CARR vs. ARR: What's the Difference, and Which One Should You Report?
The Short Answer
ARR (Annual Recurring Revenue) is the annualized value of the recurring revenue that is live and being billed today. CARR adds the contracts you've signed but haven't started billing yet. The difference between the two is, essentially, timing: CARR counts promised recurring revenue, ARR counts active recurring revenue.
That sounds like a small distinction. In practice, the gap between CARR and ARR can be large — especially for companies with long implementation cycles, delayed start dates, or a lot of recently-signed deals that haven't gone live. Understanding which number you're looking at (and which one to report to whom) matters a great deal.
One thing to get out of the way first: the "C" in CARR is used two different ways. Some firms call it Contracted ARR, others call it Committed ARR. There's no universal standard — Andreessen Horowitz uses "Contracted" while Bessemer uses "Committed" — but they refer to the same concept. We'll use the terms interchangeably here.
What ARR Actually Measures
ARR is the annualized run-rate of your active recurring subscriptions. If a customer is currently paying $2,000/month, they contribute $24,000 to ARR. Sum that across every active, billing customer and you have your ARR.
The key word is active. ARR reflects revenue that is currently recurring — contracts that have started, are being billed, and are delivering revenue right now. It excludes deals you've signed but haven't turned on yet. Because of that, ARR maps closely to GAAP-recognizable revenue and is the number most investors and boards anchor on as the "real" recurring revenue figure.
ARR is also the basis for almost every downstream SaaS metric. Your retention rates, your ARR bridge, your Net Revenue Retention, your burn multiple — they're all built on a clean ARR number. If your ARR definition is shaky, everything downstream inherits the problem.
What CARR Adds
CARR takes your live ARR and adds the recurring revenue from contracts that are signed and committed but not yet live. As Bessemer puts it, "CARR (Committed ARR) builds on the ARR concept by adding committed but not yet live contract values to total ARR and netting out forecasted churn or downsell."
The most common sources of the CARR-vs-ARR gap:
- Signed deals with future start dates. A customer signs in June but their subscription doesn't begin until September. It's in CARR now; it won't be in ARR until September.
- Contracts in implementation. Enterprise deals often have weeks or months of onboarding before the customer is live and billing. The revenue is contractually committed but not yet recurring.
- Committed expansion. A customer has signed an order form to add seats or a module starting next quarter. The expansion is committed but not yet active.
Because it captures these, CARR is a more forward-looking, momentum-oriented number. It reflects what your sales team has actually closed, not just what has turned on. That's why it's favored as a sales-momentum and bookings-health metric — and why some investors prize it. Martin Casado of a16z goes as far as to call "total contracted annual recurring revenue... the single best metric for the health of a business," because it encapsulates new logo growth, expansion, and churn in one figure.
A Worked Example
Say it's the end of Q2 and your books look like this:
- Live, billing customers: $10.0M ARR
- A $600K/year enterprise deal signed in June, going live in September (implementation): +$600K committed
- A $300K/year deal signed last week with a future Q3 start date: +$300K committed
- A committed seat expansion from an existing customer, starting next quarter: +$150K committed
Your numbers are:
ARR = $10.0M
CARR = $10.0M + $600K + $300K + $150K = $11.05M
That $1.05M gap is real, contracted, signed business — but it isn't recurring yet. If you report "$11M ARR," you're overstating your live recurring revenue by more than 10%. If you report "$11M CARR," you're being accurate, as long as you label it correctly. The mislabeling is where companies get into trouble.
When to Use Each One
Use ARR when: you're reporting realized recurring revenue, calculating retention, building your ARR bridge, or comparing yourself to benchmarks. ARR is the conservative, GAAP-aligned number — it's what most boards and investors mean when they ask "what's your ARR?" Retention metrics in particular must be built on ARR, because you can only measure churn and expansion against revenue that was actually live.
Use CARR when: you're measuring sales momentum, evaluating bookings health, or forecasting where ARR is headed over the next one to two quarters. CARR is the better leading indicator. A growing CARR-to-ARR gap tells you a lot of business has been closed and is waiting to turn on — generally a good sign, provided those contracts actually go live.
The most useful approach for most companies is to track both and report the gap. CARR tells you what you've sold; ARR tells you what's live; the gap tells you how much committed revenue is in the pipeline to be activated. Watching that gap over time is genuinely informative.
The Risks of Leaning Too Hard on CARR
CARR is useful, but it has two well-known failure modes, and credible sources are explicit about them.
1. Not all committed revenue becomes live revenue. Deals fall through during implementation. Customers delay or cancel before go-live. Committed expansions get renegotiated. CARR assumes everything contracted converts — and some of it won't. This is why CARR should net out forecasted churn and downsell, and why it's a softer number than ARR.
2. The lag can mask problems. Bessemer specifically flags that for companies with long implementation timelines, the gap between CARR and realized ARR can be problematic — a large CARR can paper over the fact that revenue isn't actually turning on fast enough. If CARR keeps growing while ARR stalls, that's not momentum; that's a backlog of deals that aren't going live.
3. CARR is not GAAP revenue. You can't recognize committed-but-not-live revenue on your financial statements. CARR is a management and investor metric, not an accounting one. Tools like Maxio's SaaSpedia are clear on this point: ARR aligns with recognizable revenue in a way CARR does not.
The practical guidance: lead with ARR as your anchor, use CARR as a forward-looking complement, and never present CARR as if it were ARR. The moment you blur the two, your reporting stops being trustworthy.
How CARR and ARR Fit Into the Bigger Picture
Both numbers are only as good as the customer-level data underneath them. The hard part isn't the definition — it's consistently tracking which contracts are live versus committed, period over period, as deals start, expand, contract, and churn. That's exactly the discipline that produces a clean ARR bridge, accurate churn measurement, and reliable retention metrics.
ARRGuide tracks ARR from your customer-level data — separating new business, expansion, contraction, and churn into a clean ARR bridge, using consistent definitions period over period. Whether you're reporting live ARR to your board or tracking the committed pipeline behind it, starting from accurate customer-level data is what makes either number trustworthy. Start your free trial →
For more on the metrics that build on a clean ARR number, see our guides on Net Revenue Retention and Gross Revenue Retention.