents over $1.0 bln in total ACV. Additionally, regarding large deals, OKTA noted that in Q4, it exceeded $1.0 bln in aggregate TCV with Amazon (AMZN) AWS in just the four years since it inked the partnership. For the year, AWS revs surged by over 80%.

OKTA anticipates its tailwinds to hold this year, projecting FY26 adjusted EPS of $3.15-3.20, a marked improvement from the $2.81 in FY25, and revs of $2.85-2.86 bln, translating to a 9% jump yr/yr at the midpoint, a slight slowdown from the 15% posted in FY25. The minor deceleration illuminates the dynamic economic picture. IT departments continue to examine their budgets closely, keeping a lid on frivolous spending.

However, cybersecurity is a necessity. While breaches can still occur when leveraging cybersecurity tools -- the massive data breach of OKTA's customer support system in 2023 is a prime example -- the damage firms are exposed to without cybersecurity can be catastrophic. Many of OKTA's peers have touched on the strong momentum within the cybersecurity landscape. Palo Alto Networks (PANW) commented on upward momentum across much of its business during Q2 (Jan). IBM (IBM) stated yesterday that cybersecurity is one of the critical factors facing its clients. There could be elevated volatility in the short run as the markets digest many influential headlines. However, cybersecurity trends underscore a favorable backdrop for OKTA over the long run.