Learn · Explainer
Deferred revenue
Cash collected before the work is done: how it's recorded, where it sits on the balance sheet, and how large it is at each company.
The short answer
Deferred revenue is money a company has been paid, or has billed, for products or services it hasn't delivered yet. It's a liability on the balance sheet, because the company still owes the customer the work, and it moves into revenue as the work is done. Accounting standards call it a contract liability; Microsoft calls it unearned revenue. Across the 52 companies here, current deferred revenue is a median 5.3% of a year's revenue. At Microsoft it's $73.0B, 22.0% of fiscal 2026 revenue.
How it works
Take a customer who pays $1,200 up front for a one-year subscription. On the day the cash arrives, the company records $1,200 of cash and $1,200 of deferred revenue. Each month it delivers the service, $100 moves from deferred revenue into revenue on the income statement. After twelve months the liability is gone and all $1,200 has been recognized.
The cash came in at the start, so operating cash flow runs ahead of net income while deferred revenue grows. That's one of the main reasons subscription businesses often report more cash from operations than profit. Accrual accounting explains the general rule.
Where to find it
Deferred revenue is in current liabilities on the balance sheet, under names such as "deferred revenue", "unearned revenue" or "contract liabilities". The part expected to be recognized more than a year out is listed separately, under long-term liabilities. The revenue note explains what's in it. Microsoft's 10-K says its unearned revenue comprises "mainly unearned revenue related to volume licensing programs" and is "generally invoiced annually at the beginning of each contract period" and recognized over the coverage period.
What it can and can't tell you
- A rising balance usually means bookings are growing faster than revenue is being recognized, since more customers have paid for service still to come.
- Billing terms matter. A company that switches from annual to monthly billing collects less up front, so its deferred revenue falls even if customers don't change.
- It's only part of the backlog. Contracts signed but not yet billed aren't in deferred revenue. Remaining performance obligations cover the whole contracted amount.
- Different business models. Software, travel and membership companies collect in advance. Manufacturers that bill on delivery carry little deferred revenue.
Every company
The highest ratio in the table is GE Vernova's, at 67.7%.
Revenue for the latest fiscal year and current deferred revenue (contract liabilities) at that year end, from each 10-K, sorted by the last column. Banks are left out. Companies that don't report a current contract liability line are not listed.
Common questions
Is deferred revenue an asset or a liability?
A liability. The company has the cash, or a bill outstanding, but still owes the customer the product or service.
When does deferred revenue become revenue?
As the company delivers what was paid for: over the subscription period for a service, or when the product is handed over.
Is deferred revenue the same as unearned revenue?
Yes. Deferred revenue, unearned revenue and contract liabilities are different names for the same thing.
Why does deferred revenue make cash flow higher than profit?
The cash arrives before the revenue is recognized, so while the balance is growing, operating cash flow exceeds net income.
What is the difference between deferred revenue and remaining performance obligations?
Deferred revenue covers amounts already paid or billed. Remaining performance obligations also include contracted amounts not yet billed.
Disclosures
- Editor holdings
- The editor holds shares of Tesla (TSLA) and SpaceX in a long-term retirement account. The editor holds no position in any other company named on this page. As of Nov 11, 2026.
- Compensation
- Nobody paid for this page. No affiliate links on this page.
- Sources
- Each company's own SEC filings, linked next to each number.
- Last updated
- Nov 9, 2026
General education, the same for every reader. Not a recommendation to buy, sell or hold any security, and it doesn't consider your situation.
More in Learn and Tools · Methodology & Disclosures explains where every number comes from.