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CFO & Strategy

Redefining ARR: Usage-Based and AI Companies

Written by Harry Prabandham

Curated by Rubric Financial

Last updated

1 / 5

Why the ARR Definition Is Breaking

  • Classic ARR assumes a fixed subscription price that recurs predictably every year.
  • Usage-based and AI products bill on consumption, so revenue moves up and down each month.
  • A single annual number hides the volatility that investors and boards now want to see.
  • Treating variable revenue as if it were a flat contract overstates how durable it really is.

Go deeper on this topic: From Flat Tiers to Token Taxes: A CFO's Guide to AI Software Economics→

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About the author

Harry Prabandham

Founder & CEO

Founder and CEO of StartupCFO. MBA from Wharton, MS in Computer Science, and decades of experience building and advising venture-backed startups.

More articles by Harry →

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