Cybersecurity stocks surged on Thursday after CrowdStrike (CRWD – Free Report) ) and Okta (OKTA – Free Report) ) both topped Q2 expectations yesterday evening and raised their outlooks.
CRWD spiked 20%, while OKTA soared nearly 30%, as investors cheered resilient security spending and the growing need to protect AI workloads and identities.
Both reports strengthened their respective growth stories, but with valuations becoming even more stretched after Thursday’s rallies, investors may want to be selective before chasing either stock.
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CrowdStrike’s Q2 Highlights Accelerating Security Demand
CrowdStrike delivered arguably the more impressive growth quarter, with Q2 revenue rising more than 26% year over year to $1.47 billion, topping the Zacks Consensus Estimate of $1.43 billion by 2%. Adjusted earnings increased nearly 35% to $0.31 per share, beating Q2 EPS expectations of $0.29.
More importantly, annual recurring revenue climbed 25% to $5.84 billion, while net new ARR surged 51% to a record $333 million.
Falcon Flex continues to be a major catalyst, with ARR from Flex customers more than doubling to over $2.29 billion. Notably, Falcon Flex is a flexible subscription and licensing model for CrowdStrike’s cybersecurity platform, allowing organizations to deploy only the security modules they need while adapting to evolving threats and operational requirements.
Other highlights included CrowdStrike generating a Q2 record $377 million in free cash flow, reinforcing the scalability of its cloud-based security platform.
Furthermore, management raised its outlook and now expects Q3 revenue of $1.523-$1.529 billion and adjusted EPS of roughly $0.31. Full-year revenue is now projected at $5.99-$6.01 billion, with adjusted EPS of $1.25-$1.26. CrowdStrike also significantly raised its net new ARR growth outlook to roughly 34% at the midpoint.
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Okta’s Profitability Makes a Big Leap
Okta’s growth rate isn’t as explosive, but its Q2 report showed an attractive combination of improving demand and expanding profitability. Quarterly revenue increased more than 11% YoY to $805 million and topped Q2 estimates of $792.14 million by over 1%.
More impressively, Q2 adjusted EPS climbed 15% to $1.05 and comfortably exceeded expectations of $0.96 per share by 9%.
Subscription backlog, or remaining performance obligations (RPO), jumped 17% to $4.86 billion, with current RPO increasing 14% to $2.59 billion. Even more encouraging, Okta’s GAAP operating margin expanded to 13% from 6%, while free cash flow reached $227 million, equaling an impressive 28% of revenue.
Okta expects Q3 revenue of $813-$817 million and adjusted EPS of $0.92-$0.94. Management also raised its fiscal 2027 outlook to revenue of $3.216-$3.226 billion, adjusted EPS of $3.90-$3.94, and free cash flow of $910-$930 million.
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CRWD & OKTA Valuation Comparison
This is where Okta starts to clearly separate itself.
Even before Thursday’s post-earnings rallies, CrowdStrike was trading over 150X forward earnings compared with 76X for Okta. Notably, Okta’s P/E multiple is much closer to their Zacks Security industry’s average of 46X, which includes other noteworthy companies such as Fortinet (FTNT – Free Report) ), Palo Alto Networks (PANW – Free Report) ), and Zscaler (ZS – Free Report) ).
Okta also trades at a much more reasonable forward sales multiple of 7X, which is slightly beneath the industry average compared to CrowdStrike’s 32X.
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Bottom Line: OKTA Looks Like the Better Buy
CrowdStrike produced the stronger Q2 growth report and remains one of cybersecurity’s premier long-term growth stories, particularly as enterprises spend more to secure AI workloads, cloud environments, and endpoints. However, after the stock’s post-earnings surge, its lofty valuation makes CRWD harder to chase.
Okta appears to offer the more attractive risk-to-reward setup, combining improving identity-security demand, expanding margins, robust free cash flow, raised guidance, and a substantially cheaper valuation.
Supporting that view, OKTA currently sports a Zacks Rank #2 (Buy), while CRWD lands a Zacks Rank #3 (Hold). Investors seeking exposure to the cybersecurity rally may therefore have more reason to chase Okta’s surge than CrowdStrike’s at current levels.
