Accounting Standards Codification (ASC)Topic 606: Revenuefrom Contracts with Customers, commonly referred to as ASC 606, changed howcompanies recognize revenue from contracts to be more formulaic, based onsatisfying certain “performance obligations” (i.e., PO). These RemainingPerformance Obligations (RPOs) and Current (cRPOs) are not on any of thefinancial statements, instead they are in earnings releases, footnotes andpresentations. Understanding and modeling RPO (remaining performanceobligations) and cRPO (current RPO) is critical in accurately forecastingfuture growth.
RPOs are particularly pertinent with large enterprisecustomers whose deals span multiple years. Two in particular that show thevalue of modeling RPOs are Oracle (ORCL) and ServiceNow (NOW). Using theDaloopa data sheet that extracted RPO and cRPO numbers from various sources, wecan see the key underlying trends and takeaways.
As Oracle becomes more of a hyperscaler, albeit a distant 4thto AWS, GCP and Azure, they are building a tremendous amount of futurecontracted revenue. Their RPO has grown from $65 billion to $98 billion, aremarkable 53% y/y growth rate. Further, 62% (1-38% shown as cRPO) is forbeyond 12 months which indicates that Oracle’s plan to reach $65 billion byFY’26 is not a far stretch with double-digit growth for the next two years ifthis trajectory continues.
ServiceNow continues to be a huge beneficiary of GenAI withtheir Now Assist product as process automation becomes a highly valued usecase. As can be seen in their RPO metrics, RPO growth accelerated over the lasttwo quarters with non cRPO growth accelerating indicating bigger, longer-termdeals.
