ARR Growth Rate: Definition, Formula & SaaS Benchmarks
What is ARR Growth Rate?
Annual Recurring Revenue (ARR) growth rate measures the year-over-year percentage increase in a company's annualized subscription revenue base. Unlike revenue growth (which can include one-time items), ARR growth is forward-looking — it represents the contracted, predictable revenue run-rate and its velocity.
Formula
ARR Growth Rate = (Current ARR − Prior Year ARR) ÷ Prior Year ARR × 100Worked Example
A company ending Q4 2025 at $800M ARR versus $600M at Q4 2024 grew ARR by $200M, a 33% growth rate. If its Rule of 40 score is 50 (33% ARR growth + 17% FCF margin), it demonstrates strong balanced performance.
What Good Looks Like
Thresholds derived from live data across 0 public SaaS companies tracked on SaaSDB.
Live Rankings
View full rankings →| Rank | Company | ARR Growth Rate |
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Frequently Asked Questions
What is the difference between ARR growth and revenue growth?
ARR growth measures the subscription revenue run-rate and is a leading indicator. Revenue growth (GAAP) lags ARR because it recognizes subscription fees ratably over time. ARR growth is the better signal for future revenue trajectory.
What ARR growth rate is good for a public SaaS company?
At scale (>$1B ARR), maintaining 20–30% growth is considered strong. Smaller public SaaS companies ($100–500M ARR) are typically expected to grow 30–50%+ to command premium valuations.
How does ARR growth relate to the Rule of 40?
ARR growth is the numerator in the Rule of 40 calculation. As ARR growth moderates with scale, companies must improve FCF margin proportionally to maintain a healthy Rule of 40 score.