What is an RPO, the number that drove Oracle’s giant share move?

Oracle might have just posted the most lucrative earnings miss in market history.

Lost in the roughly $275 billion market move that came after the results is the fact that the cloud computing and business software giant actually posted slightly disappointing results on the top and bottom lines. (Earnings per share of $1.47 missed by a penny, and sales of $14.93 billion were short of the $15.04 billion Wall Street had forecast.)

But nobody cared.

That’s because the company announced a different gobsmacking result: a 359% surge to $455 billion of a closely followed measure of the company’s “booked” revenue, known as “remaining performance obligations,” or RPO.

The company was not shy about highlighting this figure, slapping it at the top line of its earnings announcement press release.

“We signed four multi-billion-dollar contracts with three different customers in Q1,” Oracle CEO Safra Catz said. “This resulted in RPO contract backlog increasing 359% to $455 billion. It was an astonishing quarter — and demand for Oracle Cloud Infrastructure continues to build.”

But what the heck, exactly, is RPO?

Essentially, it’s booked revenue — legally binding IOUs that reflect sales Oracle expects to go through. Per Oracle’s June report, RPO reflects “deferred revenues; invoices that have been issued to customers but were uncollected and have not been recognized as revenues; and amounts that will be invoiced and recognized as revenues in future periods.”

Given the degree to which demand for Oracle’s cloud services outstrips supply, the company signs deals to provide major AI players with computing power. In June, Oracle announced a $30 billion annual contract it signed with a then undisclosed customer that was later revealed to be OpenAI. Oracle won’t actually see that revenue until fiscal year 2028, so it’s reported as RPO.

Most of Oracle’s RPO won’t turn into real revenue for quite a bit. In its annual report in June, Oracle said two-thirds of its then $137.8 billion RPO wouldn’t be recognized as revenue for at least 12 months.

Seemingly the most important new customer is OpenAI, per The Wall Street Journal’s reporting on a $300 billion deal between the two parties. The agreement will require 4.5 gigawatts of capacity, equivalent to more than twice the power produced by the Hoover Dam.

Oracle has to build out its infrastructure to meet that contracted demand, and that race is reflected in the hefty $35 billion in capital spending it expects for this fiscal year.

According to Catz in the company’s earnings call, Oracle “signed significant cloud contracts with the who’s who of AI, including OpenAI, xAI, Meta, Nvidia, AMD, and many others.” Catz said she expects Oracle’s RPO to grow to more than $500 billion in the fiscal year as the company signs more multibillion-dollar cloud deals.