ARR Growth Rate

ARR growth rate measures how much the annualized recurring revenue base has increased or decreased relative to a prior date. A common reporting interval is year over year, but quarterly and monthly comparisons also appear.

Example

A SaaS company ends the year at $780,000 ARR after starting at $600,000. It added $180,000 ARR, giving 30% annual growth. This does not mean it recognized $780,000 of subscription revenue during the year.

How to use it

Break the gain into new contracts, expansion, contraction, and churn. In the example, 30% growth could reflect a loyal customer base expanding or an expensive replacement of departing customers. Retention, margin, and cash usage help distinguish those situations.

Identify whether the comparison is year over year, quarter over quarter, or another interval. Keep currency and ARR inclusion policies consistent. Acquisitions, price increases, and changed reporting definitions can raise the number without an equivalent improvement in customer demand.

Further reading: ChartMogul on ARR Growth Rate.

Related: ARR, Rule of 40.