ARR Is Dead! (Thanks, AI.) Long Live Annual Recurring Revenue, Say These Founders and Investors

The popular financial metric has become meaningless. But don’t let that stop you from using it.

BY BRIAN CONTRERAS, STAFF WRITER @_B_CONTRERAS_

Photo illustration: Inc. Art / Getty Images

When David Matalon needs a straightforward way to talk about his company’s cash flows, he turns to the metric that software-as-a-service providers so often use in those situations: annual recurring revenue.

“ARR, for us, is very important, because it is pretty much the simplest, clearest measure of a recurring subscription base,” explains the co-founder and CEO of cybersecurity startup Venn, which typically charges customers per month, per user.

Yet nowadays, as the software sector stares down a rising tide of artificial intelligence tools and platforms, Matalon has noticed the conversation around ARR shifting beneath his feet.

“There’s no question that the conversation of … ‘Do you want to charge using a different value metric’ [is] circling the entire industry,” he explains. “I still have faith in the ARR metric, but there’s a lot of nuance in what’s going to happen to that revenue in the years ahead.”

It’s a transition that, after a decade-plus of relative consensus, seems to be making investors and other tech insiders more skeptical of this pivotal financial metric. Online, people casually refer to ARR as “made up” and debate whether claims of sky-high ARR are bunk. Across conversations with VCs, analysts, and executives, Inc. found that the shine has started to come off of ARR, even if people still find it informative or useful in certain contexts.

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