ARR (annual recurring revenue): definition, calculator and 2026 benchmarks
What is ARR?
ARR (annual recurring revenue) is the yearly value of a company's live recurring contracts at a point in time, excluding one-time and services fees: usually monthly recurring revenue × 12. It is an operating metric, not GAAP revenue, and companies define it differently, especially for usage-based pricing and contracts not yet live.
Key facts
- The SaaS Metrics Standards Board defines it simply: "ARR is the sum of subscription recurring revenue on an annualized basis." (SaaS Metrics Standards Board)
- There is no single definition. Samsara's 10-K: "ARR does not have a standardized meaning and is not necessarily comparable to similarly titled measures presented by other companies." (Samsara, 10-K)
- The phrase "annual recurring revenue" appeared in 118 annual reports filed with the SEC in 2025, up from 42 in 2020 and 10 in 2015 (our EDGAR full-text searches). (SEC EDGAR search)
- Median growth among private B2B SaaS companies was 22% in 2025, down from 25% in 2024, in SaaS Capital's survey of more than 1,000 companies. (SaaS Capital, 2026)
- CrowdStrike reported ARR of $5.84 billion at 31 July 2026, up 25% in a year. (CrowdStrike, Aug 2026)
ARR calculator
Enter this month's recurring subscription revenue (MRR) and any one-time revenue such as setup or services fees. ARR counts only the recurring part. Add last year's ARR to see your growth rate against 2025 benchmarks.
Want ARR straight from your billing data? CX Cash is being built to track MRR and ARR movements, new, expansion, contraction and churn, alongside your cash.
Get started free (opens in a new tab) See MRR and ARR tracking in CX Cash
How to calculate ARR
ARR = MRR × 12 = Σ annualized value of live recurring contracts
In words: add up the recurring, contracted revenue from every live customer, expressed per year. Leave out one-time fees, services and contracts that haven't started.
- MRR: Monthly recurring revenue from live subscriptions, with annual and multi-year plans spread evenly by month.
- Live recurring contracts: Contracts that have started and recur. Signed contracts that aren't live yet belong in committed ARR (CARR), not ARR.
Worked example
An illustrative company billing $250,000 a month in subscriptions, plus $40,000 of setup and services fees this month, with ARR of $2.4M a year ago. The results below are computed by the calculator's tested code.
| Input | Value |
|---|---|
| Recurring subscription revenue this month (MRR) | $250,000 |
| One-time revenue this month (setup and services) | $40,000 |
| ARR 12 months ago | $2,400,000 |
ARR: 3,000,000 MRR: 250,000ARR growth over 12 months: 25.0%Revenue run-rate, one-time included: 3,480,000How much the run-rate overstates ARR: 16.0%
ARR = 250,000 × 12 = 3,000,000
ARR is $3.0M, up 25% on a year ago, above the 20% median in Benchmarkit's 2025 data. Counting this month's $40,000 of fees as recurring would claim a $3.48M "run-rate", 16% more than the real ARR.
In a spreadsheet
- ARR from MRR in B2: =B2*12
- ARR of one multi-year contract, with total contract value in B2 and its term in days in C2 (Workday's method): =B2/C2*365
- ARR growth over 12 months, with ARR now in B2 and a year ago in C2: =B2/C2-1
- Net new ARR, with new, expansion, contraction and churned ARR in B2:E2: =B2+C2-D2-E2
How founders and investors read ARR
If you're the founder
- ARR is the number investors use for your scale and growth, so define it in writing and keep it consistent. Public companies spell out what they include, and the SEC expects "A clear definition of the metric and how it is calculated" (SEC, 2020).
- Show usage and committed-but-not-live revenue separately from subscription ARR. Investors will separate them anyway, and finding out you didn't costs trust.
- Reconcile ARR with revenue. ARR at year end should be close to the last month's recurring revenue times 12; a big gap needs an explanation.
Questions you'll be asked
- Is that contracted ARR or a revenue run-rate?
- How much is usage or consumption, and how predictable is it?
- Does it include signed contracts that aren't live yet?
- How much of the year's growth came from new customers versus expansion?
If you're the investor or LP
- Ask for the definition before the number. Public companies alone use MRR × 12, daily revenue × 365, a quarter × 4 and contract value ÷ days × 365.
- Watch for committed ARR passed off as ARR. TechCrunch reported in 2026 that "The main obfuscation tactic is substituting "contracted ARR," sometimes referred to as "committed ARR" (CARR), and simply calling it ARR" (TechCrunch).
- Check it against cash. Billings and collections should track ARR; if ARR grows and cash doesn't, find out why.
Questions to ask the company
- How do you calculate ARR, and has the definition changed?
- What share of ARR is usage-based, and how do you annualize it?
- What is gross and net retention on this ARR?
- How does ARR reconcile with GAAP revenue and billings?
What is a good ARR growth rate?
A good ARR growth rate depends on size: small companies grow fastest in percentage terms, and growth slows as ARR rises. Recent medians for private SaaS sit around 20% to 22% a year, well below the 2021 peak.
Show the numbers
| ARR band | Median | 75th percentile |
|---|---|---|
| Under $5M | 21.0% | 50.0% |
| $5M–20M | 26.0% | 50.0% |
| $20M–50M | 17.0% | 29.0% |
| $50M–100M | 19.0% | 30.0% |
| Over $100M | 10.0% | 25.0% |
Benchmarks
| Segment | Measure | Typical | Top quartile | As of | Sample | Source |
|---|---|---|---|---|---|---|
| Private SaaS companies, ARR or revenue growth · Surveys of different populations, so compare a company with one of them, not across them. | ||||||
| All private B2B SaaS | Median revenue growth | 22% (25% in 2024) | — | FY 2025 | More than 1,000 companies (SaaS Capital survey) | SaaS Capital, 2026 |
| Bootstrapped | Median revenue growth | 20% | — | FY 2025 | SaaS Capital survey | SaaS Capital, 2026 |
| Equity-backed | Median revenue growth | 25% | — | FY 2025 | SaaS Capital survey | SaaS Capital, 2026 |
| B2B SaaS and AI-native | Median ARR growth | 20% (30% in 2022) | 42% | CY 2025 | 338 companies (Benchmarkit) | Benchmarkit, 2026 |
| Private SaaS | ARR growth | 15% in 2024; 20% expected for 2025 | — | Nov 2025 | KeyBanc and Sapphire survey (press release) | KeyBanc & Sapphire, 2025 |
| Public software companies | ||||||
| Public SaaS comparables | Median revenue growth | 16% (last 12 months); 13% (next 12 months) | — | 25 Sep 2026 | About 70 companies (Clouded Judgement) | Clouded Judgement, Sep 2026 |
The $5M–20M band grows fastest, at a 26% median: Benchmarkit notes that companies under $5M "are struggling to find growth".
Growth has fallen since 2022: Benchmarkit's median dropped from 30% to 20%, and SaaS Capital's from 25% to 22% in the last year alone.
Compiled Oct 2, 2026. Next review: March 2027, after SaaS Capital's 2027 survey. Left out: High Alpha 2025 (Its pages are marked proprietary and confidential; we don't reproduce its tables); ICONIQ 2026 (The report prohibits reproduction, and its growth data covers ICONIQ's portfolio); KeyBanc and Sapphire full survey (Gated; only press-release figures are used). Download these benchmarks as CSV.
ARR in the wild: how eight public companies calculate it
Each company's definition from its latest annual report. Same name, different arithmetic, which is why Samsara warns that ARR "does not have a standardized meaning". (Samsara, 10-K)
| Company | How it annualizes | Counts usage? | Other choices | Source |
|---|---|---|---|---|
| Datadog | MRR × 12 | Yes: MRR includes "additional usage" | ARR is "not intended to be replacements or forecasts of revenue" | 10-K, Feb 2026 |
| GitLab | MRR × 12 | No: committed subscriptions | Excludes professional services | 10-K, Mar 2026 |
| Dynatrace | Daily revenue × 365 | No: excludes usage overage billings | Excludes month-to-month agreements | 10-K, May 2026 |
| MongoDB | Contracted next 12 months, plus Atlas usage over the prior 90 days × 4 | Yes | Excludes professional services | 10-K, Mar 2026 |
| Cloudflare | Quarter's revenue × 4 ("Annualized Revenue") | Yes | May be "higher than actual revenue over the course of the year" | 10-K, Feb 2026 |
| Workday | Contract value ÷ days in term × 365 | Subscriptions | Constant currency; calls ARR "a non-GAAP financial measure" | 10-K, Mar 2025 |
| Procore | Current year's contractual fee | Subscriptions | Ramped multi-year deals count at this year's fee | 10-K, Feb 2026 |
| CrowdStrike | Annualized contract value, assuming renewal on existing terms | Subscriptions | Expired contracts stay in ARR while a renewal is negotiated | 10-K, Mar 2026 |
Eight companies, at least six ways of annualizing, usage counted by some and excluded by others, and even opposite labels: SentinelOne says its ARR "is not a non-GAAP metric", while Workday calls ARR a non-GAAP measure. A usage-heavy company can look larger on Cloudflare's method than on Dynatrace's for the same customers.
These are the companies' own definitions, as filed. SEC filings were read from archived copies because sec.gov blocks automated access; the links go to EDGAR.
ARR vs MRR, revenue, committed ARR, run-rate and RPO
| Metric | Answers | Ignores | Use it when | It misleads when |
|---|---|---|---|---|
| ARR | Yearly value of live recurring contracts at a point in time | One-time fees, and usually usage | Measuring the scale and growth of a subscription business | Usage, signed-not-live deals or one-off fees are counted in |
| MRR | The same recurring revenue, per month | Annual seasonality | Tracking month-to-month movement, monthly plans | Annual prepayments are counted in the month they're paid |
| GAAP revenue | Revenue recognized over a period | Contract value not yet recognized | Financial statements and audits | Compared directly with ARR |
| Committed ARR (CARR) | ARR plus signed contracts not yet live, net of expected churn | Delivery and implementation risk | Long implementation cycles | Presented as ARR |
| Revenue run-rate | Current revenue × 12 or × 4, all of it | Whether the revenue recurs | Transactional or usage businesses, labelled as such | Called ARR |
| RPO | All contracted revenue not yet recognized | Revenue outside signed contracts | Judging contracted backlog | Read as annual revenue |
ARR = MRR × 12 for the same contracts. Over a year, the change in ARR is new + expansion − contraction − churn, and the retained part divided by the starting ARR is net revenue retention.
Common mistakes: how ARR gets inflated
- Counting one-time fees. Setup, implementation and services fees don't recur. a16z put it plainly in 2015: ARR "should exclude one-time (non-recurring) fees and professional service fees" (a16z).
- Calling a run-rate ARR. Twelve times this month's total revenue is a run-rate, not ARR. a16z: "when software businesses use ARR, they mean annual recurring revenue, NOT annual run rate" (a16z).
- Counting contracts that haven't started. The SaaS Metrics Standards Board: "ARR does not include contracted but not yet live ARR, and does not include known, but not yet recognized churned or down-sell ARR." Report those as committed ARR.
- Annualizing usage without saying so. Usage can be counted if it is "generally recurring and predictable", Jason Lemkin argues, but "called out as consumption revenue (vs subscription)" (SaaStr).
- Counting multi-year ramps at full value. A contract that steps up in year three adds this year's fee, not the average or the peak. Procore uses "the first-year subscription fees" while a ramped deal is in its first year.
- Treating ARR as revenue. Datadog's 10-K: "ARR and MRR are not intended to be replacements or forecasts of revenue." ARR is a snapshot; revenue is earned over time.
Where ARR came from and how it's regarded today
| When | What happened | Source |
|---|---|---|
| May 2026 | TechCrunch reports AI startups passing off committed ARR as ARR. | TechCrunch, May 2026 |
| Apr 2026 | Y Combinator's Garry Tan publishes a ladder of revenue terms and warns founders not to confuse them. | Artificial Lawyer, Apr 2026 |
| Dec 2025 | Kyle Poyar: "AI startups force us to rethink ARR." | Poyar, 2025 |
| 2025 | "Annual recurring revenue" appears in 118 annual reports filed with the SEC, against 10 in 2015. | SEC EDGAR search |
| Mar 2024 | Jamin Ball coins "ERR", experimental run-rate revenue, for AI revenue that may not recur. | Ball, 2024 |
| Sep 2021 | Bessemer: "Annual Recurring Revenue (ARR) is the primary metric for measuring scale in cloud companies." | Bessemer, 2021 |
| Jan 2020 | The SEC's guidance on key performance indicators asks companies to define metrics like ARR and explain how they're calculated. | SEC, 2020 |
| Sep 2015 | a16z: ARR means annual recurring revenue, "NOT annual run rate". | a16z, 2015 |
| Feb 2015 | Battery Ventures' Neeraj Agrawal sets out "triple, triple, double, double, double" (T2D3) growth in annualized revenue. | Agrawal, 2015 |
| Jan 2013 | David Skok makes ARR the primary metric for SaaS companies on annual contracts. | Skok, 2013 |
| 2001 | The earliest uses of "annual recurring revenue" in SEC full-text search, which starts in 2001. | SEC EDGAR search |
How it's regarded today
- Loosely used. Jason Lemkin: "Most B2B companies count everything as "ARR", right or wrong" (SaaStr, 2025).
- Stretched by AI pricing. "Since many AI companies charge based on usage or outcomes, that method of calculating annualized run-rate ARR can be misleading because revenue is no longer locked into predictable contracts" (TechCrunch, May 2026).
- Defined in every 10-K that uses it. Public companies now publish their ARR definitions, as the SEC's 2020 guidance expects, which is why the differences in the table above are visible at all.
- Growth is slower. SaaS Capital's 2025 median growth of 22% is down from 25% a year earlier, and Benchmarkit's median fell from 30% in 2022 to 20% in 2025.
- Commission Guidance on Management's Discussion and Analysis of Financial Condition and Results of Operations (Release 33-10751) (SEC, 2020). The SEC expects a clear definition, the reasons a metric is useful, and how management uses it.
- Full-text search for "annual recurring revenue" in 10-K filings, by year (SEC EDGAR search). How often "annual recurring revenue" appears in annual reports filed with the SEC, 2005 to 2025.
- 2026 Private B2B SaaS Company Growth Rate Benchmarks (SaaS Capital, 2026). Growth rates for more than 1,000 private B2B SaaS companies, bootstrapped and equity-backed.
- 2026 SaaS and AI Metrics Benchmarks (Benchmarkit, 2026). ARR growth by ARR band, with medians and quartiles for 2025.
What experts say about ARR
“ARR (Annual Recurring Revenue) is one of the most popular SaaS (Non-GAAP) metrics. However, it's also one of the most loosely used metrics, and is frequently misused.”
“But most startups don't. Most B2B companies count everything as “ARR”, right or wrong.”
“We need to adjust how we measure retention (and ARR, for that matter) to cleanly delineate experimental spend from serious spend rather than lumping them together.”
Where they disagree
Two views, ten years apart, on whether usage belongs in ARR.
“In a SaaS business, ARR is the measure of recurring revenue on an annual basis. It should exclude one-time fees, professional service fees, and any variable usage fees.”
“My summary view: It's legitimate to count consumption revenue as ARR *if* it's generally recurring and predictable. And called out as consumption revenue (vs subscription).”
ARR FAQ
What is annual recurring revenue?
ARR is the yearly value of a company's live recurring contracts at a point in time: what it would bill over the next twelve months if nothing changed. It leaves out one-time fees and services, and it is an operating metric, not revenue under GAAP.
How do you calculate ARR?
Multiply monthly recurring revenue by 12, or add up the annualized value of every live recurring contract. A company billing $250,000 a month in subscriptions has $3M of ARR, whatever its one-time fees that month.
What counts as ARR?
Recurring subscription revenue from contracts that have started. Leave out setup, implementation and services fees, and contracts not yet live. Usage is debated: some companies annualize it into ARR, others exclude it, so state your choice.
Is ARR the same as revenue?
No. Revenue is recognized over a period under accounting rules; ARR is a snapshot of contracted recurring value at one date. Datadog's 10-K says ARR and MRR "are not intended to be replacements or forecasts of revenue".
What is the difference between ARR and MRR?
They measure the same recurring revenue over different periods: ARR is MRR × 12. Companies on annual contracts tend to report ARR; those on monthly plans tend to track MRR.
What is committed ARR (CARR)?
ARR plus contracts that are signed but not yet live, minus churn already known. Bessemer describes CARR as "adding committed but not yet live contract values to total ARR and netting out forecasted churn or downsell". It should be reported separately from ARR.
What is a good ARR growth rate?
It depends on size. In 2025, median ARR growth was 26% for companies with $5M–20M of ARR and 10% above $100M in Benchmarkit's data; across all private B2B SaaS, SaaS Capital's median was 22%.
Related metrics and guides
Sources
Every link was opened and checked. Archived copies guard against links that move or disappear.
Primary data
- Full-text search for "annual recurring revenue" in 10-K filings, by year. US Securities and Exchange Commission (EDGAR), Queried 2 Oct 2026. Our query; counts are documents matching the exact phrase, and coverage starts in 2001.
- Form 10-K for the fiscal year ended 31 January 2026. Samsara Inc. (SEC filing), 16 Mar 2026. Read from the archived copy. Archived copy
- CrowdStrike Reports Second Quarter Fiscal Year 2027 Financial Results (Exhibit 99.1). CrowdStrike Holdings (SEC filing), 26 Aug 2026. Read from the archived copy. Archived copy
- Form 10-K for the fiscal year ended 31 December 2025. Datadog (SEC filing), 18 Feb 2026. Read from the archived copy. Archived copy
- Form 10-K for the fiscal year ended 31 January 2026. GitLab (SEC filing), 17 Mar 2026. Read from the archived copy. Archived copy
- Form 10-K for the fiscal year ended 31 March 2026. Dynatrace (SEC filing), 20 May 2026. Read from the archived copy. Archived copy
- Form 10-K for the fiscal year ended 31 January 2026. MongoDB (SEC filing), 11 Mar 2026. Read from the archived copy. Archived copy
- Form 10-K for the fiscal year ended 31 December 2025. Cloudflare (SEC filing), 26 Feb 2026. Read from the archived copy. Archived copy
- Form 10-K for the fiscal year ended 31 January 2025. Workday (SEC filing), 11 Mar 2025. Read from the archived copy. Archived copy
- Form 10-K for the fiscal year ended 31 December 2025. Procore Technologies (SEC filing), 24 Feb 2026. Read from the archived copy. Archived copy
- Form 10-K for the fiscal year ended 31 January 2026. CrowdStrike Holdings (SEC filing), 5 Mar 2026. Read from the archived copy. Archived copy
- Form 10-K for the fiscal year ended 31 January 2026. SentinelOne (SEC filing), 19 Mar 2026. Read from the archived copy. Archived copy
- 2026 Private B2B SaaS Company Growth Rate Benchmarks. SaaS Capital, 2026. Lender's survey; the detailed PDF is gated. Archived copy
- 2026 SaaS and AI Metrics Benchmarks. Benchmarkit, 1 Jun 2026. Sponsored report; band figures read from its chart. Archived copy
- Private SaaS Company Survey Reveals AI-Driven Transformation and Sustained Operational Excellence. KeyBanc Capital Markets (press release), 13 Nov 2025. Press release; the full survey is gated. Archived copy
Regulation
- Commission Guidance on Management's Discussion and Analysis of Financial Condition and Results of Operations (Release 33-10751). US Securities and Exchange Commission, 30 Jan 2020. sec.gov blocks automated access; read from the archived copy. Archived copy
Practitioner
- Clouded Judgement 9.25.26 - Own the Interaction Layer. Jamin Ball (Altimeter), 25 Sep 2026. Newsletter; Altimeter trades in public securities; figures read from its chart.
- Annual Recurring Revenue (ARR). SaaS Metrics Standards Board, Undated. Industry body, not an accounting standard setter. Archived copy
- 16 Startup Metrics. Jeff Jordan, Anu Hariharan, Frank Chen and Preethi Kasireddy (Andreessen Horowitz), 21 Aug 2015. Archived copy
- 16 More Startup Metrics. Anu Hariharan, Frank Chen and Jeff Jordan (Andreessen Horowitz), 23 Sep 2015. Archived copy
- SaaS Metrics 2.0 - A Guide to Measuring and Improving what Matters. David Skok (For Entrepreneurs), 16 Jan 2013. Archived copy
- The SaaS Adventure. Neeraj Agrawal (TechCrunch guest column), 1 Feb 2015. Archived copy
- Scaling to $100 Million. Mary D'Onofrio and Ethan Ding (Bessemer Venture Partners), 21 Sep 2021. Archived copy
- Clouded Judgement 3.22.24 - ERR vs ARR and the Conundrum of AI Revenue Streams Today. Jamin Ball (Clouded Judgement), 22 Mar 2024. Newsletter. Archived copy
- Dear SaaStr: We're at $10m Run Rate, But A Lot is Consumption Based. Does That Count as "ARR"?. Jason Lemkin (SaaStr), 28 Sep 2025. Practitioner opinion. Archived copy
- The AI churn wave?. Kyle Poyar (Growth Unhinged), 10 Dec 2025. Newsletter. Archived copy
News
- How VCs and founders use inflated 'ARR' to crown AI startups. TechCrunch (Marina Temkin), 22 May 2026. Relies partly on anonymous sources. Contested. Archived copy
- Y Combinator Tells Founders 'Be Truthful' On Revenue. Artificial Lawyer (reproducing Garry Tan's post on X), 27 Apr 2026. Secondary; the original post on X couldn't be read. Archived copy
Changes to this page
- · Major · Page published. Benchmarks for 2025 and filings to September 2026, compiled 2 October 2026.
Cite this page
Dominique Bouillet, "ARR (annual recurring revenue): definition, calculator and 2026 benchmarks", CX Cash, updated Oct 17, 2026, https://cxcash.com/metrics/arr
CX Cash builds software for founders and investors. This page is education, not investment advice. Third-party figures link to their source, and our own arithmetic and illustrative examples are labelled as such.