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Technology company Okta (Nasdaq: OKTA) saw its stock price plummet some 13% on Wednesday, despite a solid earnings report and outlook.

The company, a leading provider of identity management and log-in services, beat revenue and earnings estimates in its fiscal first quarter of 2026.

The firm generated $688 million in revenue, up 12% year-over-year, which topped estimates of $680 million.

Net income was $62 million, compared to a $40 million net loss in the same quarter a year ago. Adjusted net income was $158 million, up from $117 million a year ago, while adjusted earnings were 86 cents per share, up from 65 cents in the first quarter a year ago. This topped analysts’ estimates of 77 cents per share.

Its subscription backlog, or remaining performance obligation (RPO), jumped 21% to $4.1 billion, while the backlog expected over the next 12 months rose 14% to $2.2 billion.

Further, the firm posted record adjusted operating income of $184 million, or 27% of revenue, up 38% year-over-year.

“Okta had a solid start to FY26 highlighted by record operating profit and another quarter of robust free cash flow,” said Todd McKinnon, CEO and co-founder of Okta. “The world’s biggest organizations continue to turn to Okta to solve identity security across their workforces, customers, and AI use cases. We remain focused on driving profitable growth, accelerating innovation, and delivering the only modern, unified identity security platform for our customers.”

Why was Okta stock dropping?

It is a little hard to pinpoint exactly why the stock dropped as much as it did. The P/E is enormous at over 2,000, but it is skewed by the fact that Okta hadn’t been profitable until the past few quarters. Its forward P/E, based on future earnings outlook, is a more reasonable 39, and its five-year PE-to-growth (PEG) ratio is low at 0.45. A PEG below 1 typically indicates a stock trading at a value to its long-term earnings potential.

The stock may have been dropping because the company didn’t raise its outlook for the fiscal year. If that’s the case, it seems a bit overdone.

Okta maintained its guidance, calling for revenue of $2.850 billion to $2.860 billion, which would represent 9% to 10% growth. That is slower growth than the last fiscal year, but still solid.

Management stated in the report that they were taking “a prudent approach to forward guidance” and was accounting for “potential risks related to the uncertain economic environment.” That could suggest they are erring on the side of caution.

Adjusted operating income is targeted at $710 million to $720 million for an operating margin of 25%. Further, adjusted net income is projected to fall between $3.23 to $3.28, which would be a 15% to 17% jump. That is also a lower growth rate than the previous year.

Analysts were mixed on the report, as several raised their price targets, including Needham, which bumped it up $10 to $125 per share. That would be some 16% higher than the current price. Others, like UBS, dropped its target. But despite reducing the target by $20 per share, UBS still has a price target of $130, which would be a 20% gain.

Overall, Okta has a median price target of $128 and is considered a buy by most analysts.  Today’s selloff seems like a classic overreaction by the market and may represent an opportunity to buy the dip. But as always, do your own research first.

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