ARR vs Revenue: What Each Measures — Plus ACV, CARR, Run Rate and Bookings
ARR vs revenue: ARR annualizes today's recurring contracts; revenue is what you earned in a period. A worked example, plus ACV, CARR, run rate and bookings.
ARR and revenue are not the same number. ARR (annual recurring revenue) takes the recurring contracts active today and annualizes them. It is a snapshot of where the business stands now, projected over a year. Revenue is what a company actually earned and recognized during a past period, including one-time fees. A startup that reports "$1.2M ARR" may have recognized only half that in revenue last year. Below is the difference, a worked example, the related terms people mix up (ACV, CARR, run rate, bookings), and how to read a startup's claim.
Contents
What is the difference between ARR and revenue?
ARR looks forward from today; revenue looks back over a period. Stripe describes ARR as the recurring revenue expected over the next 12 months if current subscriptions continue. Revenue, as reported in an income statement, is money earned during a defined quarter or year. It follows revenue recognition rules.
| ARR | Revenue | |
|---|---|---|
| Question it answers | "How big is our recurring base right now?" | "How much did we earn last period?" |
| Time direction | Forward-looking snapshot | Backward-looking total |
| Includes one-time fees? | No | Yes |
| Includes usage and services? | Usually no | Yes |
| Accounting standard | None (an operating metric) | Governed by accounting rules |
| Main users | Founders, SaaS investors | Accountants, tax, public markets |
Neither number is better. ARR is the right lens for a subscription business's momentum; revenue is the right lens for what actually came in.
Why can ARR and revenue be so far apart?
Because growth makes today's base larger than last year's average. A worked example for a subscription startup:
- ·In January it has $20K in monthly recurring revenue (MRR).
- ·It adds $5K of MRR every month, reaching $75K MRR in December.
- ·It also charges $50K in one-time setup fees across the year.
At year end its ARR is $900K ($75K × 12). Its recognized revenue for the year is about $620K: $570K from twelve months of subscriptions, which rose from $20K to $75K, plus $50K in setup fees. The ARR figure is about 45% higher than the year's revenue, and neither is wrong.
The gap runs the other way in a shrinking business. If customers are leaving, last year's revenue can exceed today's ARR. That is why a fast-growing startup prefers to quote ARR, and why you should ask for both. Our ARR calculator converts monthly and annual contracts without double counting, and ARR vs MRR explains the monthly view.
How do ARR, ACV, CARR, run rate and bookings differ?
They measure different slices of the same money. The ones most often confused with ARR:
| Term | What it measures | How it relates to ARR |
|---|---|---|
| MRR | Monthly recurring revenue right now | ARR = MRR × 12 |
| ACV (annual contract value) | Average yearly value of one contract | ARR = number of customers × ACV, roughly |
| CARR (contracted ARR) | Signed recurring contracts, including ones not yet live | Equal to or higher than ARR |
| Annual run rate | Any recent revenue × periods in a year, including usage and one-time | Can be higher and far less stable than ARR |
| Bookings | Total value of contracts signed in a period, often multi-year | Not annualized; can dwarf ARR |
| Revenue | What was earned and recognized in a period | Backward-looking; includes non-recurring |
Two traps come up often. Run rate gets called ARR when a company with usage-based or one-off sales multiplies its best recent month by twelve. CARR gets called ARR when signed contracts have not started billing. Both make a company look larger than its live recurring base.
Which should a founder report, and when?
Report the measure your reader uses to make their decision, and label it. A practical guide:
- ·To investors in a subscription business: ARR and MRR, with the date, plus net revenue retention if you track it. They value momentum.
- ·To a buyer of your business: trailing twelve-month revenue and profit. Marketplaces for small businesses price on earnings, not on ARR.
- ·To your accountant and the tax office: recognized revenue only. ARR has no standing in your accounts.
- ·In public, such as a launch post or podcast: say which one you mean. "$20K MRR" and "$240K ARR" are the same claim; "$240K revenue" is a different one.
Mixing them is how honest founders end up with numbers that look inflated. Pick one per audience and say which it is.
How should you read a startup's ARR claim?
Ask three questions before you compare two companies: which measure, at what date, and who said it. The ProvenStartups index records each claim's exact wording for this reason:
- ·[Calendly](/projects/calendly-bootstrapped-scheduling-viral-loop) reported about $70M in *subscription revenue* for 2020. A research firm estimated about $270M in *ARR* at the end of 2023. Different measures, different dates, different sources; see our Calendly revenue breakdown.
- ·[BridgeMind](/projects/bridgemind-vibe-coding-platform) reports $242,964 ARR and $20,200 MRR. Those match ($20.2K × 12), which is a good sign the founder is quoting ARR correctly.
- ·[SiteGPT](/projects/sitegpt-free-tools-marketing) reports $13K MRR and about $500K lifetime revenue. Lifetime revenue is a cumulative total, not an annual figure, so it cannot be compared with anyone's ARR.
- ·[ListKit](/projects/listkit-productized-service-to-saas) reports about $200K MRR and about $2.4M ARR, but also $150K–$175K a month in operating costs. ARR says nothing about profit.
A simple rule: if the measure, the date and the source are not stated, treat the number as a headline, not a fact. Our grading method and Supabase revenue page show this applied to companies that never publish revenue at all.
Frequently Asked Questions
Is ARR the same as revenue?
No. ARR (annual recurring revenue) annualizes the recurring contracts active today, so it is a forward-looking snapshot. Revenue is the money a company has earned and recognized in a past period, including one-time fees. A company with $1M ARR may have recognized far less revenue that year if it grew quickly.
Why is ARR higher than revenue?
Usually because the company is growing. ARR reflects today's subscription base multiplied over a year, while revenue adds up what was earned month by month, including the smaller early months. In a shrinking business the reverse can happen, with revenue above current ARR.
What is the difference between ARR and ACV?
ARR is the total annualized recurring value across all customers. ACV (annual contract value) is the average yearly value of one contract. A company with 100 customers at $10,000 ACV has $1M ARR.
What is the difference between ARR and CARR?
CARR (contracted annual recurring revenue) includes contracts that are signed but not yet live or billing, while ARR usually counts only active recurring contracts. CARR is always equal to or higher than ARR, so check which one a company reports.
What is the difference between annual run rate and ARR?
Annual run rate multiplies any recent revenue, including usage, services and one-time sales, by the periods in a year. ARR counts only recurring subscription revenue. A usage-based company may report a run rate that is far less stable than true ARR.