RPO Analysis, Part III: Analyzing the Pipeline

Today we continue our dive into Remaining Performance Obligation (RPO) disclosures, since corporations will start making a lot of those disclosures in January when year-end 2025 reports start arriving. Analysts can compare revenue and RPO disclosures in lots of ways to help you understand how well a company is converting expected future revenue into booked revenue.

Here’s what we mean. RPO is the value of contracted revenue that a company expects to deliver in future periods based upon existing customer agreements. So one could look at a company’s RPO disclosures in the past — say, one year ago — and compare that number to actual revenue reported today. That would help you understand how efficiently the company is closing deliverables with customers and turning expected revenue into actual revenue.

The crack Calcbench research team went looking for S&P 500 firms that fit this profile. We found five firms that have already reported fiscal 2024 and 2025 revenue, and reported RPO in 2024 including what portion of that RPO they expected to deliver in the coming 12 months. See Figure 1, below.

So for example, one year ago Adobe ($ADBE) reported $21.5 billion in revenue for fiscal 2024, and reported $19.96 billion in total RPO — two-thirds of which Adobe expected to deliver within the next 12 months.

Well, two-thirds of $19.96 billion is $13.37 billion. That was the amount of future revenue Adobe expected to convert into actual revenue across fiscal 2025. At the end of 2025, however, Adobe reported $23.77 billion in actual revenue, far more than the 12-month RPO projection from one year earlier.

Indeed, as you can see, all five firms in Figure 1 reported 2025 revenues much higher than what their year-earlier RPO disclosures suggested. 

None of this means anything funny is going on with the numbers; actual revenue can deviate from prior RPO disclosures for all sorts of reasons. Contracts might get renegotiated, pulling some expected future revenue forward or pushing other amounts further out. Some revenue might come from new one-time contracts that earlier RPO numbers didn’t include. 

Our point is simply that “the pipeline” is more complicated than it looks. The numbers in that pipeline don’t always move in one direction, toward the current period’s income statement. Some contracts are delayed, some are canceled, some are accelerated, and some are executed so quickly they don’t really exist as RPO at all.

That complexity is a reflection of a company’s business model and larger economic conditions. So by knowing what those RPO disclosures are, and how much they do or don’t correlate to actual revenue over time, can provide analysts with deeper insights. You can then ask management better questions, get better answers, and make better decisions.

By the way, finding all this stuff in Calcbench is a breeze. We used our Mult-Company database. First we searched for S&P 500 companies that have already filed fiscal 2025 reports; and that made RPO disclosures (just about every company will) including which tranches of total RPO were expected in the coming 12 months (a lot fewer, but some companies do). 

Then we just compared 2025 to 2024, and wound up with Figure 2, below.

Took us less than five minutes. Good practice for when everyone else starts filing 2025 reports early next year!