Buy CrowdStrike or Okta Shares After Achieving Unprecedented Profit Margins?

Cybersecurity Leaders Outperform Amid Market Fluctuations

Despite recent turbulence in the broader market, cybersecurity giants CrowdStrike and Okta have stood out by surpassing their fourth-quarter forecasts. Both companies experienced significant stock gains—each rising over 10%—following the release of their quarterly earnings earlier this week.

Their latest financial reports showcased exceptional performance, including record-setting profitability, robust revenue increases, and expanding recurring revenue streams. The growing need for advanced cybersecurity and identity management solutions continues to drive demand for their offerings.

Image Source: Zacks Investment Research

CrowdStrike: Meeting AI-Era Security Challenges

CrowdStrike’s first-quarter results were propelled by accelerating demand for its Falcon platform, as organizations seek protection against increasingly sophisticated AI-powered cyber threats. Falcon, a cloud-native solution, delivers advanced endpoint detection and response, managed detection and response, and next-generation antivirus capabilities to safeguard businesses from evolving risks.

Driven by Falcon’s momentum, CrowdStrike reported fourth-quarter revenue of $1.3 billion—a 24% increase year-over-year, exceeding analyst expectations. The company’s net new annual recurring revenue soared 47% to a record $331 million for the quarter. Since its public debut in 2019, CrowdStrike achieved its highest profitability yet, with Q4 earnings per share climbing 9% to $1.12, outpacing projections.

Okta: Expanding Enterprise Reach and Unified Platform

Okta’s fourth-quarter performance was marked by steady growth in subscriptions, broader enterprise adoption, and strong cash flow, reflecting the success of its integrated identity security platform. This unified system enables clients to securely connect with a wide range of applications, services, and cloud environments, earning the trust of large organizations modernizing their security infrastructure.

Okta’s quarterly revenue rose 11% to $761 million, surpassing estimates, while remaining performance obligations increased 15% year-over-year—an encouraging sign for future growth. The company also achieved record profitability, with Q4 earnings per share jumping 15% to $0.90 and free cash flow reaching a new high of $252 million, up 11% from the previous year.

Annual Performance and Future Outlook

CrowdStrike capped off a banner year with annual revenue up 22% to $4.81 billion, and full-year earnings per share surging to $3.73 from $0.49. Annual recurring revenue climbed 24% to $5.25 billion. Looking ahead, CrowdStrike anticipates first-quarter sales for the current fiscal year to reach approximately $1.36 billion, representing 23%-24% growth, and expects ARR to hit $5.5 billion—a 24% increase.

Image Source: Zacks Investment Research

Okta also achieved record highs for both revenue and earnings in its most recent fiscal year, with annual sales up 12% to $2.92 billion and earnings per share rising to $3.50 from $0.40. For the upcoming quarter, Okta projects a 9% increase in revenue, a 10% rise in current remaining performance obligations, and expects non-GAAP operating margins of 23%-24% with free cash flow margins between 33% and 35%.

For the full fiscal year ahead, Okta forecasts 9% revenue growth, a non-GAAP operating margin of 25%-26%, and free cash flow margins of 27%-28%.

Image Source: Zacks Investment Research

Investor Takeaways

The impressive progress of CrowdStrike and Okta has captured the attention of investors, especially as both companies have eased concerns about the impact of AI on the software-as-a-service sector. However, Okta may appeal more to value-focused investors, trading at a forward price-to-earnings ratio of 21, compared to CrowdStrike’s higher multiple of 87.

Currently, Okta holds a Zacks Rank #1 (Strong Buy), while CrowdStrike is rated Zacks Rank #3 (Hold).